Jefferson Bancshares, Inc. Announces Earnings for the Quarter and Fiscal Year Ended June 30, 2013

  Jefferson Bancshares, Inc. Announces Earnings for the Quarter and Fiscal
  Year Ended June 30, 2013

Business Wire

MORRISTOWN, Tenn. -- July 30, 2013

Jefferson Bancshares, Inc. (NASDAQ: JFBI), the holding company for Jefferson
Federal Bank (the “Bank”), announced net income for the quarter ended June 30,
2013 of $565,000, or $0.09 per diluted share, compared to net income of
$291,000, or $0.05 per diluted share, for the quarter ended June 30, 2012. The
improvement in net income reflects a reduction in the provision for loan
losses more than offsetting a decrease in net interest income.

For the fiscal year ended June 30, 2013, the Company reported net income of
$1.6 million, or $0.25 per diluted share, compared to a net loss of $4.0
million, or $0.64 per diluted share, for the fiscal year ended June 30, 2012.
The provision for loan losses was $800,000 for the fiscal year ended June 30,
2013 compared to $9.9 million for the prior fiscal year.

Anderson L. Smith, President and Chief Executive Officer, commented, “We are
pleased with the steady progress our organization has made over the last
twelve months, despite the challenging economic and interest rate environment.
We were profitable for the sixth consecutive quarter, with net earnings of
$565,000 for the three months ended June 30, 2013 compared to $291,000 for the
prior year period. Asset quality continues to improve as charge-offs,
nonperforming assets, and delinquencies have decreased. Our loan portfolio
experienced growth during the quarter and we are cautiously optimistic that
loan demand will continue to increase as we begin a new fiscal year.”

Net interest income decreased $220,000, or 5.1%, to $4.1 million for the
quarter ended June 30, 2013 compared to $4.3 million for the same period in
2012. The decrease in net interest income is primarily due to lower average
balances and lower yields on loans, partially offset by lower average balances
and lower rates on deposits. The net interest margin was 3.67% for the quarter
ended June 30, 2013 compared to 3.68% for the same period in 2012. For the
fiscal year ended June 30, 2013, net interest income decreased $1.5 million,
or 8.3%, to $16.4 million compared to $17.9 million for the fiscal year ended
June 30, 2012, while the net interest margin decreased 8 basis points to 3.64%
compared to 3.72% for the prior fiscal year.

Noninterest income remained relatively unchanged at $494,000 for the quarter
ended June 30, 2013 compared to $491,000 for the same period in 2012. For the
fiscal year ended June 30, 2013, noninterest income decreased $67,000, or
3.1%, to $2.1 million compared to $2.2 million for the prior fiscal year.The
decrease was primarily the result of a decline in service charges and fees
totaling $70,000 and an increase in net losses on sale of other real estate
owned (“OREO”) totaling $97,000 more than offsetting an increase in mortgage
origination fee income totaling $139,000.

Noninterest expense remained stable at $3.8 million for the quarter ended June
30, 2013 and decreased $1.1 million, or 6.9%, to $15.5 million for the fiscal
year ended June 30, 2013 compared to the same periods in 2012. Valuation
adjustments and expenses on OREO decreased $105,000 and $1.6 million,
respectively, for the three and twelve month periods ended June 30, 2013
compared to the same periods in 2012. Compensation expense increased $18,000
and $552,000, respectively, for the three and twelve month periods ended June
30, 2013 due to increases in commissions, salary expense, and health insurance
costs.

At June 30, 2013, total assets were $503.0 million compared to $522.9 million
at June 30, 2012. Net loans decreased slightly to $321.3 million at June 30,
2013, compared to $322.5 million at June 30, 2012. Total deposits decreased
$24.2 million, or 5.7%, to $399.6 million at June 30, 2013 compared to $423.9
million at June 30, 2012 primarily due to the planned runoff of higher cost
certificates of deposit. Certificates of deposit comprised 37.1% of total
deposits at June 30, 2013 compared to 40.2% of total deposits at June 30,
2012. The average cost of interest-bearing deposits for the three-month period
ended June 30, 2013 was 0.40% compared to 0.58% for the corresponding period
in 2012.

The Bank continues to be well-capitalized under regulatory requirements. At
June 30, 2013, the Bank's total risk-based, Tier 1 risk-based, and Tier 1
leverage capital ratios were 14.18%, 12.93%, and 9.21%, respectively, compared
to 13.42%, 12.17%, and 8.23%, respectively, at June 30, 2012. At June 30,
2013, the Company had 6,601,091 common shares outstanding with a book value of
$8.03 per common share.

Nonperforming assets totaled $19.2 million, or 3.81% of total assets, at June
30, 2013, compared to $25.2 million, or 4.82% of total assets, at June 30,
2012. Nonaccrual loans totaled $12.8 million at June 30, 2013 compared to
$18.6 million at June 30, 2012. Nonaccrual loans with a current payment status
represented approximately 71% of total nonaccrual loans at June 30, 2013.
Foreclosed real estate totaled $5.4 million at June 30, 2013 compared to $6.1
million at June 30, 2012. Net charge-offs for the three months ended June 30,
2013 were $10,000, or 0.01% of average loans annualized, compared to $1.6
million, or 1.84% of average loans annualized, for the quarter ended June 30,
2012. The allowance for loan losses was $5.7 million, or 1.73% of total loans,
at June 30, 2013 compared to $5.9 million, or 1.78% of total loans, at June
30, 2012. There was no provision for loan losses recorded for the quarter
ended June 30, 2013, compared to $600,000 for the quarter ended June 30, 2012.
The decrease in the provision for loan losses is the result of improvements in
asset quality.

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
                     June 30, 2013   June 30, 2012
                     (Dollars in thousands)
                                                                      
Financial
Condition Data:
Total assets         $ 503,028       $ 522,930
Loans                  321,299         322,499
receivable, net
Cash and cash
equivalents, and       24,514          56,693
interest-bearing
deposits
Investment             96,024          83,483
securities
Deposits               399,642         423,882
Repurchase             551             398
agreements
FHLB advances          37,626          37,863
Subordinated           7,358           7,245
debentures
Stockholders'        $ 53,025        $ 52,629
equity
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                     Three Months Ended June 30,      Year Ended June 30,
                     2013            2012             2013            2012
                     (Dollars in thousands, except    (Dollars in thousands, except
                     per share data)                  per share data)
                                                                      
Operating Data:
Interest income      $ 4,820         $ 5,235          $ 19,501        $ 22,432
Interest expense       744             939              3,130           4,570
Net interest           4,076           4,296            16,371          17,862
income
Provision for          -               600              800             9,873
loan losses
Net interest
income after           4,076           3,696            15,571          7,989
provision for
loan losses
Noninterest            494             491              2,113           2,180
income
Noninterest            3,806           3,806            15,546          16,693
expense
Earnings before        764             381              2,138           (6,524    )
income taxes
Total income           199             90               544             (2,524    )
taxes
Net earnings         $ 565           $ 291            $ 1,594           ($4,000   )
                                                                      
                                                                      
Share Data:
Earnings per         $ 0.09          $ 0.05           $ 0.25            ($0.64    )
share, basic
Earnings per         $ 0.09          $ 0.05           $ 0.25            ($0.64    )
share, diluted
Book value per       $ 8.03          $ 7.94           $ 8.03          $ 7.94
common share
Weighted average
shares:
Basic                  6,275,519       6,261,914        6,270,523       6,243,347
Diluted                6,275,519       6,261,914        6,270,523       6,243,347
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                     Three Months Ended June 30,      Year Ended June 30,
                     2013            2012             2013            2012
                     (Dollars in thousands)           (Dollars in thousands)
                                                                      
Allowance for
Loan Losses:
Allowance at
beginning of         $ 5,670         $ 6,807          $ 5,852         $ 8,181
period
Provision for          -               600              800             9,873
loan losses
Recoveries             12              677              439             934
Charge-offs           (22       )    (2,232    )     (1,431    )    (13,136   )
Net Charge-offs       (10       )    (1,555    )     (992      )    (12,202   )
Allowance at end     $ 5,660        $ 5,852         $ 5,660        $ 5,852     
of period
                                                                      
Net charge-offs
to average
outstanding            0.01      %     1.84      %      0.31      %     3.36      %
loans during the
period,
annualized
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                     At              At
                     June 30, 2013   June 30, 2012
                     (Dollars in thousands)
                                                                      
Nonperforming
Assets:
Nonperforming        $ 12,796        $ 18,562
loans
Nonperforming          942             207
investments
Real estate            5,433           6,075
owned
Other
nonperforming         -             348       
assets
                                                                      
Total
nonperforming        $ 19,171       $ 25,192    
assets
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                     Year Ended      Year Ended
                     June 30, 2013   June 30, 2012
                                                                      
Performance
Ratios:
Return on              0.31      %     (0.74     %)
average assets
Return on              2.97      %     (7.37     %)
average equity
Interest rate          3.55      %     3.60      %
spread
Net interest           3.64      %     3.72      %
margin
Efficiency ratio       84.16     %     83.38     %
Average
interest-earning
assets to              112.76    %     111.99    %
average
interest-bearing
liabilities
                                                                      
Asset Quality
Ratios:
Allowance for
loan losses as a       1.73      %     1.78      %
percent of total
loans
Allowance for
loan losses as a
percent of             44.23     %     31.53     %
nonperforming
loans
Nonperforming
loans as a             3.91      %     5.65      %
percent of total
loans
Nonperforming
assets as a            3.81      %     4.82      %
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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