Jefferson Bancshares, Inc. Announces Earnings for the Quarter Ended September 30, 2013

  Jefferson Bancshares, Inc. Announces Earnings for the Quarter Ended
  September 30, 2013

Business Wire

MORRISTOWN, Tenn. -- October 29, 2013

Jefferson Bancshares, Inc. (NASDAQ: JFBI), the holding company for Jefferson
Federal Bank (the “Bank”), announced net income for the quarter ended
September 30, 2013 of $498,000, or $0.08 per diluted share, compared to net
income of $295,000, or $0.05 per diluted share, for the quarter ended
September 30, 2012. The improvement in net income is largely the result of
lower provision for loan losses and lower noninterest expense more than
offsetting a decrease in net interest income during the quarter ended
September 30, 2013.

Anderson L. Smith, President and Chief Executive Officer, commented, “We are
encouraged by our results for the quarter ended September 30, 2013, which
include positive net earnings, increases in capital and continued improvements
in asset quality. We have made significant progress in reducing our
non-performing assets to $15.2 million at September 30, 2013 compared to $19.2
million at June 30, 2013 and $24.7 million at September 30, 2012. Delinquency
levels have declined, with the 30-89 day category totaling $397,000 at
September 30, 2013, compared to $4.1 million for the same period in 2012.”

Net interest income decreased $167,000, or 4.1%, to $4.0 million for the
quarter ended September 30, 2013 compared to $4.1 million for the same period
in 2012. The decrease in net interest income is primarily due to lower yields
on loans, partially offset by lower rates on interest-bearing liabilities. The
net interest margin was 3.56% for the quarter ended September 30, 2013
compared to 3.57% for the same period in 2012.

Noninterest income increased 8.3% to $494,000 for the quarter ended September
30, 2013 compared to $456,000 for the same period in 2012.The increase was
primarily the result of a decline in net losses on sale of other real estate
owned (“OREO”) totaling $132,000 more than offsetting a decrease in mortgage
origination fee income totaling $98,000. The decrease in mortgage origination
fee income is due to a decline in refinance originations.

Noninterest expense decreased $184,000, or 4.7%, to $3.7 million for the
quarter ended September 30, 2013 compared to the same period in 2012.
Valuation adjustments and expenses on OREO decreased $111,000 for the three
month period ended September 30, 2013 compared to the same period in 2012.

At September 30, 2013, total assets were $498.6 million compared to $503.0
million at June 30, 2013. Net loans decreased $7.3 million, or 2.3%, to $314.0
million at September 30, 2013, compared to $321.3 million at June 30, 2013.
Although loan demand has increased during the quarter ended September 30,
2013, loan payoffs have exceeded the origination of new loans. Total deposits
decreased $3.7 million to $396.0 million at September 30, 2013 compared to
$399.6 million at June 30, 2013 primarily due to the planned runoff of higher
cost certificates of deposit. Certificates of deposit comprised 36.6% of total
deposits at September 30, 2013 compared to 37.1% of total deposits at June 30,
2013. The average cost of interest-bearing deposits for the three-month period
ended September 30, 2013 was 0.39% compared to 0.49% for the corresponding
period in 2012.

The Bank continues to be well-capitalized under regulatory requirements. At
September 30, 2013, the Bank's total risk-based, Tier 1 risk-based, and Tier 1
leverage capital ratios were 14.47%, 13.25%, and 9.35%, respectively, compared
to 14.18%, 12.93%, and 9.21%, respectively, at June 30, 2013. At September 30,
2013, the Company had 6,597,739 common shares outstanding with a book value of
$8.08 per common share.

Nonperforming assets totaled $15.2 million, or 3.05% of total assets, at
September 30, 2013, compared to $19.2 million, or 3.81% of total assets, at
June 30, 2013. Nonaccrual loans totaled $8.4 million at September 30, 2013
compared to $12.8 million at June 30, 2013. Nonaccrual loans with a current
payment status represented approximately 54% of total nonaccrual loans at June
30, 2013. Foreclosed real estate totaled $5.9 million at September 30, 2013
compared to $5.4 million at June 30, 2013. Net charge-offs for the three
months ended September 30, 2013 were $667,000, or 0.82% of average loans
annualized, compared to $391,000, or 0.48% of average loans annualized, for
the quarter ended September 30, 2012. The allowance for loan losses was $5.0
million, or 1.56% of total loans, at September 30, 2013 compared to $5.7
million, or 1.73% of total loans, at June 30, 2013. There was no provision for
loan losses recorded for the quarter ended September 30, 2013, compared to a
$300,000 provision for the quarter ended September 30, 2012. The decrease in
the provision for loan losses is the result of continued improvement 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
                        September 30, 2013     June 30, 2013
                        (Dollars in thousands)
                                                                 
Financial Condition
Data:
Total assets            $   498,565            $  503,028
Loans receivable, net       313,995               321,299
Cash and cash
equivalents, and            23,593                24,514
interest-bearing
deposits
Investment securities       100,960               96,024
Deposits                    395,972               399,642
Repurchase agreements       916                   551
FHLB advances               37,418                37,626
Subordinated                7,386                 7,358
debentures
Stockholders' equity    $   53,316             $  53,025
                                                                 
                                                                 
                        Three Months Ended September 30,
                        2013                   2012
                        (Dollars in thousands, except per
                        share data)
                                                                 
Operating Data:
Interest income         $   4,601              $  4,969
Interest expense            645                   846
Net interest income         3,956                 4,123
Provision for loan          -                     300
losses
Net interest income
after provision for         3,956                 3,823
loan losses
Noninterest income          494                   456
Noninterest expense         3,722                 3,906
Earnings before             728                   373
income taxes
Total income taxes          230                   78
Net earnings            $   498                $  295
                                                                 
                                                                 
Share Data:
Earnings per share,     $   0.08               $  0.05
basic
Earnings per share,     $   0.08               $  0.05
diluted
Book value per common   $   8.08               $  8.02
share
Weighted average
shares:
Basic                       6,272,957             6,261,233
Diluted                     6,272,957             6,261,233
                                                                 
                                                                 
                        Three Months Ended September 30,
                        2013                   2012
                        (Dollars in thousands)
                                                                 
Allowance for Loan
Losses:
Allowance at            $   5,660              $  5,852
beginning of period
Provision for loan          -                     300
losses
Recoveries                  97                    392
Charge-offs                (764        )        (783       )
Net Charge-offs            (667        )        (391       )
Allowance at end of     $   4,993             $  5,761      
period
                                                                 
Net charge-offs to
average outstanding         0.82        %         0.48       %
loans during the
period, annualized
                                                                 
                        At                     At                At
                        September 30, 2013     June 30, 2013     September 30,
                                                                 2012
                        (Dollars in thousands)
                                                                 
Nonperforming Assets:
Nonperforming loans     $   8,402              $  12,796         $  17,252
Nonperforming               930                   942               668
investments
Real estate owned           5,882                 5,433             6,753
Other nonperforming        -                 -                  31      
assets
                                                                 
Total nonperforming     $   15,214            $  19,171        $  24,704  
assets
                                                                 
                                                                 
                                                                 
                        Three Months Ended     Year Ended        Three Months
                                                                 Ended
                        September 30, 2013     June 30, 2013     September 30,
                                                                 2012
                                                                 
Performance Ratios:
Return on average           0.40        %         0.31       %      0.23    %
assets
Return on average           3.74        %         2.97       %      2.21    %
equity
Interest rate spread        3.49        %         3.55       %      3.47    %
Net interest margin         3.56        %         3.64       %      3.57    %
Efficiency ratio            83.64       %         84.16      %      85.38   %
Average
interest-earning
assets to average           113.02      %         112.76     %      112.72  %
interest-bearing
liabilities
                                                                 
Asset Quality Ratios:
Allowance for loan
losses as a percent         1.56        %         1.73       %      1.80    %
of total loans
Allowance for loan
losses as a percent         59.43       %         44.23      %      33.39   %
of nonperforming
loans
Nonperforming loans
as a percent of total       2.63        %         3.91       %      5.40    %
loans
Nonperforming assets
as a percent of total       3.05        %         3.81       %      4.87    %
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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