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, 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 June 30, 1997: 4,987,492
<PAGE>
<TABLE>
<CAPTION>
JeffBanks, Inc.
Consolidated Balance Sheet
UNAUDITED
June 30, December 31,
1997 1996(a)
(in thousands)
<S> <C> <C>
Assets:
Cash and cash equivalents:
Cash and due from banks ........................................ $ 47,841 $ 45,343
Federal funds sold ............................................. 52,550 41,950
---------- ----------
100,391 87,293
Investment securities available for sale ........................... 172,460 174,551
Investment securities held to maturity ............................. 685 687
Mortgages held for sale ............................................ 5,848 725
Loans, net ......................................................... 844,937 815,128
Premises and equipment, net ........................................ 16,177 14,989
Accrued interest receivable ........................................ 7,754 7,299
Other real estate owned ............................................ 4,055 3,982
Goodwill ........................................................... 8,439 8,776
Other assets ....................................................... 15,266 13,744
---------- ----------
Total assets ................................................... $1,176,012 $1,127,174
========== ==========
Liabilities and shareholders' equity:
Deposits:
Demand (non-interest bearing) .................................. $ 132,892 $ 137,361
Savings and money market ....................................... 309,117 315,939
Time deposits .................................................. 291,436 249,787
Time deposits, $100,000 and over ............................... 85,012 84,052
---------- ----------
818,457 787,139
Securities sold under repurchase agreements ........................ 63,504 73,764
FHLB advances ...................................................... 125,000 127,750
Subordinated notes and debentures .................................. 32,000 32,000
Company-obligated mandatorily redeemable preferred securities of the
Company's subsidiary trust, holding solely $25.3 million aggregate
principal amount of 9.25% junior subordinated deferrable interest
debentures due 2027 of the Company ............................... 25,300
Accrued interest payable ........................................... 9,103 8,082
Other liabilities .................................................. 6,392 7,158
---------- ----------
Total liabilities .............................................. 1,079,756 1,035,893
---------- ----------
Shareholders' equity:
Common Stock - authorized, 10,000,000 shares of $1 par value;
issued and outstanding 4,987,492 and 4,952,039 (a) shares,
respectively ................................................. 4,988 4,716
Additional paid-in capital ..................................... 70,745 64,030
Retained earnings .............................................. 20,167 22,355
Net unrealized gain on investment securities available for sale 356 180
---------- ----------
Total shareholders' equity ..................................... 96,256 91,281
---------- ----------
Total liabilities and shareholders' equity ..................... $1,176,012 $1,127,174
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
(a) The prior year period was restated for the acquisition of United Valley Bank
("UVB") on January 21, 1997 as required under the pooling of interests method of
accounting, and for the 5% stock dividend declared April 1, 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JeffBanks, Inc.
Consolidated Statements of Income
UNAUDITED
Six Months Three Months
Ended June 30, Ended June 30,
1997 1996(a) 1997 1996(a)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Loans including fees ...................... $38,295 $35,687 $19,540 $17,917
Investment securities ..................... 5,582 5,083 2,853 2,659
Federal funds sold ........................ 1,267 1,092 550 522
------- ------- ------- -------
45,144 41,862 22,943 21,098
------- ------- ------- -------
Interest expense:
Time deposits, $100,000 and over .......... 2,398 2,559 1,209 1,283
Other deposits ............................ 11,778 13,079 5,998 6,563
FHLB advances ............................. 3,262 1,392 1,675 552
Subordinated notes and debentures ......... 1,434 964 717 717
Preferred securities ...................... 949 585
Securities sold under repurchase agreements 1,519 1,062 743 645
------- ------- ------- -------
21,340 19,056 10,927 9,760
------- ------- ------- -------
Net interest income .................... 23,804 22,806 12,016 11,338
Provision for credit losses .................... 1,695 1,599 870 840
------- ------- ------- -------
Net interest income after provision
for credit losses ..................... 22,109 21,207 11,146 10,498
------- ------- ------- -------
Non-interest income:
Service fees on deposit accounts .......... 1,612 1,578 810 820
Mortgage servicing fees ................... 371 417 186 206
Gain on sales of residential mortgages and
capitalized mortgage servicing rights ... 343 225 191 105
Gain on sales of investment securities .... 147 78 147 78
Merchant credit card deposit fees ......... 967 703 485 382
Credit card fee income .................... 161 47 63 25
Other ..................................... 634 457 369 254
------- ------- ------- -------
4,235 3,505 2,251 1,870
------- ------- ------- -------
Non-interest expense:
Salaries and employee benefits ............ 8,053 8,032 4,257 4,070
Occupancy expense ......................... 1,845 1,848 908 909
Depreciation .............................. 863 815 430 407
FDIC expense .............................. 46 12 24 5
Data processing expense ................... 448 675 179 335
Legal ..................................... 495 399 258 187
Stationery, printing and supplies ......... 434 394 171 201
Shares tax ................................ 398 378 201 187
Advertising ............................... 486 669 199 311
Other real estate owned maintenance expense 102 97 29 45
Loss on sale and write-downs of other
real estate owned ........................ 173 32 101
Amortization of intangibles ............... 630 623 307 313
Merchant credit card deposit expense ...... 750 548 397 263
Credit card orgination expense ............ 254 136 143 100
Credit card processing expense ............ 236 148 108 88
Merger related expenses ................... 178
Other ..................................... 2,513 2,293 1,287 1,243
------- ------- ------- -------
17,904 17,099 8,999 8,664
------- ------- ------- -------
Income before income taxes ..................... 8,440 7,613 4,398 3,704
Income taxes ................................... 2,755 2,717 1,397 1,328
------- ------- ------- -------
Net income ............................. $ 5,685 $ 4,896 $ 3,001 $ 2,376
======= ======= ======= =======
Per share data:
Average number of common shares and equivalents 5,273 5,131 5,306 5,143
Net income per common share ......... .......... $ 1.08 $ 0.95 $ 0.57 $ 0.46
<FN>
The accompanying notes are an integral part of these financial statements.
(a) Prior year periods were restated for the acquisition of UVB on January 21,
1997 as required under the pooling of interests method of accounting, and for
the 5% stock dividend declared April 1, 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JeffBanks, Inc.
Consolidated Statement of Changes in Shareholders' Equity
UNAUDITED
Net unrealized
gain
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, 1996 ... $ 4,716 $ 64,030 $ 22,355 $ 180 $ 91,281
Net income ..................... -- -- 5,685 -- 5,685
Issuance of common stock for
401(K) plan ................... 14 339 -- -- 353
Issuance of common stock for
dividend reinvestment plan .... 3 66 -- -- 69
Warrants exercised ............. 18 201 219
Cash dividends on common stock . -- -- (1,527) -- (1,527)
5% stock dividend .............. 237 6,109 (6,346) -- --
Change in net unrealized gain on
securities available for sale . -- -- -- 176 176
---------- ---------- ---------- ---------- ----------
Balance at June 30, 1997 ....... $ 4,988 $ 70,745 $ 20,167 $ 356 $ 96,256
========== ========== ========== ========== ==========
<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 ... $ 4,649 $ 63,102 $ 16,802 $ 485 $ 85,038
Net income ..................... -- -- 4,896 -- 4,896
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 reinvetsment plan .... 3 54 -- -- 57
Warrants exercised ............. 47 505 552
Cash dividends on common stock . -- -- (1,168) -- (1,168)
Change in net unrealized gain
(loss) on securities available
for sale ...................... -- -- -- (974) (974)
---------- ---------- ---------- ---------- ----------
Balance at June 30, 1996 ....... $ 4,706 $ 63,824 $ 20,530 $ (489) $ 88,571
========== ========== ========== ========== ==========
<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,
1997 1996
(in thousands)
<S> <C> <C>
Operating activities:
Net income ......................................................... $ 5,685 $ 4,896
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization ...................................... 2,039 1,813
Provision for credit losses ........................................ 1,695 1,599
Gain on sales of investment securities ............................. (147) (78)
Mortgage loans originated for sale ................................. (18,214) (12,496)
Mortgage loan sales ................................................ 13,091 12,481
Increase in interest receivable .................................... (455) (327)
Increase in interest payable ....................................... 1,021 1,952
Increase in other assets ........................................... (1,919) (923)
Decrease in other liabilities ...................................... (766) (917)
--------- ---------
Net cash provided by operating activities ....................... 2,030 8,000
--------- ---------
Investing activities:
Proceeds from sales of investment securities available for sale .... 17,142 2,752
Proceeds from maturities of investment securities available for sale 32,392 46,708
Proceeds from maturities of investment securities held to maturity . 2,839
Proceeds from sales of other real estate owned ..................... 760 1,525
Purchase of investment securities available for sale ............... (47,560) (66,394)
Net increase in loans .............................................. (32,337) (27,459)
Purchase of premises and equipment ................................. (2,051) (716)
--------- ---------
Net cash used in investing activities ........................... (31,654) (40,745)
--------- ---------
Financing activities:
Net increase (decrease) in deposits ................................ 31,318 (28,374)
Net (decrease) increase in repurchase agreements ................... (10,260) 37,229
Net proceeds from issuance and redemption of common stock .......... 641 780
Net decrease in FHLB advances ...................................... (2,750) (26,250)
Proceeds from issuance of subordinated notes ....................... -- 23,000
Proceeds from issuance of preferred securities ..................... 25,300 --
Dividends paid on common stock ..................................... (1,527) (1,168)
--------- ---------
Net cash provided by financing activities ....................... 42,722 5,217
--------- ---------
Net increase (decrease) in cash and cash equivalents ................... 13,098 (27,528)
Cash and cash equivalents at beginning of year ......................... 87,293 101,741
--------- ---------
Cash and cash equivalents at end of period ............................. $ 100,391 $ 74,213
========= =========
<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,
1997 1996
(in thousands)
Balance, beginning of period .. $ 13,734 $ 14,991
Provision charged to operations 1,695 1,599
Loans charged off ............. (3,020) (2,496)
Recoveries .................... 336 176
-------- --------
Balance, end of period ........ $ 12,745 $ 14,270
======== ========
The balances of impaired loans were $10,109,000 and $14,115,000
respectively, at June 30, 1997 and 1996. The allowance for credit losses
associated with impaired loans was $2,332,676 and $4,681,000, respectively, at
those dates. Total cash collected on impaired loans during the first six months
of 1997 and 1996, respectively, was $1,390,000 and $869,000, 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
$549,000 and $668,000. 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, 1997, 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 ...... $ 43,296 $ 79 $ 45 $ 43,330 $ 43,330
Federal agency obligations .... 72,905 227 192 72,940 72,940
State and municipal obligations 41,241 528 40 41,729 41,729
Other securities .............. 14,466 3 8 14,461 14,461
-------- -------- -------- -------- --------
Total ......................... $171,908 $ 837 $ 285 $172,460 $172,460
======== ======== ======== ======== ========
Held to Maturity:
State and municipal obligations 685 11 -- 696 685
-------- -------- -------- -------- --------
Total ......................... $ 685 $ 11 $ -- $ 696 $ 685
======== ======== ======== ======== ========
</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 UVB acquisition 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 31, 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, through its subsidiary Jefferson Bank
("Jefferson PA"), acquired UVB through merger. The Company acquired UVB's
holding company ("UVBHC") and thereafter merged UVB into 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 six months ended June 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 of 9.25% of junior
subordinated deferrable interest debentures ( 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.
<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.("the Company") amounted to $5.7
million for the six months ended June 30, 1997 as compared to $4.9 million for
the six months ended June 30, 1996, an increase of approximately 16%.
Net Interest Income and Average Balances. Net interest income was $23.8 million
for the first six months of 1997, compared to $22.8 million for the first six
months of 1996, an increase of $998,000 or 4%. Yields on interest earning assets
increased to 8.48% for the first six months of 1997 from 8.44% in the prior year
period, a difference of .04 %. The cost of interest bearing liabilities
increased to 4.72% for the first six months of 1997 from 4.60% in the prior year
period, a difference of .12%. Accordingly, the net interest margin on JBI's
interest earning assets decreased to 4.52% in 1997 as compared to 4.61% in the
comparable prior year period, a difference of .09%. 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
$132.8 million in 1997 compared to $121.3 million in 1996, an increase of 9%.
Average balances for savings and money market deposits increased to $310.2
million in 1997 compared to $304.4 million in the comparable 1996 period, an
increase of $5.8 million or 2%.
In the first six months of 1997, average interest earning assets totaled
$1.1 billion, an increase of $82 million or 8% over the 1996 comparable period.
Reflected in that net increase was a $67.3 million or 9% increase in average
loans to $846 million.
Non-Interest Income. Total non-interest income for the first six months of 1997
was $4.2 million compared to $3.5 million for the first six months of 1996, an
increase of $730,000 or 21%. Gain on sales of residential mortgages and
capitalized mortgage servicing rights increased to $343,000 in 1997, an increase
of $118,000 or 52% over 1996. The increase in 1997 reflected an increase in
residential mortgage loan originations. Merchant credit card deposit fees
increased to $967,000 in 1997, an increase of $264,000 or 38%. Increases
reflected in this total were substantially offset by increases in merchant
credit card deposit expense and reflected higher volume.
Non-Interest Expense. Total non-interest expense for the first six months of
1997, was $17.9 million, compared to $17.1 million for the comparable prior year
period, an increase of $805,000 or 5%. Salaries and employee benefits amounted
to $8.1 million in the first six months of 1997 and $8.0 million for the
comparable prior year period.
Data processing expense decreased to $448,000 for the first six months of
1997, a decrease of $227,000 or 34% from the comparable 1996 period. The
decrease reflected reductions in data processing fees resulting from a new
outsourcing contract.
Legal expense increased to $495,000 for the first six months of 1997, an
increase of $96,000, or 24% over 1996. The increase reflected legal fees on
several unrelated matters.
Advertising decreased to $486,000 for the six months of 1997, a decrease
of $183,000 or 27% over the comparable 1996 period. The decrease reflected the
impact of a one time advertising campaign for personal transaction accounts in
the first six months of 1996.
Loss on sale and write-downs of other real estate owned increased to
$173,000 for the six months of 1997, an increase of $141,000, or 441% over 1996.
Approximately $87,000 of the increase resulted from a loss on the sale of a
property acquired in the Constitution Bank acquisition.
Credit card origination expense increased to $254,000 for the first six
months of 1997, an increase of $118,000, or 87% 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 $236,000 for the first six
months of 1997, an increase of $88,000, or 59% 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 on vacated locations.
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 $32.3 million for the first six months of 1997
compared to $27.5 million for the 1996 period. Cash outflows required for
mortgage loans originated for sale amounted to $18.2 million for the first six
months of 1997 compared to $12.5 million for the first six months of 1996.
At June 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
June 30, December 31, June 30, December 31, June 30, December 31,
1997 1996 1997 1996 1997 1996
Entity:
<S> <C> <C> <C> <C> <C> <C>
JBI .......................... 9.59% 7.28% 12.84% 9.92% 17.84% 15.13%
Jefferson PA ................. 7.18% 7.14% 9.56% 9.59% 14.45% 14.67%
Jefferson NJ ................. 8.05% 8.10% 10.35% 11.16% 15.36% 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 June 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 ................ $ 52,550
Available for sale:
Taxable investment securities ... 15,519 $ 11,055 $ 29,573 $ 26,090 $ 36,786 $ 11,708
Non-taxable investment securities 455 240 455 1,137 367 39,075
Held to maturity:
Taxable investment securities ... --
Non-taxable investment securities -- -- -- -- 265 420
Mortgages held for sale ............ 5,848 -- -- -- -- --
Loans net of unearned discount ..... 374,425 61,177 63,106 124,855 179,496 54,623
--------- --------- --------- --------- --------- ---------
Total interest earning assets ......... 448,797 72,472 93,134 152,082 216,914 105,826
--------- --------- --------- --------- --------- ---------
Interest bearing liabilities:
Savings and money market ........... 309,117 -- -- -- -- --
Time deposits ...................... 114,893 95,089 129,924 15,132 20,746 664
Securities sold under repurchase
agreements ....................... 63,504 -- -- -- -- --
FHLB advances ...................... 125,000 -- -- -- -- --
Subordinated notes and debentures .. -- -- -- -- -- 32,000
Preferred securities ............... -- -- -- -- -- 25,300
--------- --------- --------- --------- --------- ---------
Total interest bearing liabilities .... 612,514 95,089 129,924 15,132 20,746 57,964
--------- --------- --------- --------- --------- ---------
Gap ................................... $(163,717) $ (22,617) $ (36,790) $ 136,950 $ 196,168 $ 47,862
========= ========= ========= ========= ========= =========
Cumulative gap ........................ $(163,717) $(186,334) $(223,124) $ (86,174) $ 109,994 $ 157,856
========= ========= ========= ========= ========= =========
Gap to assets ratio ................... -14% -2% -3% 12% 17% 4%
Cumulative gap to assets ratio ........ -14% -16% -19% -7% 9% 13%
</TABLE>
<PAGE>
Loan Portfolio. The following table summarizes the loan portfolio of the Company
by loan category and amount at June 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 $1.9 million at June 30, 1997. Large
loans as a percentage of total loans at that date were 10%.
Book Value
(in thousands)
Loans secured by real estate:
Construction and land development ....................... $ 74,186
Secured by 1-4 family residential properties ............ 206,795
Secured by multifamily (5 or more) residential properties 21,943
Secured by non-farm non-residential properties .......... 245,796
Commercial and industrial loans:
To U.S. addresses (domicile) ............................ 123,935
Loans to individuals for household, family and other personal
expenditures (consumer):
Credit cards and related plans .......................... 11,003
Other ................................................... 156,287
Tax exempt industrial development obligations ................ 3,335
All other loans .............................................. 2,496
Lease financing receivables, net of unearned income .......... 17,754
--------
Total ................................................... $863,530
========
<PAGE>
Non-Performing Loans. The following table presents the principal amounts of non
accrual and renegotiated loans (1) at June 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 June 30, 1997 the ratio of the allowance for credit losses to total
loans amounted to 1.48%. On an annualized basis, the ratio of net charge-offs to
average loans was .63% for the six month period ended June 30, 1997.
<TABLE>
<CAPTION>
June 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 $10,109 $14,115 $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) ................... 10,109 14,115 11,269 13,127 11,607 8,325 9,090
------- ------- ------- ------- ------- ------- -------
Other real estate owned .......................... 4,055 4,017 3,537 4,260 6,093 5,937 5,710
------- ------- ------- ------- ------- ------- -------
Total non-performing assets (1) .................. $14,164 $18,132 $14,806 $17,387 $17,700 $14,262 $14,800
======= ======= ======= ======= ======= ======= =======
Non-performing loans/total loans (1) ............. 1.17% 1.77% 1.36% 1.69% 1.83% 1.56% 1.81%
Non-performing assets/total loans and
non-performing assets (1) .................... 1.63% 2.26% 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 $10,241 $ 5,279 $ 4,478 $ 6,898 $ 6,190 $ 4,564 $ 3,656
======= ======= ======= ======= ======= ======= =======
</TABLE>
Non-accrual loans(1) decreased to $10.1 million at June 30, 1997 compared
to $11.3 million at December 31, 1996. The decrease reflects approximately
$262,000 of transfers to other real estate owned, $2.3 million of charge-offs,
$2.9 million of additions, $1.4 million of payments and $91,000 of loans
returned to accrual status.
Other real estate owned amounted to $4.1 million at June 30, 1997 compared
to $3.5 million at December 31, 1996. Activity in the six months ended June 30,
1997 reflects $1.6 million of additions with sales and other receipts of
$760,000, and charge-offs and other write downs of $327,000.
Interest on Non-Accrual Loans(1). If interest on non-accrual loans had
been accrued, such income would have been $549,000 and $668,000, respectively
for the first six months of 1997 and 1996.
Provision for Credit Losses. The provision for credit losses for the first
six months of 1997 was $1.7 million compared to $1.6 million in the first six
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>
June 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 .............................. 698 1,030 1,914 2,816 1,198 736 1,051
Construction ............................ -- 59 473 -- 167 -- 134
Real estate mortgage .................... 1,885 1,120 4,272 1,588 1,768 1,274 1,209
Credit card ............................. 144 36 160 16 -- -- --
Installment and lease financing ......... 293 251 522 435 236 243 157
------- ------- ------- ------- ------- ------- -------
Total ................................ 3,020 2,496 7,341 4,855 3,369 2,253 2,551
------- ------- ------- ------- ------- ------- -------
Recoveries:
Commercial .............................. 48 61 109 265 309 73 43
Construction ............................ -- -- -- -- -- 1 --
Real estate mortgage .................... 244 97 901 437 196 31 41
Credit card ............................. 8 -- -- -- -- -- --
Installment and lease financing ......... 36 18 51 51 28 28 21
------- ------- ------- ------- ------- ------- -------
Total ................................ 336 176 1,061 753 533 133 105
------- ------- ------- ------- ------- ------- -------
Net charge-offs ............................. 2,684 2,320 6,280 4,102 2,836 2,120 2,446
Acquisitions ................................ -- -- -- 6,121 3,098 -- --
Provision charged to operations ............. 1,695 1,599 5,023 3,986 1,857 2,519 3,686
------- ------- ------- ------- ------- ------- -------
Balance in allowance for credit losses at end
of period ............................... $12,745 $14,270 $13,734 $14,991 $ 8,986 $ 6,867 $ 6,468
======= ======= ======= ======= ======= ======= =======
Net charge-offs/average loans ............... 0.63% 0.60% 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: August 1, 1997 By /s/ Paul Frenkiel
------------------------------------------
Paul Frenkiel
Chief Financial Officer
Dated: August 1, 1997 By /s/ Martin F. Egan
------------------------------------------
Martin F. Egan
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<CASH> 47841
<INT-BEARING-DEPOSITS> 1284
<FED-FUNDS-SOLD> 52550
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 172460
<INVESTMENTS-CARRYING> 685
<INVESTMENTS-MARKET> 696
<LOANS> 863530
<ALLOWANCE> 12745
<TOTAL-ASSETS> 1176012
<DEPOSITS> 818457
<SHORT-TERM> 125000
<LIABILITIES-OTHER> 15495
<LONG-TERM> 57300
0
0
<COMMON> 4988
<OTHER-SE> 91268
<TOTAL-LIABILITIES-AND-EQUITY> 1176012
<INTEREST-LOAN> 38295
<INTEREST-INVEST> 5582
<INTEREST-OTHER> 1267
<INTEREST-TOTAL> 45144
<INTEREST-DEPOSIT> 14176
<INTEREST-EXPENSE> 21340
<INTEREST-INCOME-NET> 23804
<LOAN-LOSSES> 1695
<SECURITIES-GAINS> 147
<EXPENSE-OTHER> 17904
<INCOME-PRETAX> 8440
<INCOME-PRE-EXTRAORDINARY> 5685
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5685
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
<YIELD-ACTUAL> 4.52
<LOANS-NON> 10109
<LOANS-PAST> 10241
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 13734
<CHARGE-OFFS> 3020
<RECOVERIES> 336
<ALLOWANCE-CLOSE> 12745
<ALLOWANCE-DOMESTIC> 12745
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
