Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 2003 Commission File Number: 0-19212
JEFFERSONVILLE BANCORP
(Exact name of Registrant as specified in its charter)
New York 22-2385448
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
P. O. Box 398, Jeffersonville, New York 12748
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (845) 482-4000
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 proceeding 12 months (or for such shorter period that
the Registrant was required to file such report(s)), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date:
Number of Shares Outstanding
Class of Common Stock as of May 12, 2003
$0.50 par value 1,478,107
INDEX TO FORM 10-Q
Page
Part 1 FINANCIAL INFORMATION
Item 1 Consolidated Interim Financial Statements (Unaudited)
Consolidated Balance Sheets at
March 31, 2003 and December 31, 2002 1
Consolidated Statements of Income for the Three
Months Ended March 31, 2003 and 2002 2
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2003 and 2002 3
Notes to Unaudited Consolidated Interim Financial Statements 4-5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-13
Item 3 Quantitative and Qualitative Disclosures about Market Risk 13
Item 4 Controls & Procedures 13
Part 2 OTHER INFORMATION
Item 1 Legal Proceedings 14
Item 2 Changes in Securities and Use of Proceeds 14
Item 3 Defaults upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
Signatures 15
Index to Exhibits 18
Jeffersonville Bancorp and Subsidiary
Consolidated Balance Sheets
March 31, December 31,
2003 2002
------------ ------------
(Unaudited)
ASSETS
Cash and due from banks $ 13,511,000 $ 12,874,000
Federal funds sold 11,600,000 --
Securities available for sale, at fair value 99,306,000 117,942,000
Securities held to maturity, estimated fair value of $4,517,000
at March 31, 2003 and $4,789,000 at December 31, 2002 4,350,000 4,673,000
Loans, net of allowance for loan losses of $3,168,000
at March 31, 2003 and $3,068,000 at December 31, 2002 172,660,000 168,909,000
Accrued interest receivable 1,691,000 1,933,000
Premises and equipment, net 3,170,000 3,230,000
Federal Home Loan Bank stock 1,500,000 1,900,000
Other real estate owned 80,000 126,000
Cash surrender value of bank-owned life insurance 11,885,000 11,734,000
Other assets 1,452,000 1,704,000
------------ ------------
TOTAL ASSETS $321,205,000 $325,025,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Demand deposits (non-interest bearing) $ 50,563,000 $ 49,675,000
NOW and super NOW accounts 36,410,000 35,630,000
Savings and insured money market deposits 79,926,000 79,094,000
Time deposits 87,209,000 88,393,000
------------ ------------
TOTAL DEPOSITS 254,108,000 252,792,000
Federal Home Loan Bank borrowings 30,000,000 30,000,000
Short-term debt 296,000 6,433,000
Accrued expenses and other liabilities 3,612,000 3,303,000
------------ ------------
TOTAL LIABILITIES $288,016,000 $292,528,000
------------ ------------
Stockholders' equity:
Series A preferred stock, no par value:
2,000,000 shares authorized, none issued -- --
Common stock, $0.50 par value; 2,250,000 shares
authorized ; 1,589,262 shares
issued at March 31, 2003 and December 31, 2002 795,000 795,000
Paid-in capital 8,072,000 8,072,000
Treasury stock, at cost; 111,155 shares at March 31, 2003
and at December 31, 2002 (1,108,000) (1,108,000)
Retained earnings 24,764,000 23,664,000
Accumulated other comprehensive income 666,000 1,074,000
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 33,189,000 32,497,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $321,205,000 $325,025,000
============ ============
See accompanying notes to unaudited consolidated interim financial
statements.
1
Jefferson Bancorp and Subsidiary
Consolidated Statements of Income
(Unaudited)
For the Three Months
Ended March 31,
2003 2002
---------- ----------
INTEREST INCOME
Loan interest and fees $3,450,000 $3,380,000
Securities:
Taxable 1,031,000 1,369,000
Non-taxable 438,000 242,000
Federal funds sold 11,000 19,000
---------- ----------
TOTAL INTEREST INCOME 4,930,000 5,010,000
---------- ----------
INTEREST EXPENSE
Deposits 732,000 1,116,000
Federal Home Loan Bank borrowings 323,000 320,000
Other 3,000 8,000
---------- ----------
TOTAL INTEREST EXPENSE 1,058,000 1,444,000
---------- ----------
NET INTEREST INCOME 3,872,000 3,566,000
Provision for loan losses 150,000 100,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,722,000 3,466,000
---------- ----------
NON-INTEREST INCOME
Service charges 486,000 443,000
Increase in cash surrender value
of bank-owned life insurance 151,000 98,000
Net security gains 149,000 4,000
Other non-interest income 208,000 208,000
---------- ----------
TOTAL NON-INTEREST INCOME 994,000 753,000
---------- ----------
NON-INTEREST EXPENSES
Salaries and employee benefits 1,484,000 1,258,000
Occupancy and equipment expenses 467,000 403,000
Other real estate owned expenses, net 36,000 32,000
Other non-interest expenses 702,000 748,000
---------- ----------
TOTAL NON-INTEREST EXPENSES 2,689,000 2,441,000
---------- ----------
Income before income taxes 2,027,000 1,778,000
Income tax expense (601,000) (530,000)
---------- ----------
NET INCOME $1,426,000 $1,248,000
========== ==========
Basic earnings per common share $ 0.96 $ 0.84
========== ==========
Average common shares outstanding 1,478,000 1,478,000
========== ==========
See accompanying notes to unaudited consolidated interim financial statements.
2
Jeffersonville Bancorp and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months
Ended March 31,
2003 2002
---- ----
OPERATING ACTIVITIES
Net income $ 1,426,000 $ 1,248,000
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for loan losses 150,000 100,000
Write down of other real estate owned -- 5,000
Gain on sales of other real estate owned (28,000) (61,000)
Depreciation and amortization 162,000 198,000
Net increase in cash surrender value
of bank-owned life insurance (151,000) (98,000)
Net security gains (149,000) (4,000)
Decrease in accrued interest receivable 242,000 157,000
Decrease(increase) in other assets 280,000 (590,000)
Increase in accrued
expenses and other liabilities 309,000 413,000
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,241,000 1,368,000
----------- -----------
INVESTING ACTIVITIES
Proceeds from maturities and calls:
Securities available for sale 16,548,000 5,570,000
Securities held to maturity 418,000 1,633,000
Proceeds from sales of securities available for sale 11,900,000 5,186,000
Purchases:
Securities available for sale (10,100,000) (13,093,000)
Securities held to maturity (95,000) (1,392,000)
Disbursements for loan originations, net of
principal collections (3,901,000) (1,902,000)
Call of Federal Home Loan Bank stock 400,000 --
Net purchases of premises and equipment (102,000) (359,000)
Capital improvements made on other real estate -- (229,000)
Proceeds from sales of other real estate owned 74,000 1,260,000
----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 15,142,000 (3,326,000)
----------- -----------
FINANCING ACTIVITIES
Net increase in deposits 1,316,000 2,372,000
(Decrease) increase in short-term debt (6,137,000) 367,000
Cash dividends paid (325,000) (296,000)
----------- -----------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (5,146,000) 2,443,000
----------- -----------
NET INCREASE IN
CASH AND CASH EQUIVALENTS 12,237,000 485,000
Cash and cash equivalents at beginning of period 12,874,000 10,844,000
----------- -----------
Cash and cash equivalents at end of period $ 25,111,000 $ 11,329,000
============ ============
Supplemental imformation:
Cash paid for:
Interest $ 1,105,000 $ 1,429,000
Income taxes 43,000 166,000
See accompanying notes to unaudited consolidated interim financial
statements.
3
JEFFERSONVILLE BANCORP
AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
March 31, 2003
(Unaudited)
A. Financial Statement Basis of Presentation
The accompanying unaudited interim consolidated statements include
the accounts of Jeffersonville Bancorp (the "Company") and its wholly
owned susbsidiary, The First National Bank of Jeffersonville
(collectively, the Company and its subsidiary are referred to herein as
the Company). In the opinion of Management of the Company, the
accompanying unaudited consolidated interim financial statements contain
all adjustments necessary to present the financial position as of March
31, 2003 and December 31, 2002, and the results of operations and cash
flows for the three month periods ended March 31, 2003 and 2002. All
adjustments are normal and recurring. The accompanying unaudited
consolidated interim financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X and should be
read in conjunction with the Company's consolidated year-end financial
statements, including notes thereto, which are included in the 2002
Annual Report on Form 10-K and notes thereto.
B. Earnings per Share
Basic earnings per share amounts were calculated for the three
month periods ended March 31, 2003 and 2002 based on weighted average
common shares outstanding of 1,478,000 and 1,478,000, respectively.
There were no dilutive securities during either period. Earnings per
share were $0.96 for the quarter ended March 31, 2003, as compared to
$0.84 per share for the same period in 2002.
C. Comprehensive Income
Comprehensive income for the three-month periods ended March 31,
2003 and 2002 was $1,018,000 and $759,000, respectively. The following
summarizes the components of the Company's other comprehensive income
(loss) for the three-month periods:
Three Months Ended March 31, 2003
Net unrealized holding losses arising during the
period, net of tax (pre-tax amount of $541,000) $(320,000)
Reclassification adjustment for net gains realized
in net income during the period, net of tax
(pre-tax amount of $149,000) $ (88,000)
---------
Other comprehensive loss $(408,000)
=========
4
Three Months Ended March 31, 2002
Net unrealized holding losses arising during the
period, net of tax (pre-tax amount of $823,000) $(486,000)
Reclassification adjustment for net gains realized
in net income during the period, net of tax
(pre-tax amount of $4,000) $ (3,000)
---------
Other comprehensive loss $(489,000)
=========
D. Recent Accounting Pronouncements
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in
a Restructuring). This statement is effective for exit or disposal
activities initiated after December 31, 2002. The Company will review
the impact of applying this standard to any exit or disposal activities
initiated after December 31, 2002.
In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure - an Amendment of
FASB Statement No. 123, to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, this statement amends
the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the
effect of the method used on reported results. This statement is
effective for fiscal years ending after December 15, 2002 and was
adopted by the Company on January 1, 2003. Accordingly, the adoption of
this statement did not have an impact on the Company's consolidated
financial statements. The Company has no stock based employee
compensation arrangements covered by this statement.
E. Guarantees
The Company does not issue any guarantees that would require
liability-recognition or disclosure, other than its standby letters of
credit. Standby letters of credit are conditional commitments issued by
the Company to guarantee the performance of a customer to a third party.
Standby letters of credit generally arise in connection with lending
relationships. The credit risk involved in issuing these instruments is
essentially the same as that involved in extending loans to customers.
Contingent obligations under standby letters of credit totaled
approximately $506,000 at March 31, 2003 and represent the maximum
potential future payments the Company could be required to make.
Typically, these instruments have terms of twelve months or less and
expire unused; therefore, the total amounts do not necessarily represent
future cash requirements. Each customer is evaluated individually for
creditworthiness under the same underwriting standards used for
commitments to extend credit and on-balance sheet instruments. Company
policies governing loan collateral apply to standby letters of credit at
the time of credit extension. Loan-to-value ratios are generally
consistent with loan-to-value requirements for other commercial loans
secured by similar types of collateral. The fair value of the Company's
standby letters of credit at March 31, 2003 was insignificant.
5
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward Looking Statements
In addition to historical information, this report includes certain
forward-looking statements with respect to the financial condition;
results of operations and business of the Parent Company and the Bank
based on current management expectations. The Company's ability to
predict results or the effect of future plans and strategies is
inherently uncertain and actual results, performance or achievements
could differ materially from those management expectations. Factors that
could cause future results to vary from current management expectations
include, but are not limited to, general economic conditions,
legislative and regulatory changes, monetary and fiscal policies of the
federal government, changes in tax policies, rates and regulations,
changes in interest rates, deposit flows, the cost of funds, demand for
loan products, demand for financial services, competition, changes in
the quality or composition of the Bank's loan and securities portfolios,
changes in accounting principles, and other economic, competitive,
governmental, and technological factors affecting the Company's
operations, markets, products, services and prices.
A. Overview - Financial Condition
During the period from December 31, 2002 to March 31, 2003, total assets
decreased $4,028,000 or 1.2%. Decreases in securities available for
sale, FHLB stock, accrued interest receivable and other assets were
partially offset by increases in cash, cash equivalents and loans.
Securities available for sale decreased from $117,942,000 at year end to
$99,306,000 at March 31, 2003, a decrease of $18,636,000 or 15.8%. Net
loans increased from $168,909,000 at year end 2002 to $172,660,000 at
March 31, 2003, an increase of $3,751,000 or 2.2%.
Deposits increased from $252,792,000 at December 31, 2002 to
$254,108,000 at March 31, 2003, an increase of $1,316,000 or 0.5%.
Demand deposits increased from $49,675,000 at December 31, 2002 to
$50,563,000 at March 31, 2003, an increase of $888,000 or 1.8%. Time
deposits decreased from $88,393,000 at December 31, 2002 to $87,209,000
at March 31, 2003, a decrease of $1,184,000 or 1.3%.
Total stockholders' equity increased $692,000 or 2.1% from
$32,497,000 at December 31, 2002 to $33,189,000 at March 31, 2003. This
increase was the result of net income of $1,426,000 less cash dividends
of $325,000 and a $408,000 decrease in accumulated other comprehensive
income.
6
Loan Portfolio Composition
March 31, 2003 December 31, 200
Amount Percent Amount Percent
REAL ESTATE LOANS
Residential $ 74,428 41.9% $ 72,559 41.7%
Commercial 46,745 23.3 44,807 25.7
Home Equity 15,639 8.8 14,825 8.5
Farm Land 2,016 1.1 1,828 1.1
Construction 3,416 1.9 3,414 2.0
-------- ----- -------- -----
$142,244 80.1% $137,433 79.0%
-------- ----- -------- -----
OTHER LOANS
Commercial Loans $ 16,997 9.6 $ 17,445 10.0
Consumer Install Loans 16,837 9.5 17,314 9.9
Other Consumer Loans 1,267 0.7 1,537 0.9
Agriculture 253 0.2 375 0.2
-------- ----- -------- -----
35,354 19.9 36,671 21.0
-------- ----- -------- -----
Total Loans $177,598 100.0% $174,104 100.0%
-------- ----- -------- -----
Unearned Discounts (1,770) (2,127)
Allowance for L/L (3,168) (3,068)
-------- --------
Total Loans, Net $172,660 $168,909
Summary of Deposits as of :
March 31, 2003 December 31, 2002
Demand deposits (non-interest bearing) $ 50,563 $ 49,675
NOW and super NOW accounts 36,410 35,630
Savings and insured money market deposits 79,926 79,094
Time deposits 87,209 88,393
-------- --------
Total deposits: $254,108 $252,792
-------- --------
B. Allowance for Loan Losses
The allowance for loan losses reflects management's assessment of
the inherent loss risk in the loan portfolio, local and regional
economies, and past loan experience. The provision for loan losses was
$150,000 for the three months ended March 31, 2003 compared to $100,000
for the three months ended March 31, 2002. The increase in the provision
is considered prudent by management due to the continued increase in the
volume of lending activity. Total charge offs for the 2003 three month
period were $96,000 compared to $50,000 for the same period in the prior
year, while recoveries decreased from $65,000 for the 2002 period to
$46,000 for the 2003 period. The amounts represent a net charge off of
$50,000 in the first quarter of 2003 versus a net recovery of $15,000
for the same period in the prior year. Based on management's analysis of
the loan portfolio, management believes the current level of the
allowance for loan losses is adequate.
7
Changes in the allowance for loan losses are summarized as follows for
the three month periods ended March 31:
2003 2002
---- ----
Balance at beginning of period $3,068,000 $2,614,000
Provision for loan losses 150,000 100,000
Loans charged off (96,000) (50,000)
Recoveries 46,000 65,000
---------- ----------
Balance at end of period $3,168,000 $2,729,000
========== ==========
Annualized net charge offs (recoveries) as
a percentage of average oustanding loans 0.11% (0.04%)
Allowance for loan losses to:
Total loans 1.80% 1.66%
Total non-performing loans 143.9% 100.9%
C. Non Accrual and Past Due Loans
The Company places a loan on nonaccrual status when collectability of
principal or interest is doubtful, or when either principal or interest
is 90 days or more past due and the loan is not well secured and in the
process of collection. Interest payments received on nonaccrual loans are
applied as a reduction of the principal balance when concern exists as to
the ultimate collection of principal
Non-performing loans are summarized as follows at March 31:
2003 2002
---- ----
Non-accrual loans $ 930,000 $2,219,000
Loans past due 90 days or more
and still accruing interest 1,272,000 487,000
---------- ----------
Total non-performing loans $2,202,000 $2,706,000
Non-performing loans as a percentage ---------- ----------
of total loans 1.25% 1.64%
---------- ----------
As of March 31, 2003 and 2002, the recorded investment in loans
considered to be impaired under Statement of Financial Accounting
Standards ("SFAS") No.114 totaled $981,000 and $1,692,000, respectively.
There was no allowance for loan impairment under SFAS No.114 at either
date, primarily due to prior charge offs and the adequacy of collateral
values on these loans.
We review all commercial real estate and commercial loans for
impairment. These loans are considered to be impaired if they are on
non-accrual status or past due 90 or more days. Impaired loans that are
over $5,000 are individually assessed to determine whether a loan's
carrying value is in excess of the fair value of the collateral or the
present value of the loan's cash flows. Smaller balance homogenous loans
that are collectively evaluated for impairment, such as residential
mortgage loans and consumer loans, are specifically excluded from the
impairment review. We had $981,094 and $689,746 of loans classified
impaired at March 31, 2003 and March 31, 2002, respectively.
In addition to the non-performing loans, we have identified through
normal internal credit review procedures, $6,573,928 in loans that
warrant increased attention as of March 31, 2003. These loans are
classified as substandard as they exhibit certain risk factors, which
have the potential to cause them to become non-performing. Accordingly,
these credits are reviewed on at least a quarterly basis and were
considered in our evaluation of the allowance for loan losses at March
31, 2003. None of these loans was considered impaired and as such, no
specific impairment allowance was established for these.
8
2003
AVERAGE % OF INTEREST AVERAGE
BALANCE ASSETS PAID YIELD
ASSETS:
Investment securities
Taxable securities 75,490 23.38% 1,031 5.46%
Tax exempt securities 37,977 11.76% 730 7.69%
-------- ------ ----- -----
Total securities 113,467 35.15% 1,761 6.21%
-------- ------ ----- -----
Short term investments 4,711 1.46% 11 0.93%
Loans(net of unearned discount)
Real estate mortgages 124,711 38.63% 2,472 7.93%
Home equity loans 15,196 4.71% 247 6.50%
Time and demand loans 14,428 4.47% 209 5.79%
Installment loans 17,219 5.33% 449 10.43%
Other loans 2,655 0.82% 73 11.00%
-------- ------ ----- -----
Total loans 174,209 53.96% 3,450 7.92%
-------- ------ ----- -----
Total interest earning assets 292,387 90.57% 5,222 7.14%
-------- ------ ----- -----
Reserve for loan losses (3,097) (0.96%)
Unrealized gains and losses on portfolio 3,205 0.99%
Cash and due from banks(demand) 11,842 3.67%
Fixed assets(net) 3,217 1.00%
Bank owned life insurance 11,802 3.66%
Other assets 3,475 1.08%
-------- ------
TOTAL ASSETS $322,831 100.00%
======== ======
LIABILITIES AND STKHLDERS EQUITY:
Now and super now accounts $ 37,990 11.77% 44 0.46%
Savings and insured money market 78,897 24.44% 145 0.74%
Time deposits 87,506 27.11% 543 2.48%
-------- ------ ----- -----
Total interest bearing deposits 204,393 63.31% 732 1.43%
-------- ------ ----- -----
Federal funds purchased and other
short term debt 1,015 0.31% 3 1.18%
Long term debt 30,000 9.29% 323 4.31%
-------- ------ ----- -----
Total interest bearing
liabilities 235,408 72.92% 1,058 1.80%
-------- ------ ----- -----
Demand deposits 51,722 16.02%
Other liabilities 3,100 0.96%
-------- ------
Total liabilities 290,230 89.90%
Stockholders equity 32,601 10.10%
-------- ------
TOTAL LIABILITIES
AND STK EQUITY $322,831 100.00%
-------- ------
Net interest income $ 4,164
========
Net interest spread 5.35%
====
Net interest margin 5.70%
====
9
D. Capital
In January 2003, the Board of Directors allocated $1,000,000 for
the repurchase of common stock on the open market. There were no
repurchased shares from January 1, 2003 through March 31, 2003.
Under the Federal Reserve Bank's risk-based capital rules, the
Company's Tier I risk-based capital was 17.5% and total risk-based
capital was 18.8% of risk-weighted assets at March 31, 2003. These
risk-based capital ratios are well above the minimum regulatory
requirements of 4.0% for Tier I capital and 8.0% for total capital. The
Company's leverage ratio (Tier I capital to average assets) of 10.1% at
March 31, 2003 is well above the 4.0% minimum regulatory requirement.
The following table shows the Company's actual capital measurements
compared to the minimum regulatory requirements at March 31, 2003.
TIER I CAPITAL
Stockholders' equity, excluding accumulated
other comprehensive income $ 32,523,000
TIER II CAPITAL
Allowance for loan losses (1) 2,322,000
------------
Total risk-based capital $ 34,845,000
------------
Risk-weighted assets (2) $185,784,000
------------
Average assets $322,831,000
------------
RATIOS
Tier I risk-based capital (minimum 4.0%) 17.5%
Total risk-based capital (minimum 8.0%) 18.8%
Leverage (minimum 4.0%) 10.1%
(1) The allowance for loan losses is limited to 1.25% of
risk-weighted assets for the purpose of this calculation.
(2) Risk-weighted assets have been reduced for excess allowance for
loan losses excluded from total risk-based capital
Consolidated Average Balance Sheet as of March 31, 2003
Liquidity
Liquidity is the ability to provide sufficient cash flow to meet
financial commitments such as additional loan demand and withdrawals of
existing deposits. The Company's primary sources of liquidity are
dividends from the Bank, its deposit base; FHLB borrowings; repayments
and maturities on loans; short-term assets such as federal funds and
short-term interest bearing deposits in banks; and maturities and sales
of securities available for sale. These sources are available in amounts
sufficient to provide liquidity to meet the Company's ongoing funding
requirements. The ability of the Bank to pay dividends is subject to
various regulatory limitations. The Bank's membership in the FHLB of New
York enhances liquidity in the form of overnight and 30 day lines of
credit of approximately $29.9 million, which may be used to meet
unforeseen liquidity demands. There were Federal funds sold of
$11,600,000 at a rate of 1.4375% available for use March 31, 2003. Six
separate FHLB term advances totaling $30.0 million at March 31, 2003
were being used to fund securities leverage transactions.
10
In 2003, cash generated from operating activities amounted to $2.2
million and cash generated from investing activities amounted to $15.1
million. These amounts were offset by amounts used in financing
activities of $5.1 million, resulting in a net increase in cash and cash
equivalents of $12.2 million. See the Consolidated Statements of Cash
Flows for additional information.
Maturity Schedule of Time Deposits of $100,000 or More
Deposits
Due three months or less $ 7,949,000
Over three months through six months 3,707,000
Over six months through twelve months 3,375,000
Over twelve months 4,439,000
-----------
$19,470,000
===========
Management anticipates much of these maturing deposits to rollover
at maturity, and that liquidity will be adequate to meet funding
requirements.
11
E. Results of Operations
Net income for the first three months of 2003 increased by $178,000 to
$1,426,000 compared to $1,248,000 for the same period in 2002. An
increase of $306,000 in net interest income and $241,000 in non-interest
income were offset by increases of $248,000 in non-interest expenses and
$50,000 in the provision for loan losses. The Company's annualized
return on average assets was 1.8% in the current quarter compared to
1.6% in the same period last year. The annualized return on average
stockholders' equity was 17.5% and 17.4% for the first three months of
2003 and 2002, respectively.
Tax equivalent interest income increased $87,000 or 1.7% in the
first three month's of 2003 compared to the same period in 2002,
primarily due to an increase in average earning assets partially offset
by a decrease in assets yields. The yield on investment securities
decreased 4 basis points from 6.25% in 2002 to 6.21% in 2003. The yield
on the total loan portfolio decreased by 36 basis points in the quarter
ended March 31, 2003 compared to the first quarter of 2002. All loan
category rates decreased. The average yield on real estate mortgage
loans, the major portion of the loan portfolio, decreased 13 basis
points to 7.93% from 8.06% for the three month period. The overall yield
on interest earning assets decreased 22 basis points from 7.36% for the
three months ended March 31, 2002 to 7.14% for the same period in 2003.
The total average balance for earning assets was $292,387,000 for the
three month period ended March 31, 2003 compared to $279,089,000 for the
same three month period in 2002, an increase of $13,298,000 or 4.8%. An
increase in average loans of $10,901,000 accounted for 82.0% of this
increase. An increase in average investments of $2,281,000 accounted for
17.2% of the increase.
The yield on interest bearing liabilities decreased by 75 basis
points for the three month period ended March 31, 2003 as compared to
the same period in 2002. The overall net interest margin increased 41
basis points from 5.29% in the first quarter of 2002 to 5.70% in the
first quarter of 2003.
Non-interest income was $994,000 in the first three months of 2003
compared to the same period in 2002, an increase of $241,000 or 32.0%.
Increases in service charge income and the increase in the cash
surrender value of bank-owned life insurance amounted to $96,000 or
39.8% of this increase. Net security gains increased from $4,000 to
$149,000 for the first quarter, an increase of $145,000. The gains
resulted from the sales of $11,100,000 of callable agency securities
which were to be called during the next six months.
Non-interest expenses were $2,689,000 for the first three months of
2003 compared to $2,441,000 for the same period in 2002, an increase of
$248,000 or 10.2%. This increase reflects a $226,000 increase in
salaries and employee benefits costs due to normal salary increases and
increased costs for health care benefits. An increase of $64,000 in
occupancy and equipment expenses is primarily due to additional
technology expenditures
F. Critical Accounting Policies
Pursuant to recent SEC guidance, management of public companies are
encouraged to evaluate and disclose those accounting policies that are
judged to be critical policies, or those most important to the portrayal
of the Company's financial condition and results, and that require
management's most difficult subjective or complex judgments. Management
of the Company considers the accounting policy relating to the
12
allowance for loan losses to be a critical accounting policy given the
inherent uncertainty in evaluating the levels of the allowance required
to cover credit losses in the portfolio and the material effect that
such judgments can have on the results of operations. The allowance for
loan losses is maintained at a level deemed adequate by management based
on an evaluation of such factors as economic conditions in the Company's
market area, past loan loss experience, the financial condition of
individual borrowers, and underlying collateral values based on
independent appraisals. While management uses available information to
recognize losses on loans, future additions to the allowance for loan
losses may be necessary based on changes in economic conditions and
values of real estate particularly in Sullivan County. In the event that
the casino gambling proposals do not progress, collateral underlying
certain real estate loans could lose value which could lead to future
additions to the allowance for loan losses. In addition, Federal
regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses and may
require the Company to recognize additions to the allowance based on
their judgments about information available to them at the time of their
examination, which may not be currently available to management. There
are no new accounting standards that are expected to have a material
impact on the Company's consolidated financial statements.
Item 3: Quantitative and Qualitative Disclosures about Market Risk
The Company's most significant form of market risk is interest rate
risk, as the majority of the assets and liabilities are sensitive to
changes in interest rates. There have been no material changes in the
Company's interest rate risk position since December 31, 2002. Other
types of market risk, such as foreign exchange rate risk and commodity
price risk, do not arise in the normal course of the Company's business
activities.
ITEM 4. CONTROLS & PROCEDURES
(a) The Company's management, including the Chief Executive Officer and
the Chief Financial Officer evaluated the effectiveness of the design
and operation of the Company's disclosure controls and procedures (as
defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as
amended) (the "Exchange Act") as of a date (the "Evaluation Date")
within 90 days prior to the filing date of this report. Based upon that
evaluation, the Company's management, including the Chief Executive
Officer and the Chief Financial Officer concluded that, as of the
Evaluation Date, the Company's disclosure controls and procedures were
effective in timely alerting them to any material information relating
to the Company and its subsidiaries required to be included in the
Company's Exchange Act filings.
(b) There were no significant changes made in the Company's internal
controls or in other factors that that could significantly affect these
internal controls subsequent to the date of the evaluation performed by
the Company's Chief Executive Officer and the Chief Financial Officer.
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PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to its business, to which Jeffersonville Bancorp or any
of its subsidiaries is a party or of which any of their property is the
subject.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable
(b) Not applicable
(c) Not applicable
(d) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Not applicable
(b) Not applicable
(c) Not applicable
(d) Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Additional Exhibit - Section 906 Certification of Chief
Executive Officer
99.2 Additional Exhibit - Section 906 Certification of Chief
Financial Officer
(b) Reports on Form 8-K
Current Report on Form 8-K, filed with the SEC on April 24, 2003.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JEFFERSONVILLE BANCORP
/s/ Raymond Walter
Raymond Walter
President and Chief Executive Officer
/s/ Charles E. Burnett
Charles E. Burnett
Chief Financial Officer and Treasurer
May 13, 2003
15
Certification
I, Raymond Walter, certify that:
1. I have reviewed this annual report on Form 10-Q of Jeffersonville Bancorp;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c)presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operations of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ Raymond Walter
Raymond Walter
President and Chief Executive Officer
May 13, 2003
16
Certification
I, Charles E. Burnett, certify that:
1. I have reviewed this annual report on Form 10-Q of Jeffersonville Bancorp;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operations of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ Charles E. Burnett
Charles E. Burnett
Chief Financial Officer and Treasurer
May 13, 2003
17
Exhibit 99.1
Written Statement of Principal Executive Officer Pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Jeffersonville Bancorp (the
"Company") on Form 10-K for the period ending December 31, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned hereby certifies to his knowledge on the date
hereof, that:
1. The Report fully complies with the requirements of section 13(a) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the Company.
/s/ Raymond Walter
Raymond Walter
President and Chief Executive Officer
A signed original of this written statement required by Section 906 has been
provided to Jeffersonville Bancorp and will be retained by Jeffersonville
Bancorp and furnished to the Securities and Exchange Commission or its staff
upon request.
Exhibit 99.2
Written Statement of Principal Financial Officer Pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Jeffersonville Bancorp (the
"Company") on Form 10-K for the period ending December 31, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned hereby certifies to his knowledge on the date hereof, that:
1. The Report fully complies with the requirements of section 13(a) of the
Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ Charles E. Burnett
Charles E. Burnett
Chief Financial Officer and Treasurer
A signed original of this written statement required by Section 906 has been
provided to Jeffersonville Bancorp and will be retained by Jeffersonville
Bancorp and furnished to the Securities and Exchange Commission or its staff
upon request.
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