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Jefferson Bancshares, Inc. Announces Earnings For The Quarter Ended December 31, 2011

Jefferson Bancshares, Inc. (NASDAQ: JFBI), the holding company for Jefferson Federal Bank, announced a net loss for the quarter ended December 31, 2011 of $3.7 million, or $0.59 per diluted share, compared to net income of $359,000, or $0.06 per diluted share, for the quarter ended December 31, 2010. Financial results for the quarter ended December 31, 2011 were negatively impacted by a $5.7 million provision for loan losses compared to a provision of $950,000 for the quarter ended December 31, 2010. The increase in the provision for loan losses was attributable to higher realized and estimated losses. For the six months ended December 31, 2011, the Company reported a net loss of $4.6 million, or $0.74 per diluted share, compared to net income of $618,000, or $0.10 per diluted share, for the six months ended December 31, 2010. The provision for loan losses was $8.7 million for the six months ended December 31, 2011 compared to $950,000 for the comparable period in 2010.

Anderson L. Smith, President and Chief Executive Officer, commented, “The Bank’s performance for the quarter was negatively impacted by a significant provision for loan losses and other costs associated with the resolution of nonperforming assets. The decision to strengthen the allowance for loan losses was primarily based on our assessment of the effects of the economy as it relates to nonperforming loans. We have been able to decrease our cost of funds to offset the impact of reduced loan demand on earnings. Our liquidity position is strong and our capital ratios continue to exceed those required to be considered 'well capitalized' for regulatory purposes.”

Net interest income increased $140,000, or 3.2%, to $4.6 million for the three months ended December 31, 2011 compared to $4.4 million for the same period in 2010. The net interest margin was 3.77% for the three months ended December 31, 2011 compared to 3.11% for the same period in 2010. The yield on interest-earning assets increased 11 basis points to 4.76% for the three months ended December 31, 2011 compared to 4.65% for the same period in 2010 primarily due to a change in the mix of average earning assets. The cost of interest-bearing liabilities declined 55 basis points to 1.11% for the three months ended December 31, 2011 compared to 1.66% for the same period in 2010, due to lower interest rates paid on deposits and FHLB advances. For the six months ended December 31, 2011, net interest income increased $557,000, or 6.3%, to $9.3 million compared to $8.8 million for the six months ended December 31, 2010, while the net interest margin increased 75 basis points to 3.80% compared to 3.05% for the same period in 2010.

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