HopFed Bancorp, Inc. Reports First Quarter Results

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HOPKINSVILLE, Ky.--(BUSINESS WIRE)--

HopFed Bancorp, Inc. HFBC (the "Company"), the holding company for Heritage Bank USA, Inc. (the "Bank"), today reported results for the three month period ended March 31, 2015. For the three month period ended March 31, 2015, the Company's net income was $1.4 million, or $0.20 per share, basic and diluted, compared to net income of $354,000, or $0.05 per share basic and diluted, for the three month period ended March 31, 2014.

Commenting on the first quarter results, John E. Peck, President and Chief Executive Officer, said, "The Company's loan portfolio grew by $9.4 million during the three month period ended March 31, 2015, ending the quarter at $548.7 million. The Company is beginning to find success in our new loan production office in Nashville, Tennessee. We are excited about the team of professional bankers we have assembled and the opportunities that Nashville affords the Company."

Mr. Peck concluded, "The Company's investment in a subordinated debenture was returned to accrual status after receiving past due interest of approximately $830,000. For the three month period ended March 31, 2015, the receipt of past due interest added approximately $0.08 per share to our net income and approximately 0.40% to our net interest margin. Excluding the receipt of past due interest, the Company's net interest margin would have been 3.38% during the three month period ended March 31, 2015. Our improved net interest margin is the result of actions taken last year to reduce our interest expense. The Company's interest expense for the three month period ended March 31, 2015, was $1.6 million compared to $2.3 million for the three month period ended March 31, 2014, and $2.0 million for the three month period ended December 31, 2014."

Financial Highlights

  • The Company purchased 725,341 shares of its common stock in the quarter at a weighted average price of $13.40 per share. At March 31 2015, the Company holds 903,724 shares in treasury stock with a weighted average cost of $12.47 per share.
  • At March 31, 2015, the Company's tangible book value was $14.10 per share and tangible common equity ratio was 10.13%. The Company re-issued 600,000 shares of common stock at $13.14 per share to establish the HopFed Bancorp, Inc. 2015 Employee Stock Purchase Plan (the "ESOP"). The ESOP holds approximately 8.5% of the Company's common shares outstanding at March 31, 2015. At March 31, 2015, the Company has no committed ESOP shares. As such, all unearned ESOP shares are excluded from the Company's earnings per share calculations and our tangible book value per share computation.
  • The Bank's Tier 1 Leverage Ratio, Common Equity Tier 1 Capital Ratio and Total Risk Based Capital Ratio at March 31, 2015, were 10.53%, 16.36% and 17.44%, respectively. The Company's Tier 1 Leverage Ratio, Common Equity Tier 1 Capital Ratio and Total Risk Based Capital Ratio at March 31, 2015, were 10.73%, 16.64% and 17.71%, respectively.

Asset Quality

At March 31, 2015, the Company's level of non-accrual loans totaled $2.2 million, as compared to $3.2 million at December 31, 2014. A summary of non-accrual loans at March 31, 2015, and December 31, 2014, is as follows:

           
March 31 2015 December 31, 2014
(Dollars in Thousands)
 
One-to-four family mortgages $ 1,235 $ 1,501
Multi-family --- 95
Land --- 215
Non-residential real estate 542 1,159
Farmland --- 115
Commercial loans   347   90
Total non-accrual loans $ 2,124 $ 3,175
 

At March 31, 2015, non-accrual loans plus other real estate owned totaled $4.5 million, or 0.50% of assets, as compared to $5.1 million, or 0.55% of total assets, at December 31, 2014. A summary of the activity in other real estate owned for the three month period ended March 31, 2015, is as follows:

   
Activity During 2015
               

Gain
(Loss)

   

Balance
12/31/2014

   

Foreclosures

   

Sale
Proceeds

   

Reduction
In Values

   

on
Sale

   

Balance
3/31/2015

(Dollars in Thousands)
One-to-four family mortgages $ 159 55 (46 ) --- 7 $ 175
Land 1,768 --- --- --- --- 1,768
Non-residential real estate   --- 409 ---   --- ---   409
 
Total $ 1,927 464 (46 ) --- 7 $ 2,352
 

Asset Quality (continued)

At March 31, 2015, the Company's level of loans classified as substandard was $31.9 million as compared to $37.4 million at December 31, 2014. At March 31, 2015, the Company's classified loan to risk based capital ratio was approximately 31.1%. The Company's specific reserve for impaired loans was $1.8 million at March 31, 2015, and $1.5 million at December 31, 2014. A summary of the level of classified loans net of unearned fees, at March 31, 2015, is as follows:

                           
Specific Allowance
Impaired Loans Allowance for

March 31, 2015

Special for Performing
Pass Mention Substandard Doubtful Total Impairment Loans
(Dollars in Thousands)
One-to-four family mortgages $ 144,453 --- 3,382 --- $ 147,835 $ 136 $ 1,022
Home equity line of credit 33,099 243 765 --- 34,107 --- 163
Junior liens 1,992 39 19 --- 2,050 --- 11
Multi-family 17,128 1,944 2,997 --- 22,069 --- 69
Construction 26,736 --- --- --- 26,736 --- 110
Land 15,453 45 10,716 --- 26,214 766 464
Non-residential real estate 148,306 297 11,392 --- 159,995 703 1,308
Farmland 41,350 692 241 --- 42,283 --- 389
Consumer loans 14,628 --- 186 --- 14,814 45 346
Commercial loans   76,822 143 2,190 ---   79,155   140   498
 
Total $ 519,967 3,403 31,888 --- $ 555,258 $ 1,790 $ 4,380
 

Net Interest Income

For the three month period ended March 31, 2015, the Company's net interest income was $7.6 million, compared to $6.3 million for each of the three month periods ended December 31, 2014, and March 31, 2014, respectively. For the three month period ended March 31, 2015, the Company's net interest margin was 3.78%, as compared to 3.06% for the three month period ended December 31, 2014, and 3.00% for the three month period ended March 31, 2014. In the three month period ended March 31, 2015, the Company's net interest margin excluding the receipt of past due interest was 3.38%.

For the three month period ended March 31, 2015, and March 31, 2014, interest income on loans was $6.3 million, respectively. For the three month period ended March 31, 2015, the average yield on loans was 4.65%, compared to 4.75% for the three month periods ended March 31, 2014, and 4.74% for the three month period ended December 31, 2014.

For the three month period ended March 31, 2015, interest expense was $1.6 million, declining $368,000 and $705,000 as compared to the three month periods ended December 31, 2014 and March 31, 2014, respectively. For the three month period ending March 31, 2015, the average cost of interest bearing liabilities was 0.94%, as compared to 1.20% and 1.23% for the three month periods ended December 31, 2014 and March 31, 2014, respectively.

Net Interest Income (continued)

The majority of interest expense reductions were the result of a reduction in the balance and cost of FHLB advances. For the three months ended March 31, 2015, the Company's average balance of funds borrowed from the FHLB was $23.2 million and our weighted average cost was 1.19%. For the three month period ended March 31, 2014, the average balance of FHLB borrowings was $45.8 million and our weighted average cost was 3.79%.

Non-interest Income

Non-interest income for the three month periods ended March 31, 2015, and December 31, 2014, was $1.9 million, respectively, as compared to $1.6 million for the three month period ended March 31, 2014. For the three month period ended March 31, 2015, service charge income declined by $135,000 and $64,000, respectively, as compared to the three month periods ended December 31, 2014 and March 31, 2014. For the three month period ended March 31, 2015, the Company's income on the origination of mortgage loans was $177,000, as compared to $212,000 and $58,000 during the three month periods December 31, 2014, and March 31, 2014, respectively.

The Company recognized net gains on the sale of securities of $366,000, $30,000, and $13,000 for the three month periods ended March 31, 2015, December 31, 2014, and March 31, 2014, respectively. For the three month period ended March 31, 2015, the sale of securities was accomplished to fund loan growth, the liquidation of FHLB advances and the purchase of treasury shares.

Non-interest Expense

On a linked quarter basis, the Company's non-interest expenses declined by $4.1 million. For the three months ended December 31, 2014, the Company paid a $2.5 million penalty on the prepayment of FHLB debt and recognized a $1.8 million loss on the sale of a loan. Excluding the prepayment penalty and the loss on the sale of the loans, the Company's linked quarter non-interest expenses increased by $179,000. On a linked quarter basis, salaries and benefits increased by $330,000 due to a $91,000 increases in payroll taxes, a $61,000 increase in healthcare benefits expense. On a linked quarter basis, expenses related to other real estate owned increased $64,000 due to expenses related to foreclosures that occurred in the three month period ended March 31, 2015.

For the three month period ended March 31, 2015, non-interest expenses increased by $146,000 as compared to the three month period ended March 31, 2014. At March 31, 2015, the Company's compensation and benefits expense increased by $389,000 as compared to March 31, 2014. The increase in compensation was the result of annual pay increases and benefits cost plus the addition of a new loan production office in Nashville.

Balance Sheet

At March 31, 2015, consolidated assets were $897.1 million, a decline of $38.7 million as compared to December 31, 2014. For the three month period ended March 31, 2015, the Company experienced a $7.7 million decrease in time deposits, a $15.0 million decrease in FHLB borrowings, a $4.7 million decrease in cash balances, and a $9.4 million increase in net loan balances. For the three month period ended March 31, 2015, the Company funded loan growth and its reduction of liabilities by reducing its available for sale securities portfolio by $43.7 million, to $259.9 million.

The Company

Prior to June 5, 2013, HopFed Bancorp, Inc. was a federally chartered savings and loan holding company with Heritage Bank as its wholly owned thrift subsidiary. On June 5, 2013, Heritage Bank's legal name was changed to Heritage Bank USA, Inc. and its charter was converted to a Kentucky state chartered commercial bank with the Kentucky Department of Financial Institutions and the Federal Deposit Insurance Corporation as its regulators. Also on June 5, 2013, HopFed Bancorp, Inc. became a non-member federally chartered commercial bank holding company regulated by the Federal Reserve Board. HopFed Bancorp, Inc. is the holding company for Heritage Bank USA, Inc. headquartered in Hopkinsville, Kentucky. The Bank has eighteen offices in western Kentucky and middle Tennessee and a loan production office in Nashville, Tennessee. The Company has two additional operating divisions including Heritage Wealth Management of Murray, Kentucky, Hopkinsville, Kentucky, and Pleasant View, Tennessee, which offers a broad line of financial services. Heritage Mortgage Services of Clarksville, Tennessee, offers long term fixed rate 1- 4 family mortgages loans that are originated for the secondary market in all communities in the Company's general market area. The Bank offers a broad line of banking and financial products and services with the personalized focus of a community banking organization. More information about HopFed Bancorp and Heritage Bank USA, Inc. may be found on its website www.bankwithheritage.com.

Forward-Looking Information

Information contained in this press release, other than historical information, may be considered forward-looking in nature and is subject to various risk, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. Among the key factors that may have a direct bearing on the Company's operating results, performance or financial condition are competition and the demand for the Company's products and services, and other factors as set forth in filings with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations. Certain tabular presentations may not reconcile because of rounding.

       

HOPFED BANCORP, INC.

Consolidated Balance Sheets

(Dollars in thousands)

 

Assets

March 31, 2015 December 31, 2014
(unaudited)
 
Cash and due from banks $ 26,150 34,389
Interest-earning deposits   9,599 6,050
Cash and cash equivalents 35,749 40,439
Federal Home Loan Bank stock, at cost 4,428 4,428
Securities available for sale 259,867 303,628
Loans held for sale 2,051 1,444

Loans receivable, net of allowance for loan losses of $6,170 at March 31, 2015 and $6,289 at December 31, 2014

548,740 539,264
Accrued interest receivable 4,228 4,576
Real estate and other assets owned 2,352 1,927
Bank owned life insurance 10,055 9,984
Premises and equipment, net 23,282 22,940
Deferred tax assets 1,092 2,261
Intangible asset 17 33
Other assets   5,245 4,861
Total assets $ 897,106 935,785
 
 

Liabilities and Stockholders' Equity

Liabilities:
Deposits:
Non-interest-bearing accounts $ 110,828 115,051
Interest-bearing accounts
Interest-bearing checking accounts 189,882 186,616
Savings and money market accounts 102,284 97,726
Other time deposits   324,215 331,915
Total deposits 727,209 731,308
 

Advances from Federal Home Loan Bank

19,000 34,000
Repurchase agreements 45,466 57,358
Subordinated debentures 10,310 10,310
Advances from borrowers for taxes and insurance 793 513
Dividends payable 272 301
Accrued expenses and other liabilities   3,180 3,593
Total liabilities   806,230 837,383
 

This information is preliminary and based on company data available at the time of the presentation.

 
       

HOPFED BANCORP, INC.

Consolidated Balance Sheets, Continued

(Dollars in thousands)

 
March 31, 2015 December 31, 2014
(unaudited)
 

Stockholders' equity

Preferred stock, par value $0.01 per share; authorized 500,000 shares; no shares issued and outstanding at March 31, 2015, and December 31, 2014

--- ---

Common stock, par value $.01 per share; authorized 15,000,000 shares; 7,949,665 issued and 7,045,941 outstanding at March 31, 2015, and 7,949,665 issued and 7,171,282 outstanding at December 31, 2014

79 79
Additional paid-in-capital 58,515 58,466
Retained earnings 46,827 45,729

Treasury stock- common (at cost, 903,724 shares at March 31, 2015, and 778,383 shares at December 31, 2014)

(11,267 ) (9,429 )

Unearned ESOP Shares (at cost, 600,000 shares at March 31, 2015 and no shares at December 31, 2014)

(7,884 ) ---
Accumulated other comprehensive income, net of taxes   4,606   3,557  
 
Total stockholders' equity   90,876   98,402  
 
Total liabilities and stockholders' equity $ 897,106   935,785  
 

This information is preliminary and based on company data available at the time of the presentation.

 
   

HOPFED BANCORP, INC.

Consolidated Condensed Statements of Income

(Dollars in thousands)

Unaudited

 
For the Three Month Periods
Ended March 31,
   
2015 2014
Interest and dividend income:
Loans receivable $6,290 6,327
Investment in securities, taxable 2,448 1,779
Nontaxable securities available for sale 453 544
Interest-earning deposits 4 8
Total interest and dividend income 9,195 8,658
 
Interest expense:
Deposits 1,260 1,471
Advances from Federal Home Loan Bank 69 434
Repurchase agreements 120 249
Subordinated debentures 184 184
Total interest expense 1,633 2,338
 
Net interest income 7,562 6,320
Provision for loan losses 215 380
 

Net interest income after provision for loan losses

7,347 5,940
 
Non-interest income:
Service charges 714 778
Merchant card income 270 259
Mortgage origination revenue 177 58
Gain on sale of securities 366 13
Income from bank owned life insurance 71 95
Financial services commission 159 206
Other operating income 156 189
Total non-interest income 1,913 1,598
 

This information is preliminary and based on company data available at the time of the presentation.

 
   

 

HOPFED BANCORP, INC.

Consolidated Condensed Statements of Income, Continued

(Dollars in thousands, except share and per share data)

(Unaudited)

 

For the Three Month Periods

Ended March 31,
   
2015 2014
Non-interest expenses:
Salaries and benefits $ 4,184 3,795
Occupancy expense 738 909
Data processing expense 692 728
Other state taxes 248 246
Intangible amortization expense 16 32
Professional services expense 329 287
Deposit insurance and examination expense 117 197
Advertising expense 306 314
Postage and communications expense 132 143
Supplies expense 146 145
Loss (gain) on sale of real estate owned (7 ) 23
Real estate owned expenses 137 130
Other operating expenses   432     375  
Total non-interest expense   7,470     7,324  
 
Income before income tax expense 1,790 214
Income tax expense (benefit)   435     (140 )
 
Net income $ 1,355     354  
Net income per share:
Basic $ 0.20   $ 0.05  
Fully diluted $ 0.20   $ 0.05  
Dividend per share $ 0.04   $ 0.04  
 
Weighted average shares outstanding - basic   6,732,456     7,416,716  
Weighted average shares outstanding - diluted   6,732,456     7,416,716  
 

This information is preliminary and based on company data available at the time of the presentation.

 
       

HOPFED BANCORP, INC.

Selected Financial Data

(Dollars in thousands)

 

For the Three
Months Ended

 
    Change from
3/31/2015 12/31/2014 Prior Quarter
 
Interest and dividend income:
Loans receivable $ 6,290 6,282 8
Investment in securities, taxable 2,448 1,513 935
Nontaxable securities available for sale 453 492 (39 )
Interest-earning deposits   4 7   (3 )
Total interest and dividend income   9,195 8,294   901  
 
Interest expense:
Deposits 1,260 1,290 (30 )
Advances from Federal Home Loan Bank 69 373 (304 )
Repurchase agreements 120 152 (32 )
Subordinated debentures   184 186   (2 )
Total interest expense   1,633 2,001   (368 )
 
Net interest income   7,562 6,293   1,269  
Provision for loan losses   215 (1,500 ) 1,715  
 

Net interest income after provision for loan losses

  7,347 7,793   (446 )
 
Non-interest income:
Service charges 714 849 (135 )
Merchant card income 270 275 (5 )
Mortgage origination revenue 177 212 (35 )
Gain on sale of securities 366 30 336
Income from bank owned life insurance 71 81 (10 )
Financial services commission 159 243 (84 )
Other operating income   156 214   (58 )
 
Total non-interest income   1,913 1,904   9  
 

This information is preliminary and based on company data available at the time of the presentation

 
       

HOPFED BANCORP, INC.

Selected Financial Data

(Dollars in thousands, except share and per share data)

 
Months Ended  
    Change from
3/31/2015 12/31/2014 Prior Quarter
 
Non-interest expenses:
Salaries and benefits $ 4,184 3,854 330
Occupancy expense 738 719 19
Data processing expense 692 693 (1 )
Other state taxes 248 346 (98 )
Intangible amortization 16 16 ---
Professional services 329 306 23
Deposit insurance and examination 117 162 (45 )
Advertising expense 306 318 (12 )
Postage and communications 132 154 (22 )
Supplies expense 146 168 (22 )
Loss (gain)on sale of real estate owned (7 ) 48 (55 )
Real estate owned expenses 137 73 64
Loss on sale of loan --- 1,781 (1,781 )
Loss on extinguishment of debt --- 2,510 (2,510 )
Other operating expenses   432     434   (2 )
 
Total non-interest expense   7,470     11,582   (4,112 )
 
Net income (loss) before income tax expense 1,790 (1,885 ) 3,675
Income tax expense (benefit)   435     (852 ) 1,287  
 
Net income (loss) $ 1,355     (1,033 ) 2,388  

Net income (loss) available (attributable) to common stockholders

Per share, basic $ 0.20     ($0.14 ) 0.34  
Per share, diluted $ 0.20     ($0.14 ) 0.34  
Dividend per share $ 0.04   $ 0.04  
 
Weighted average shares outstanding - basic   6,732,456     7,165,957  
Weighted average shares outstanding - diluted   6,732,456     7,165,957  
 

This information is preliminary and based on company data available at the time of the presentation.

 
                       

HOPFED BANCORP, INC.

Selected Financial Data

 

The table below adjusts tax-free investment income for the three month periods ended March 31, 2015, and March 31, 2014, by $223,000 and $266,000, respectively; for a tax equivalent rate using a cost of funds rate of 0.95% for the three month period ended March 31, 2015, and 1.20% for the three month period ended March 31, 2014. The table adjusts tax-free loan income by $1,000 for three month periods ended March 31, 2015, and March 31, 2014, respectively, for a tax equivalent rate using the same cost of funds rate:

 
Average Income & Average Average Income & Average
Balance Expense Rates Balance Expense Rates
03/31/2015 03/31/2015 03/31/2015 03/31/2014 03/31/2014 03/31/2014
 
Loans $ 541,097 $ 6,291 4.65 % $ 532,720 $ 6,328 4.75 %
Investments AFS taxable 220,302 2,448 4.44 % 266,780 1,779 2.67 %
Investments AFS tax free 57,628 677 4.70 % 67,294 810 4.81 %
Interest earning deposits   5,984   4   0.27 %   12,569   8   0.25 %
 
Total interest earning assets 825,011   9,420   4.57 % 879,363   8,925   4.06 %
 
Other assets   77,419   84,187
 
Total assets $ 902,430 $ 963,550
 
Retail time deposits $ 292,401 845 1.16 % $ 332,033 963 1.16 %
Brokered deposits 35,358 96 1.09 % 46,119 145 1.26 %
Interest bearing checking accounts 191,604 269 0.56 % 184,114 321 0.70 %
MMDA and savings accounts 99,701 50 0.20 % 93,325 42 0.18 %
FHLB borrowings 23,167 69 1.19 % 45,808 434 3.79 %
Repurchase agreements 42,525 120 1.13 % 49,362 249 2.02 %
Subordinated debentures   10,310   184   7.14 %   10,310   184   7.14 %
 
Total interest bearing liabilities 695,066   1,633   0.94 % 761,071   2,338   1.23 %
 
Non-interest bearing deposits 111,869 100,237

Other non-interest bearing liabilities

2,778 4,429
 
Stockholders' equity   92,717   97,813
 

Total liabilities and stockholders' equity

$ 902,430 $ 963,550
 

Net change in interest earning assets and interest bearing liabilities

$ 7,787   $ 6,587  
Interest rate spread 3.63 % 2.83 %
Net interest margin   3.78 %   3.00 %
 

This information is preliminary and based on company data available at the time of the presentation.

 

HopFed Bancorp, Inc.
John E. Peck, 270-885-1171
President and CEO

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