Jefferson Bancshares, Inc. (NASDAQ: JFBI), the holding company for Jefferson Federal Bank, announced net income for the quarter ended March 31, 2011 of $260,000, or $0.04 per diluted share, compared to net income of $323,000, or $0.05 per diluted share, for the quarter ended March 31, 2010. For the nine months ended March 31, 2011, the Company reported net income of $878,000, or $0.14 per diluted share, compared to net income of $392,000, or $0.06 per diluted share, for the nine months ended March 31, 2010.
Anderson L. Smith, President and Chief Executive Officer, commented, “We continue to experience weak loan demand in our markets which has resulted in higher levels of cash on our balance sheet. During the quarter ended March 31, 2011, we took advantage of excess liquidity and prepaid $20.0 million of Federal Home Loan Bank (“FHLB”) advances with an average cost of 4.14% and incurred a prepayment penalty of $585,000. In addition, FHLB advances totaling $17.0 million with an average cost of 4.15% were prepaid and restructured. These actions will have a positive impact on future earnings, performance ratios and capital ratios. We continue to maintain a strong liquidity position and our regulatory capital ratios exceed those required to be considered “well capitalized” for regulatory purposes. Due to the prolonged economic downturn, asset quality and the adequacy of the loan loss reserve have remained our primary focal points. Although we continue to experience positive trends in the level of nonperforming loans and delinquencies, unemployment rates and deterioration in real estate values continue to cause uncertainty in our local economies. We recorded a loan loss provision totaling $1.4 million for the quarter ended March 31, 2011 in recognition of uncertain collateral values and the risk of additional credit losses.”
Net interest income remained relatively unchanged at $4.7 million for the three months ended March 31, 2011 compared to the same period in 2010. The net interest margin was 3.66% for the three months ended March 31, 2011 compared to 3.46% for the same period in 2010. The yield on interest-earning assets declined 39 basis points to 5.06% for the three months ended March 31, 2011 compared to 5.45% for the same period in 2010 due primarily to a shift from average loan balances into lower yielding investment and interest earning deposits. The cost of interest-bearing liabilities declined 58 basis points to 1.52% for the three months ended March 31, 2011 compared to 2.10% for the same period in 2010, due to lower interest rates on deposits and a lower level of FHLB advances. For the nine months ended March 31, 2011, net interest income decreased $332,000, or 2.4%, to $13.5 million while the net interest margin remained stable at 3.31% compared to the same period in 2010.