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, 1997
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, 1997: 4,994,988
<PAGE>
<TABLE>
<CAPTION>
JeffBanks, Inc.
Consolidated Balance Sheet
UNAUDITED
September 30, December 31,
1997 1996
(in thousands)
<S> <C> <C>
Assets:
Cash and cash equivalents:
Cash and due from banks ........................................ $ 52,904 $ 45,343
Federal funds sold ............................................. 108,775 41,950
---------- ----------
161,679 87,293
Investment securities available for sale ........................... 171,272 174,551
Investment securities held to maturity ............................. 683 687
Mortgages held for sale ............................................ 4,666 725
Loans, net ......................................................... 852,200 815,128
Premises and equipment, net ........................................ 17,052 14,989
Accrued interest receivable ........................................ 7,807 7,299
Other real estate owned ............................................ 2,914 3,982
Goodwill ........................................................... 8,271 8,776
Other assets ....................................................... 14,427 13,744
---------- ----------
Total assets ................................................... $1,240,971 $1,127,174
========== ==========
Liabilities and shareholders' equity:
Deposits:
Demand (non-interest bearing) .................................. $ 135,699 $ 137,361
Savings and money market ....................................... 379,184 315,939
Time deposits .................................................. 308,943 249,787
Time deposits, $100,000 and over ............................... 95,491 84,052
---------- ----------
919,317 787,139
Securities sold under repurchase agreements ........................ 70,151 73,764
FHLB advances ...................................................... 75,000 127,750
Subordinated notes and debentures .................................. 32,000 32,000
Company-obligated mandatorily redeemable preferred securities of a
subsidiary trust holding solely subordinated debentures of the
Company .......................................................... 25,300
Accrued interest payable ........................................... 10,734 8,082
Other liabilities .................................................. 8,822 7,158
---------- ----------
Total liabilities .............................................. 1,141,324 1,035,893
---------- ----------
Shareholders' equity:
Common Stock - authorized, 10,000,000 shares of $1 par value;
issued and outstanding 4,994,988 and 4,952,039 shares,
respectively ................................................. 4,995 4,952
Additional paid-in capital ..................................... 70,953 63,794
Retained earnings .............................................. 22,572 22,355
Net unrealized gain on investment securities available for sale 1,127 180
---------- ----------
Total shareholders' equity ..................................... 99,647 91,281
---------- ----------
Total liabilities and shareholders' equity ..................... $1,240,971 $1,127,174
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JeffBanks, Inc.
Consolidated Statements of Income
UNAUDITED
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Loans including fees ...................... $58,755 $53,936 $20,460 $18,249
Investment securities ..................... 8,107 7,747 2,525 2,664
Federal funds sold ........................ 2,620 1,667 1,353 575
------- ------- ------- -------
69,482 63,350 24,338 21,488
------- ------- ------- -------
Interest expense:
Time deposits, $100,000 and over .......... 3,882 3,805 1,484 1,246
Other deposits ............................ 18,941 19,205 7,163 6,126
FHLB advances ............................. 4,349 2,370 1,087 978
Subordinated notes and debentures ......... 2,151 1,684 717 720
Preferred securities ...................... 1,534 -- 585 --
Securities sold under repurchase agreements 2,256 1,956 737 894
------- ------- ------- -------
33,113 29,020 11,773 9,964
------- ------- ------- -------
Net interest income ................... 36,369 34,330 12,565 11,524
Provision for credit losses ................... 2,640 2,520 945 921
------- ------- ------- -------
Net interest income after provision
for credit losses .................... 33,729 31,810 11,620 10,603
------- ------- ------- -------
Non-interest income:
Service fees on deposit accounts .......... 2,505 2,393 893 815
Mortgage servicing fees ................... 555 624 184 207
Gain on sales of residential mortgages and
capitalized mortgage servicing rights ... 669 310 326 85
Gain on sales of investment securities .... 330 149 183 71
Merchant credit card deposit fees ......... 1,433 1,107 466 357
Credit card fee income .................... 269 121 108 74
Other ..................................... 1,078 674 444 264
------- ------- ------- -------
6,839 5,378 2,604 1,873
------- ------- ------- -------
Non-interest expense:
Salaries and employee benefits ............ 12,321 12,032 4,268 4,000
Occupancy expense ......................... 2,777 2,767 932 919
Depreciation .............................. 1,292 1,238 429 423
FDIC expense .............................. 72 17 26 5
Data processing expense ................... 617 947 169 272
Legal ..................................... 638 676 143 277
Stationery, printing and supplies ......... 625 624 191 195
Shares tax ................................ 599 564 201 186
Advertising ............................... 750 963 264 294
Other real estate owned maintenance expense 163 136 61 39
Loss on sale and write-downs of other
real estate owned ........................ 447 36 274 4
Amortization of intangibles ............... 984 942 354 319
Merchant credit card deposit expense ...... 1,135 852 385 215
Credit card orgination expense ............ 386 146 132 10
Credit card processing expense ............ 370 189 134 41
Merger related expenses ................... 178 -- -- --
Other ..................................... 3,996 3,603 1,483 1,434
------- ------- ------- -------
27,350 25,732 9,446 8,633
------- ------- ------- -------
Income before income taxes .................... 13,218 11,456 4,778 3,843
Income taxes .................................. 4,284 4,080 1,529 1,363
------- ------- ------- -------
Net income ............................ $ 8,934 $ 7,376 $ 3,249 $ 2,480
======= ======= ======= =======
Per share data:
Average number of common shares and equivalents 5,382 5,217 5,414 5,225
Net income per common share ................... $ 1.66 $ 1.41 $ 0.60 $ 0.47
<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
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, 1996 ... $ 4,716 $ 64,030 $ 22,355 $ 180 $ 91,281
Net income ..................... -- -- 8,934 -- 8,934
Issuance of common stock for
401(K) plan ................... 18 456 -- -- 474
Issuance of common stock for
dividend reinvestment plan .... 5 145 -- -- 150
Warrants exercised ............. 19 216 235
Cash dividends on common stock . -- -- (2,374) -- (2,374)
5% stock dividend .............. 237 6,106 (6,343) -- --
Change in net unrealized gain on
securities available for sale . -- -- -- 947 947
========== ========== ========== ========== ==========
Balance at September 30, 1997 .. $ 4,995 $ 70,953 $ 22,572 $ 1,127 $ 99,647
========== ========== ========== ========== ==========
<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,
1997 1996
(in thousands)
<S> <C> <C>
Operating activities:
Net income ......................................................... $ 8,934 $ 7,376
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization ...................................... 2,995 2,852
Provision for credit losses ........................................ 2,640 2,520
Gain on sales of investment securities ............................. (330) (149)
Mortgage loans originated for sale ................................. (32,452) (16,852)
Mortgage loan sales ................................................ 28,511 17,166
Increase in accrued interest receivable ............................ (508) (218)
Increase in accrued interest payable ............................... 2,652 1,882
Increase in other assets ........................................... (1,685) (2,808)
Increase in other liabilities ...................................... 1,664 1,892
--------- ---------
Net cash provided by operating activities ....................... 12,421 13,661
--------- ---------
Investing activities:
Proceeds from sales of investment securities available for sale .... 32,806 6,734
Proceeds from maturities of investment securities available for sale 43,882 59,910
Proceeds from maturities of investment securities held to maturity . 2,839
Proceeds from sales of other real estate owned ..................... 1,852 1,646
Purchase of investment securities available for sale ............... (72,324) (81,546)
Net increase in loans .............................................. (40,496) (32,661)
Purchase of premises and equipment ................................. (3,355) (1,563)
--------- ---------
Net cash used in investing activities ........................... (37,635) (44,641)
--------- ---------
Financing activities:
Net increase (decrease) in deposits ................................ 132,178 (42,058)
Net (decrease) increase in repurchase agreements ................... (3,613) 28,038
Net proceeds from issuance and redemption of common stock .......... 859 905
Net (decrease) increase in FHLB advances ........................... (52,750) 1,750
Proceeds from issuance of subordinated notes ....................... -- 23,000
Proceeds from issuance of preferred securities ..................... 25,300 --
Dividends paid on common stock ..................................... (2,374) (1,763)
--------- ---------
Net cash provided by financing activities ....................... 99,600 9,872
--------- ---------
Net increase (decrease) in cash and cash equivalents ................... 74,386 (21,108)
Cash and cash equivalents at beginning of year ......................... 87,293 101,741
--------- ---------
Cash and cash equivalents at end of period ............................. $ 161,679 $ 80,633
========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
Note 1 - Allowance for Credit Losses:
Nine months ended September 30,
1997 1996
(in thousands)
Balance, beginning of period .. $ 13,734 $ 14,991
Provision charged to operations 2,640 2,520
Loans charged off ............. (4,478) (6,426)
Recoveries .................... 1,136 947
-------- --------
Balance, end of period ........ $ 13,032 $ 12,032
======== ========
The balances of impaired loans were $9,461,000 and $11,268,000
respectively, at September 30, 1997 and 1996. The allowance for credit losses
associated with impaired loans was $2,254,000 and $3,738,000 respectively, at
those dates. Total cash collected on impaired loans during the first nine months
of 1997 and 1996, respectively, was $2,651,000 and $912,000, 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
$713,000 and $866,000. 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, 1997, are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Approximate
cost gains losses fair value
(in thousands)
<S> <C> <C> <C> <C>
Available for Sale:
U.S. treasury securities ...... $ 42,573 $ 142 $ 7 $ 42,708
Federal agency obligations .... 69,611 354 65 69,900
State and municipal obligations 46,282 1,316 9 47,589
Other securities .............. 11,073 5 3 11,075
-------- -------- -------- --------
Total ......................... $169,539 $ 1,817 $ 84 $171,272
======== ======== ======== ========
Held to Maturity:
State and municipal obligations 683 15 -- 698
-------- -------- -------- --------
Total ......................... $ 683 $ 15 $ -- $ 698
======== ======== ======== ========
</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. The
retroactive effect of stock dividends and the restatement required by the
pooling of interests accounting method utilized for the acquisition of United
Valley Bank ("UVB") in January 1997 are also considered.
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standard ("SFAS") No. 128, Earnings Per Share ("EPS"),
which is effective for financial statements issued after December 15, 1997. Once
effective, the new standard eliminates primary and fully diluted EPS and instead
requires presentation of basic and diluted EPS in conjunction with the
disclosure of the methodology used in computing such EPS. Basic EPS excludes
dilution and is computed by dividing income available to common shareholders by
the weighted-average common shares outstanding during the period. Diluted EPS
takes into consideration the potential dilution that could occur if securities
or other contracts to issue common stock were exercised and converted into
common stock. The effect of adopting this new standard has not been determined;
however, it is not expected to be material.
Note 5:
On January 21, 1997, the Company acquired through merger United Valley
Bancorp, Inc. ("UVBHC") the holding company for UVB. Thereafter, the Company
merged UVB into its subsidiary Jefferson Bank ("Jefferson PA"). Under the terms
of the merger, each share of UVBHC common stock was converted into .339 of a
share of the Company's common stock, resulting in the issuance of 749,278 shares
of the Company's common stock. In addition, outstanding warrants to purchase
UVBHC's common stock were converted into warrants to purchase 255,381 shares of
the Company's common stock, with an exercise price of $11.80 per share. UVB was
a Pennsylvania chartered banking institution engaged in commercial and retail
banking with one principal office in Philadelphia. UVB had total assets of
$121.1 million at the time of acquisition. The acquisition was accounted for
under the pooling of interests method of accounting. Accordingly, all prior
period information has been restated to reflect UVB historical performance. The
income statement for the nine months ended September 30, 1997 reflected a total
of $178,000 of merger related expenses, primarily legal, accounting and filing
fees.
Note 6:
On February 5, 1997, the Company issued $25.3 million principal amount of
9.25% junior subordinated deferrable interest debentures due March 31, 2027 (
the "debentures") to JBI Capital Trust I (the "Trust"), a Delaware business
trust, in which the Company owns all of the common equity. The debentures are
the sole asset of the Trust. The trust issued $25 million of preferred
securities to investors. The Company's obligations under the debentures and
related documents, taken together, constitute a full and unconditional guarantee
by the Company of the Trust's obligations under the preferred securities.
Although the subordinated debentures will be treated as debt of the Company,
they currently qualify for tier 1 capital treatment. The preferred securities
are callable by the Company on or after March 31, 2002, or earlier in the event
the deduction of related interest for federal income taxes is prohibited,
treatment as tier 1 capital is no longer permitted or certain other
contingencies arise. The preferred securities must be redeemed upon maturity of
the debentures in 2027. See "Liquidity and Capital Resources" below.
Note 7:
On April 1, 1997, the Company declared a 5% common stock dividend, payable
May 13, 1997. That dividend is reflected in the financial statements and
earnings per share computations for all periods.
Note 8:
In June, 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, "Reporting Comprehensive Income", which is effective for years
beginning after December 15, 1997. This new standard requires entities
presenting a complete set of financial statements to include details of
comprehensive income. Comprehensive income consists of net income or loss for
the current period and income, expenses, gains, and losses that bypass the
income statement and are reported directly in a separate component of equity.
The effect of adoption is not expected to be material.
Note 9:
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which is effective for all periods
beginning after December 15, 1997 . SFAS 131 requires that public business
enterprises report certain information about operating segments in complete sets
of financial statements of the enterprise and in condensed financial statements
of interim periods issued to shareholders. It also requires that public business
enterprises report certain information about their products and services, the
geographic areas in which they operate, and their major customers. The effect of
adoption is not expected to be material.
Note 10:
Certain captions in the financial statements presented for prior periods have
been reclassified to conform with the current period presentation.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters discussed in this form 10Q that are forward looking statements
relate to future events or the future financial performance of the company and
are based on current management expectations that involve risks and
uncertainties. Such statements are only predictions and actual events or
performance may differ materially from the events or performance expressed in
any such forward looking statements.
Results of Operations
Net income. Net income for JeffBanks, Inc. ("the Company") amounted to $8.9
million for the nine months ended September 30, 1997 as compared to $7.4 million
for the nine months ended September 30, 1996, an increase of approximately 21%.
Net Interest Income and Average Balances. Net interest income was $36.4 million
for the first nine months of 1997, compared to $34.3 million for the first nine
months of 1996, an increase of $2.0 million or 6%. Yields on interest earning
assets increased to 8.57% for the first nine months of 1997 from 8.44% in the
prior year period, a difference of .13 %. The cost of interest bearing
liabilities increased to 4.77% for the first nine months of 1997 from 4.61% in
the prior year period, a difference of .16%. Accordingly, the net interest
margin on JBI's interest earning assets decreased to 4.54% in 1997 as compared
to 4.59% in the comparable prior year period, a difference of .05%. The increase
in the cost of interest bearing liabilities and the decrease in the net interest
margin reflected the full period effect in 1997 of the issuance of $23 million
of 8.75% subordinated notes on March 25, 1996 and the issuance of $25.3 million
of 9.25% preferred securities on February 5, 1997.
Average balances for non-interest bearing demand deposits increased to
$132.0 million in 1997 compared to $123.4 million in 1996, an increase of 7%.
Average balances for savings and money market deposits increased to $323.8
million in 1997 compared to $310.7 million in the comparable 1996 period, an
increase of $13.1 million or 4%.
In the first nine months of 1997, average interest earning assets totaled
$1.1 billion, an increase of $91.5 million or 9% over the 1996 comparable
period. Reflected in that net increase was a $68.4 million or 9% increase in
average loans to $854.2 million.
Savings and money market deposits at September 30, 1997 reflect $54 million
in short term money market deposits from a corporation at which a director of
the Company is an officer. Interest on the deposits is paid at money market
rates.
Non-Interest Income. Total non-interest income for the first nine months of 1997
was $6.8 million compared to $5.4 million for the first nine months of 1996, an
increase of $1.5 million or 27%. Gain on sales of residential mortgages and
capitalized mortgage servicing rights increased to $669,000 in 1997, an increase
of $359,000 or 116% over 1996. The increase in 1997 reflected an increase in
residential mortgage loan originations. Gain on sales of securities increased to
$330,000 for the first nine months of 1997, an increase of $181,000 over 1996.
The increased gains reflected the gains on sales of shorter maturity securities
which were replaced by longer term maturities at higher yields. Merchant credit
card deposit fees increased to $1.4 million in 1997, an increase of $326,000 or
29%. Increases reflected in this total were substantially offset by increases in
merchant credit card deposit expense and reflected higher volume. Other income
increased to $1.1 million for the first nine months of 1997, an increase of
$404,000 or 60% from the comparable 1996 period. The increase reflected $147,000
in service charge income for non customer usage on ATMs which were instituted in
the third quarter of 1997.
Non-Interest Expense. Total non-interest expense for the first nine months of
1997, was $27.4 million, compared to $25.7 million for the comparable prior year
period, an increase of $1.6 million or 6%. Salaries and employee benefits
amounted to $12.3 million in the first nine months of 1997 compared to $12.0
million for the first nine months of 1996, an increase of $289,000 or 2%.
Data processing expense decreased to $617,000 for the first nine months of
1997, a decrease of $330,000 or 35% from the comparable 1996 period. The
decrease reflected reductions in data processing fees resulting from a new
outsourcing contract.
Advertising decreased to $750,000 for the nine months of 1997, a decrease
of $213,000 or 22% over the comparable 1996 period. The decrease reflected the
$125,000 impact of a one time advertising campaign for personal transaction
accounts in the first nine months of 1996.
Loss on sale and write-downs of other real estate owned increased to
$447,000 for the nine months of 1997, an increase of $411,000, over 1996.
Approximately $229,000 of the increase resulted from a loss on a single property
and $87,000 resulted from a loss on the sale of another property acquired in the
1995 Constitution Bank acquisition.
Credit card origination expense increased to $386,000 for the first nine
months of 1997, an increase of $240,000, or 164% over 1996. The increase
reflected origination costs incurred in connection with the Bank's efforts to
expand its retail credit card portfolio.
Credit card processing expense increased to $370,000 for the first nine
months of 1997, an increase of $181,000, or 96% over 1996. The increase
reflected significant increases in the outstanding number of credit card
accounts, and related increases in transaction volume.
Merger expenses related to the acquisition of UVB amounted to $178,000 in
1997. The merger expenses reflected $55,000 in legal fees, $20,000 in external
accounting fees, $22,000 in printing costs, $23,000 in regulatory filing fees
and $58,000 from the write-off of leasehold improvements at vacated locations.
A decrease in the effective income tax rate to 32% in the nine months ended
September 30, 1997 compared to 36% in the comparable prior year period,
reflected the impact of increased purchases of tax exempt municipal bonds.
Liquidity and Capital Resources. The major sources of funding for the Company'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 $40.5 million for the first nine months of 1997
compared to $32.4 million for the 1996 period. Cash outflows required for
mortgage loans originated for sale amounted to $32.5 million for the first nine
months of 1997 compared to $16.9 million for the first nine months of 1996. At
September 30, 1997 the Company and its subsidiaries exceeded "well capitalized"
ratios as determined by the appropriate regulatory authorities. The following
table sets forth the regulatory capital ratios of the Company, 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
September 30, December 31, September 30, December 31, September 30, December 31,
1997 1996 1997 1996 1997 1996
Entity:
<S> <C> <C> <C> <C> <C> <C>
JBI .......................... 9.54% 7.28% 12.86% 9.92% 17.70% 15.13%
Jefferson PA ................. 7.19% 7.14% 9.83% 9.59% 14.66% 14.67%
Jefferson NJ ................. 7.57% 8.10% 9.77% 11.16% 14.50% 16.88%
"Well capitalized" institution
(under FDIC Regulations) . 5.00% 5.00% 6.00% 6.00% 10.00% 10.00%
</TABLE>
<PAGE>
Asset and Liability Management
The following table summarizes repricing intervals for interest earning assets
and interest bearing liabilities as of September 30, 1997 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:
Investment securities:
Federal funds sold ................ $ 108,775
Available for sale:
Taxable investment securities ... 14,490 $ 11,030 $ 25,553 $ 28,513 $ 21,952 $ 22,144
Non-taxable investment securities 240 375 330 1,140 115 45,389
Held to maturity:
Non-taxable investment securities -- -- -- -- 263 420
Mortgages held for sale ............ 4,666 -- -- -- -- --
Loans net of unearned discount ..... 376,295 63,234 66,458 126,946 178,388 53,911
--------- --------- --------- --------- --------- ---------
Total interest earning assets ......... 504,466 74,639 92,341 156,599 200,718 121,864
--------- --------- --------- --------- --------- ---------
Interest bearing liabilities:
Savings and money market deposits .. 379,184 -- -- -- -- --
Time deposits ...................... 121,606 179,018 66,618 16,092 20,437 663
Securities sold under repurchase
agreements ....................... 70,151 -- -- -- -- --
FHLB advances ...................... 75,000 -- -- -- -- --
Subordinated notes and debentures .. -- -- -- -- -- 32,000
Preferred securities ............... -- -- -- -- -- 25,300
--------- --------- --------- --------- --------- ---------
Total interest bearing liabilities .... 645,941 179,018 66,618 16,092 20,437 57,963
--------- --------- --------- --------- --------- ---------
Gap ................................... $(141,475) $(104,379) $ 25,723 $ 140,507 $ 180,281 $ 63,901
========= ========= ========= ========= ========= =========
Cumulative gap ........................ $(141,475) $(245,854) $(220,131) $ (79,624) $ 100,657 $ 164,558
========= ========= ========= ========= ========= =========
Gap to assets ratio ................... -11% -9% 2% 11% 15% 5%
Cumulative gap to assets ratio ........ -11% -20% -18% -7% 8% 13%
</TABLE>
<PAGE>
Loan Portfolio. The following table summarizes the loan portfolio of the Company
by loan category and amount at September 30, 1997 and corresponds to appropriate
regulatory definitions. Loans with a principal amount in excess of 2% of the
Company's equity capital are generally considered to be large loans. By this
standard, large loans were those exceeding $2 million at September 30, 1997.
Large loans as a percentage of total loans at that date were 9%.
Book Value
(in thousands)
Loans secured by real estate:
Construction and land development ....................... $ 75,322
Secured by 1-4 family residential properties ............ 203,491
Secured by multifamily (5 or more) residential properties 25,481
Secured by non-farm non-residential properties .......... 242,655
Commercial and industrial loans:
To U.S. addresses (domicile) ............................ 106,234
Loans to individuals for household, family and other personal
expenditures (consumer):
Credit cards and related plans .......................... 12,777
Other ................................................... 177,907
Tax exempt industrial development obligations ................ 3,292
All other loans .............................................. 4,708
Lease financing receivables, net of unearned income .......... 18,031
--------
Total ................................................... $869,898
========
<PAGE>
Non-Performing Loans. The following table presents the principal amounts of non
accrual and renegotiated loans (1) at September 30, 1997 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, 1997 the ratio of the allowance for credit losses to total
loans amounted to 1.50%. On an annualized basis, the ratio of net charge-offs to
average loans was .52% for the nine month period ended September 30, 1997.
<TABLE>
<CAPTION>
September 30, December 31,
------------------ ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Loans accounted for on a non-accrual basis ...... $ 9,461 $11,268 $11,269 $13,127 $10,240 $ 6,832 $ 7,344
Loans renegotiated to provide a reduction or
deferral of interest or principal ........... -- -- -- -- 1,367 1,493 1,746
------- ------- ------- ------- ------- ------- -------
Total non-performing loans (1) .................. 9,461 11,268 11,269 13,127 11,607 8,325 9,090
------- ------- ------- ------- ------- ------- -------
Other real estate owned ......................... 2,914 4,575 3,537 4,260 6,093 5,937 5,710
------- ------- ------- ------- ------- ------- -------
Total non-performing assets (1) ................. $12,375 $15,843 $14,806 $17,387 $17,700 $14,262 $14,800
======= ======= ======= ======= ======= ======= =======
Non-performing loans/total loans (1) ............ 1.09% 1.41% 1.36% 1.69% 1.83% 1.56% 1.81%
Non-performing assets/total loans and
non-performing assets (1) ................... 1.42% 1.97% 1.78% 2.23% 2.76% 2.64% 2.91%
Loans past due 90 days or more as to interest
or principal payments still accruing interest
and not included in non-accrual loans $ ..... 5,137 $ 3,833 $ 4,478 $ 6,898 $ 6,190 $ 4,564 $ 3,656
======= ======= ======= ======= ======= ======= =======
</TABLE>
Non-accrual loans(1) decreased to $9.5 million at September 30, 1997 compared to
$11.3 million at December 31, 1996. The decrease reflects approximately $262,000
of transfers to other real estate owned, $2.8 million of charge-offs, $4.0
million of additions, $2.7 million of payments and $91,000 of loans returned to
accrual status.
Other real estate owned amounted to $2.9 million at September 30, 1997
compared to $3.5 million at December 31, 1996. Activity in the nine months ended
September 30, 1997 reflects $2.0 million of additions with sales and other
receipts of $1.9 million, and charge-offs and other write downs of $664,000.
Interest on Non-Accrual Loans(1). If interest on non-accrual loans had been
accrued, such income would have been $713,000 and $866,000, respectively for the
first nine months of 1997 and 1996.
Provision for Credit Losses. The provision for credit losses for the first
nine months of 1997 was $2.6 million compared to $2.5 million in the first nine
months of 1996.
- --------------------------------------------------------------------------------
(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,
------------------ ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance in the allowance for credit losses at
beginning of period ..................... $13,734 $14,991 $14,991 $ 8,986 $ 6,867 $ 6,468 $ 5,228
------- ------- ------- ------- ------- ------- -------
Loans charged-off:
Commercial .............................. 729 1,643 1,914 2,816 1,198 736 1,051
Construction ............................ -- 473 473 -- 167 -- 134
Real estate mortgage .................... 2,619 3,790 4,272 1,588 1,768 1,274 1,209
Credit card ............................. 501 121 160 16 -- -- --
Installment and lease financing ......... 629 399 522 435 236 243 157
------- ------- ------- ------- ------- ------- -------
Total ................................ 4,478 6,426 7,341 4,855 3,369 2,253 2,551
------- ------- ------- ------- ------- ------- -------
Recoveries:
Commercial .............................. 165 83 109 265 309 73 43
Construction ............................ -- -- -- -- -- 1 --
Real estate mortgage .................... 907 836 901 437 196 31 41
Credit card ............................. 9 -- -- -- -- -- --
Installment and lease financing ......... 55 28 51 51 28 28 21
------- ------- ------- ------- ------- ------- -------
Total ................................ 1,136 947 1,061 753 533 133 105
------- ------- ------- ------- ------- ------- -------
Net charge-offs ............................. 3,342 5,479 6,280 4,102 2,836 2,120 2,446
Acquisitions ................................ -- -- -- 6,121 3,098 -- --
Provision charged to operations ............. 2,640 2,520 5,023 3,986 1,857 2,519 3,686
------- ------- ------- ------- ------- ------- -------
Balance in allowance for credit losses at end
of period ............................... $13,032 $12,032 $13,734 $14,991 $ 8,986 $ 6,867 $ 6,468
======= ======= ======= ======= ======= ======= =======
Net charge-offs/average loans ............... 0.52% 0.93% 0.79% 0.58% 0.50% 0.42% 0.50%
</TABLE>
<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: November 1, 1997 By /s/ Paul Frenkiel
------------------------------------------
Paul Frenkiel
Chief Financial Officer
Dated: November 1, 1997 By /s/ Martin F. Egan
------------------------------------------
Martin F. Egan
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sep-30-1997
<CASH> 52904
<INT-BEARING-DEPOSITS> 1360
<FED-FUNDS-SOLD> 108775
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 171272
<INVESTMENTS-CARRYING> 683
<INVESTMENTS-MARKET> 698
<LOANS> 869898
<ALLOWANCE> 12032
<TOTAL-ASSETS> 1240971
<DEPOSITS> 919317
<SHORT-TERM> 75000
<LIABILITIES-OTHER> 19556
<LONG-TERM> 57300
0
0
<COMMON> 4995
<OTHER-SE> 94652
<TOTAL-LIABILITIES-AND-EQUITY> 1240971
<INTEREST-LOAN> 58755
<INTEREST-INVEST> 8107
<INTEREST-OTHER> 2620
<INTEREST-TOTAL> 69482
<INTEREST-DEPOSIT> 22823
<INTEREST-EXPENSE> 33113
<INTEREST-INCOME-NET> 36369
<LOAN-LOSSES> 2640
<SECURITIES-GAINS> 330
<EXPENSE-OTHER> 27350
<INCOME-PRETAX> 13218
<INCOME-PRE-EXTRAORDINARY> 8934
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8934
<EPS-PRIMARY> 1.66
<EPS-DILUTED> 1.66
<YIELD-ACTUAL> 4.54
<LOANS-NON> 9461
<LOANS-PAST> 5137
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 13734
<CHARGE-OFFS> 4478
<RECOVERIES> 1136
<ALLOWANCE-CLOSE> 13032
<ALLOWANCE-DOMESTIC> 13032
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
