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Jefferson Bancshares Inc. Reports Operating Results (10-Q)

February 14, 2011 | About:
10qk

10qk

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Jefferson Bancshares Inc. (JFBI) filed Quarterly Report for the period ended 2010-12-31.

Jefferson Bancshares Inc. has a market cap of $26.58 million; its shares were traded at around $4 with and P/S ratio of 0.78. Mutual Fund and Other Gurus that owns JFBI: Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Net income for the three months ended December 31, 2010 was $359,000, or $0.06 per diluted share, compared to a net loss of $415,000, or ($0.07) per diluted share, for the corresponding period in 2009. Net income for the three months ended December 31, 2010 was favorably impacted by a $743,000 gain on investment securities and a decrease in the provision for loan and lease losses which more than offset an increase in write-downs and losses on other real estate owned (OREO).

Interest on loans decreased $707,000, or 10.4%, to $6.1 million for the three months ended December 31, 2010 primarily due to a lower average balance of loans. The average balance of loans decreased $50.0 million, or 11.0%, to $405.3 million, due to the combination of reduced loan demand, normal paydowns on existing loans, transfers to OREO and charge-offs. Reduced loan demand has resulted from continued economic weakness in the Banks market areas. The average yield on loans was 5.98% for the three months ended December 31, 2010 compared to 5.94% for the same period in 2009.

Total interest expense decreased $907,000 to $2.2 million for the three months ended December 31, 2010 compared to $3.1 million for the corresponding period in 2009 primarily due to lower market interest rates. The rate paid on interest-bearing liabilities declined 66 basis points to 1.66% while the average balance of interest-bearing liabilities decreased $5.6 million, to $525.3 million during the quarter ended December 31, 2010. The average rate paid on deposits was 1.35% for the three months ended December 31, 2010, compared to 2.02% for the same period in 2009. Average FHLB borrowings decreased $23.1 million to $67.1 million for the three months ended December 31, 2010 compared to $90.1 million for the three months ended December 31, 2009, while the average rate paid on borrowings decreased 17 basis points to 3.44%, as excess liquidity was used to repay FHLB advances.

The provision for loan losses for the three months ended December 31, 2010 was $950,000, compared to $1.5 million for the comparable period in 2009. Net charge-offs for the three months ended December 31, 2010 were $1.8 million compared to $924,000 for the comparable period in 2009. A significant portion of the loan charge-offs during the three months ended December 31, 2010 were against specific reserves and did not require replenishment of the allowance for loan and lease losses.

Noninterest income increased $640,000 to $1.4 million for the three months ended December 31, 2010 compared to $804,000 for the corresponding period in 2009 due primarily to an increase in gain on investment securities. The gain on investment securities was the result of a large unexpected prepayment of principal on a deeply discounted mortgage-backed security. The deep discount on this security originated from the GAAP required write down to fair value in connection with the Companys acquisition of State of Franklin Bancshares, Inc., which was consummated on October 31, 2008. Service charges and fees declined $103,000, or 24.6%, to $315,000 for the three months ended December 31, 2010 compared to the prior year period. Management believes fee revenue decreased due to heightened customer awareness of fees and a resultant increased management of account balances in the current economic downturn. Mortgage origination fee income increased $128,000 to $224,000 for the three months ended December 31, 2010 due to higher demand for residential mortgage refinancing resulting from the low interest rate environment.

Noninterest expense decreased $42,000 to $4.4 million for the three months ended December 31, 2010 compared to $4.3 million for the corresponding 2009 period. Noninterest expense for the three months ended December 31, 2010 was negatively impacted by an increase in OREO expense due to valuation adjustments and expenses related to the maintenance and disposition of foreclosed real estate. OREO expense increased $332,000 to $573,000 for the three months ended December 31, 2010 as compared to the corresponding period in 2009. Occupancy expense decreased $197,000 to $358,000 for the three months ended December 31, 2010, due to a decrease in amortization of leasehold improvements. Advertising expense decreased $33,000 to $59,000 during the three months ended December 31, 2010 as compared to $92,000 for the same period in 2009 due to Managements strategic decision to postpone marketing campaigns to future periods. Prepayment penalties totaling $190,000 were incurred in connection with the repayment of FHLB advances totaling $26.5 million during the three months ending December 31, 2010. Management believes the future savings in interest expense will more than offset the prepayment penalties. Other categories of noninterest expense decreased $188,000 to $731,000 for the three months ended December 31, 2010 due to cost control initiatives, declines in legal and professional fees and lower franchise tax expense.

Read the The complete Report

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