Jefferson Bancshares, Inc. Announces Earnings for the Quarter and Nine Months Ended March 31, 2013

  Jefferson Bancshares, Inc. Announces Earnings for the Quarter and Nine
  Months Ended March 31, 2013

Business Wire

MORRISTOWN, Tenn. -- April 25, 2013

Jefferson Bancshares, Inc. (NASDAQ: JFBI), the holding company for Jefferson
Federal Bank (the “Bank”), announced net income for the quarter ended March
31, 2013 of $386,000, or $0.06 per diluted share, compared to net income of
$334,000, or $0.05 per diluted share, for the quarter ended March 31, 2012.
For the nine months ended March 31, 2013, the Company reported net income of
$1.0 million, or $0.16 per diluted share, compared to a net loss of $4.3
million, or $0.69 per diluted share, for the nine months ended March 31, 2012.
The provision for loan losses was $800,000 for the nine months ended March 31,
2013 compared to $9.3 million for the comparable period in 2012.

Anderson L. Smith, President and Chief Executive Officer, commented, “We are
pleased to report another quarter of profitability and continued improvement
in asset quality trends. We have focused our efforts on improving asset
quality and are pleased with the steady progress we have made in reducing the
level of adversely classified assets. However, as with many financial
institutions, historically low interest rates and the slow economic recovery
continue to present an ongoing challenge for the Company.”

Net interest income decreased $199,000, or 4.7%, to $4.0 million for the
quarter ended March 31, 2013 compared to $4.2 million for the same period in
2012. The decrease in net interest income is primarily due to lower average
balances on loans, partially offset by lower average balances and lower rates
on deposits. The net interest margin was 3.63% for the quarter ended March 31,
2013 compared to 3.60% for the same period in 2012. For the nine months ended
March 31, 2013, net interest income decreased $1.3 million, or 9.4%, to $12.3
million compared to $13.6 million for the nine months ended March 31, 2012,
while the net interest margin decreased 12 basis points to 3.63% compared to
3.75% for the same period in 2012.

Noninterest income increased $74,000, or 14.6%, to $582,000 for the quarter
ended March 31, 2013 compared to $508,000 for the same period in 2012 due
primarily to an $89,000 increase in net gain on sale of other real estate
owned (“OREO”). For the nine months ended March 31, 2013, noninterest income
decreased $70,000, or 4.1%, to $1.6 million compared to $1.7 million for the
same period in 2012.The decrease was the result of a decline in service
charges and fees totaling $61,000, an increase in net losses on sale of OREO
totaling $41,000 and a decrease in gain on sale of investment securities
totaling $27,000 more than offsetting an increase in mortgage origination fee
income totaling $110,000.

Noninterest expense increased $101,000, or 2.7%, to $3.9 million for the
quarter ended March 31, 2013 and decreased $1.1 million, or 8.9%, to $11.7
million for the nine months ended March 31, 2013 compared to the same periods
in 2012. Valuation adjustments and expenses on OREO decreased $145,000 and
$1.5 million, respectively, for the three and nine month periods ended March
31, 2013 compared to the same periods in 2012. Compensation expense increased
$218,000 and $534,000, respectively, for the three and nine month periods
ended March 31, 2013 due to increases in commissions, salary expense, bonus
accruals, and health insurance costs.

At March 31, 2013, total assets were $506.0 million compared to $522.9 million
at June 30, 2012. Net loans decreased $10.9 million, or 3.4%, to $311.6
million at March 31, 2013, compared to $322.5 million at June 30, 2012, due
primarily to reduced loan demand combined with normal paydowns on existing
loans. Reduced loan demand is primarily the result of continued economic
weakness in the Bank’s market areas.

Total deposits decreased $18.5 million, or 4.4%, to $405.4 million at March
31, 2013 compared to $423.9 million at June 30, 2012. Certificates of deposit
decreased $19.6 million, or 11.5%, to $150.8 million while transaction
accounts increased $1.1 million, to $254.6 million at March 31, 2013. The
average cost of interest-bearing deposits for the three month period ended
March 31, 2013 was 0.41% compared to 0.71% for the corresponding period in
2012. Certificates of deposit comprised 37.2% of total deposits at March 31,
2013 compared to 40.2% of total deposits at June 30, 2012.

The Bank continues to be well-capitalized under regulatory requirements. At
March 31, 2013, the Bank's total risk-based, Tier 1 risk-based, and Tier 1
leverage capital ratios were 14.31%, 13.05%, and 9.04%, respectively, compared
to 13.42%, 12.17%, and 8.23%, respectively, at June 30, 2012. At March 31,
2013, the Company had 6,604,585 common shares outstanding with a book value of
$8.11 per common share.

Nonperforming assets totaled $20.1 million, or 3.98% of total assets, at March
31, 2013, compared to $25.2 million, or 4.82% of total assets, at June 30,
2012. Nonaccrual loans totaled $12.9 million at March 31, 2013 compared to
$18.6 million at June 30, 2012. Nonaccrual loans with a current payment status
represented approximately 82% of total nonaccrual loans at March 31, 2013.
Foreclosed real estate totaled $6.5 million at March 31, 2013 compared to $6.1
million at June 30, 2012. Net charge-offs for the three months ended March 31,
2013 were $232,000, or 0.29% of average loans annualized, compared to $4.7
million, or 5.22% of average loans annualized, for the quarter ended March 31,
2012. The allowance for loan losses was $5.7 million, or 1.79% of total loans,
at March 31, 2013 compared to $5.9 million, or 1.78% of total loans, at June
30, 2012 and $6.8 million, or 1.95% of total loans, at March 31, 2012. The
provision for loan losses totaled $200,000 for the quarter ended March 31,
2013, compared to $600,000 for the quarter ended March 31, 2012.

Jefferson Bancshares, Inc. is the holding company for Jefferson Federal Bank,
a Tennessee-chartered savings bank headquartered in Morristown, Tennessee.
Jefferson Federal Bank is a community oriented financial institution offering
traditional financial services with offices in Hamblen, Knox, Washington and
Sullivan Counties, Tennessee. The Company’s stock is listed on the NASDAQ
Global Market under the symbol “JFBI.” More information about Jefferson
Bancshares and Jefferson Federal Bank can be found at its website:
www.jeffersonfederal.com.

This press release, as well as other written communications made from time to
time by the Company and its subsidiaries and oral communications made from
time to time by authorized officers of the Company, may contain statements
relating to the future results of the Company (including certain projections
and business trends) that are considered “forward-looking statements” as
defined in the Private Securities Litigation Reform Act of 1995 (the “PSLRA”).
Such forward-looking statements may be identified by the use of such words as
“believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “intend”
and “potential.” For these statements, the Company claims the protection of
the safe harbor for forward-looking statements contained in the PSLRA.

The Company cautions you that a number of important factors could cause actual
results to differ materially from those currently anticipated in any
forward-looking statement. Such factors include, but are not limited to:
prevailing economic and geopolitical conditions; changes in interest rates,
loan demand, real estate values and competition; changes in accounting
principles, policies and guidelines; changes in any applicable law, rule,
regulation or practice with respect to tax or legal issues; and other
economic, competitive, governmental, regulatory and technological factors
affecting the Company’s operations, pricing, products and services and other
factors that may be described in the Company’s annual report on Form 10-K and
quarterly reports on Form 10-Q as filed with the Securities and Exchange
Commission. The forward-looking statements are made as of the date of this
release, and, except as may be required by applicable law or regulation, the
Company assumes no obligation to update the forward-looking statements or to
update the reasons why actual results could differ from those projected in the
forward-looking statements.

                                                              
JEFFERSON BANCSHARES, INC.
                                                                   
                    At               At
                    March 31,        June 30,
                    2013             2012
                    (Dollars in thousands)
                                                                   
Financial
Condition Data:
Total assets        $506,014         $522,930
Loans receivable,   311,628          322,499
net
Cash and cash
equivalents, and    35,465           56,693
interest-bearing
deposits
Investment          99,383           83,483
securities
Deposits            405,361          423,882
Repurchase          607              398
agreements
FHLB advances       37,644           37,863
Subordinated        7,330            7,245
debentures
Stockholders'       $53,579          $52,629
equity
                                                                   
                                                                   
                    Three Months Ended March 31,    Nine Months Ended March
                                                    31,
                    2013             2012           2013           2012
                    (Dollars in thousands, except   (Dollars in thousands,
                    per share data)                 except per share data)
                                                                   
Operating Data:
Interest income     $4,781           $5,302         $14,681        $17,197
Interest expense    751              1,073          2,386          3,631
Net interest        4,030            4,229          12,295         13,566
income
Provision for       200              600            800            9,273
loan losses
Net interest
income after        3,830            3,629          11,495         4,293
provision for
loan losses
Noninterest         582              508            1,619          1,689
income
Noninterest         3,873            3,772          11,740         12,887
expense
Earnings before     539              365            1,374          (6,905    )
income taxes
Total income        153              31             345            (2,614    )
taxes
Net earnings        $386             $334           $1,029         ($4,291   )
                                                                   
                                                                   
Share Data:
Earnings per        $0.06            $0.05          $0.16          ($0.69    )
share, basic
Earnings per        $0.06            $0.05          $0.16          ($0.69    )
share, diluted
Book value per      $8.11            $7.85          $8.11          $7.85
common share
Weighted average
shares:
Basic               6,292,214        6,261,939      6,271,036      6,237,203
Diluted             6,292,214        6,261,939      6,271,036      6,237,203
                                                                   
                                                                   
                    Three Months Ended March 31,    Nine Months Ended March
                                                    31,
                    2013             2012           2013           2012
                    (Dollars in thousands)          (Dollars in thousands)
                                                                   
Allowance for
Loan Losses:
Allowance at
beginning of        $5,702           $10,880        $5,852         $8,181
period
Provision for       200              600            800            9,273
loan losses
Recoveries          27               175            427            257
Charge-offs         (259       )     (4,848    )    (1,409    )    (10,904   )
Net Charge-offs     (232       )     (4,673    )    (982      )    (10,647   )
Allowance at end    $5,670          $6,807        $5,670        $6,807    
of period
                                                                   
Net charge-offs
to average
outstanding loans   0.29       %     5.22      %    0.41      %    3.82      %
during the
period,
annualized
                                                                   
                    At               At             At
                    March 31,        June 30,       March 31,
                    2013             2012           2012
                    (Dollars in thousands)
                                                                   
Nonperforming
Assets:
Nonperforming       $12,937          $18,562        $18,468
loans
Nonperforming       719              207            277
investments
Real estate owned   6,489            6,075          7,823
Other
nonperforming       -               348           147       
assets
                                                                   
Total
nonperforming       $20,145         $25,192       $26,715   
assets
                                                                   
                                                                   
                                                                   
                    Nine Months      Year Ended     Nine Months
                    Ended                           Ended
                    March 31,        June 30,       March 31,
                    2013             2012           2012
                                                                   
Performance
Ratios:
Return on average   0.27       %     (0.74     %)   (1.05     %)
assets
Return on average   2.56       %     (7.37     %)   (10.44    %)
equity
Interest rate       3.54       %     3.60      %    3.62      %
spread
Net interest        3.63       %     3.72      %    3.74      %
margin
Efficiency ratio    84.45      %     83.38     %    84.69     %
Average
interest-earning
assets to average   112.66     %     111.99    %    111.99    %
interest-bearing
liabilities
                                                                   
Asset Quality
Ratios:
Allowance for
loan losses as a    1.79       %     1.78      %    1.95      %
percent of total
loans
Allowance for
loan losses as a
percent of          43.83      %     31.53     %    36.86     %
nonperforming
loans
Nonperforming
loans as a          4.07       %     5.65      %    5.30      %
percent of total
loans
Nonperforming
assets as a         3.98       %     4.82      %    5.00      %
percent of total
assets

Contact:

Jefferson Bancshares, Inc.
Anderson L. Smith, 423-586-8421
President and Chief Executive Officer
or
Jane P. Hutton, 423-586-8421
Chief Financial Officer
 
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