Market Overview

HopFed Bancorp, Inc. Reports First Quarter Results

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HOPKINSVILLE, Ky., April 30, 2013 /PRNewswire/ -- HopFed Bancorp, Inc. (NASDAQ: HFBC) (the "Company"), the holding company for Heritage Bank (the "Bank"), today reported results for the three month period ended March 31, 2013.  For the three month period ended March 31, 2013, the Company's net income available to common shareholders was $984,000, or $0.13 per common share, basic and diluted, compared to net income available to common shareholders of $470,000, or $0.06 per common share basic and diluted, for the three month period ended March 31, 2012. The improved level of net income available to common shareholders was largely the result of an increase in gains on the sale of securities, a reduction in the Company's provision for loan loss expense and the elimination of preferred stock dividends and warrant accretion associated with the Company's Preferred stock. The Preferred stock was repurchased on December 19, 2012, and the Company's warrant was repurchased on January 16, 2013.

Commenting on the first quarter results, John E. Peck, President and Chief Executive Officer, said, "The Company experienced modest loan growth in the last few days of the quarter. Our loan pipeline continues to provide a reason for optimism for future loan growth. Loan demand appears to be slowly building with competitive pressures keeping overall yields lower."

Mr. Peck continued, "We continue to find success in reducing our level of criticized and classified assets.  At March 31, 2013, total loans classified as substandard or worse were $43.7 million, or 38.9% of the Company's risk based capital.  At December 31, 2012, loans classified as substandard or worse totaled $66.6 million, or 60.8% of the Company's risk based capital. For HopFed Bancorp, maintaining a level of classified loans to risk based capital ratio of less than 50% is an important asset quality measure."

Mr. Peck concluded, "On April 11, 2013, Heritage Bank was notified that it has received conditional approval from the Kentucky Department of Financial Institutions ("KDFI") for a state commercial bank charter. Upon conversion, Heritage Bank will be regulated by the KDFI and the Federal Deposit Insurance Corporation.  HopFed Bancorp, Inc. has applied to convert its thrift holding company charter to a bank holding company and will continue to be regulated by the Federal Reserve Bank of Saint Louis. We appreciate the long history of our Company as a federal savings and loan. However, the benefits once enjoyed by savings and loan chartered institutions have been marginalized by regulatory changes. Our charter conversions will free the Company from both the burden of duplicate reporting requirements and additional burdensome regulatory restrictions placed on savings and loans such as the qualified thrift lender test and the Home Owners Lending Act."

Financial Highlights

  • The Company and Bank's capital ratios remain strong. At March 31, 2013, the Company's tangible book value was $13.84 per share and our tangible common equity ratio is 10.59%. The Bank's Tier 1 Leverage and Total Risk Based Capital Ratios at March 31, 2013, are 10.59% and 19.01%, respectively. The Company's Tier 1 Leverage and Total Risk Based Capital Ratios are 10.77% and 19.25%, respectively.

  • At March 31, 2013, the Company's allowance for loan loss totaled $10.6 million, or 1.95% of total loans and 150.35% of non-accrual loans. In the three month period ended March 31, 2013, the Company's net charge offs totaled $445,000, or an annualized rate of 0.33% of average loans.

  • For the three month period ended March 31, 2013, the Company's net interest margin was 2.99% as compared to 3.01% for the three month period ended December 31, 2012. In the six month period beginning April 1, 2013, and ending September 30, 2013, the Company has $138.6 million in time deposits that are scheduled to mature at a weighted average cost of 1.71%. The Company is focused on re-pricing these deposits at current market rates and reducing our interest expense.

Asset Quality

At March 31, 2013, the Company's level of non-accrual loans totaled $7.0 million, as compared to $7.6 million at December 31, 2012. At March 31, 2013, and December 31, 2012, non-accrual loans totaled 1.30% and 1.43% of total loans, respectively.

A summary of non-accrual loans at March 31, 2013, and December 31, 2012, is as follows:

 


March 31, 2013


December 31, 2012


(Dollars in Thousands)





One-to-four family mortgages

$1,883


2,243

Home equity line of credit

66


66

Junior lien

3


4

Multi-family

---


38

Construction

177


---

Land

2,754


2,768

Farmland

545


648

Non-residential real estate

951


1,134

Consumer loans

65


145

Commercial loans

592


617

Total non-accrual loans 

$7,036


7,663

 

At March 31, 2013, non-accrual loans plus other real estate owned totaled $8.5 million, or 0.87% of total assets, as compared to $9.2 million, or 0.94% of total assets, at December 31, 2012. The Company's level of other real estate owned declined $68,000 from December 31, 2012, to March 31, 2013.

A summary of the activity in other real estate owned for the three month period ended March 31, 2013, is as follows:

 



Activity During 2013





Balance




Reduction

Gain (Loss)

Balance


12/31/2012

Foreclosures


Sales

in Values

on Sale 

3/31/2013



(Dollars in Thousands)












One-to-four family mortgages

$258

---


(70)

---

(23)

165

Multi-family

---

---


---

---

---

---

Construction

130

---


---

---

---

130

Farmland

157

---


---

---

---

157

Land

955

---


---

---

---

955

Non-residential real estate

44

73


(32)

---

(12)

73

Consumer assets 

4

---


(4)

---

---

---









     Total

$1,548

73


(106)

---

(35)

1,480

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

 

At March 31, 2013, the Company's level of loans classified as substandard and doubtful were $43.6 million and $32,000 as compared to $66.6 million and none at December 31, 2012.  The Company's specific allowance for impaired loans was $2.7 million at March 31, 2013, and $3.8 million at December 31, 2012.

A summary of the level of classified loans at March 31, 2013, is as follows:

 








Specific 

Allowance




Impaired Loans


Allowance

for 

March 31, 2013


Special





for 

Loans not


Pass

Mention

Substandard


Doubful

Total

Impairment

Impaired




(Dollars in Thousands)




One-to-four family mortgages

$ 155,940

654

3,545


32

160,171

791

2,357

    Home equity line of credit

34,934

---

888


---

35,822

144

334

    Junior liens

3,688

45

455


---

4,188

70

48

Multi-family

31,144

---

1,866


---

33,010

---

500

Construction

10,436

---

4,112


---

14,548

---

131

Land

14,644

8,917

18,719


---

42,280

946

508

Non-residential real estate

126,706

1,489

4,823


---

133,018

117

2,108

Farmland

43,325

354

5,520


---

49,199

18

706

Consumer loans

12,843

---

272


---

13,115

56

435

Commercial loans

52,154

471

3,433


---

56,058

522

788










 Total

$ 485,814

11,930

43,633


32

541,409

2,664

7,915

 

A summary of the level of classified loans at December 31, 2012, is as follows:

 








Specific 

Allowance




Impaired Loans


Allowance

for 

December 31, 2012


Special





for 

Performing 


Pass

Mention

Substandard


Doubful

Total

Impairment

Loans




(Dollars in Thousands)




One-to-four family mortgages

$156,961

779

4,595


---

162,335

754

1,736

    Home equity line of credit

34,737

1,109

1,237


---

37,083

76

298

    Junior liens

3,821

47

468


---

4,336

188

42

Multi-family

27,463

1,478

4,115


---

33,056

38

486

Construction

14,052

---

4,848


---

18,900

---

256

Land

14,374

7,683

23,849


---

45,906

932

1,252

Non-residential real estate

107,947

669

14,021


---

122,637

1,240

1,681

Farmland

38,496

1,230

7,073


---

46,799

184

528

Consumer loans

13,330

---

556


---

13,886

121

217

Commercial loans

44,191

516

5,842


---

50,549

308

311










 Total

$455,372

13,511

66,604


---

535,487

3,841

6,807

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

 

At March 31, 2013, the Company's level of performing Troubled Debt Restructurings ("TDRs") was $4.7 million, as compared to $11.0 million at December 31, 2012. A summary of the activity in loans classified as performing TDRs for the three month period ended March 31, 2013, is as follows:

 








Removed








Removed due to

from




Balance at


New

Loss or 

Payment or 

(Taken to)

Balance at



12/31/12


TDR 

Foreclosure

Performance

Non-accrual

3/31/13



(Dollars in Thousands)

One-to-four family mortgages


$1,888


---

---

(1,863)

---

25

    Home equity line of credit


---


---

---

---

---

---

Junior Lien


96


---

---

(10)

---

86

Multi-family


234


---

---

(234)

---

---

Construction


4,112


---

---

---

---

4,112

Land


656


---

---

(656)

---

---

Non-residential real estate


3,173


266

---

(3,071)

---

368

Farmland


865


---

---

(865)

---

---

Consumer loans


5


---

---

(1)

---

4

Commercial loans


9


95

---

---

---

104










Total performing TDR


$11,038


361

---

(6,700)

---

4,699

 

A summary of TDRs and non-performing TDRs at March 31, 2013, and December 31, 2012, is stated below:

 


3/31/2013

12/31/2012


(Dollars in Thousands)

One-to-four family mortgages

$70

1,888

Home equity line of credit 

---

---

Junior lien

86

196

Multi-family

---

234

Construction

4,112

4,112

Land

2,754

3,424

Non-residential real estate

368

3,173

Farmland

---

909

Consumer loans

4

5

Commercial loans

232

128

Total TDR

7,626

14,069

Less:



TDR in non-accrual status



One-to-four family mortgages

(45)

---

Home equity line of credit

---

(100)

Junior lien

---

---

Multi-family

---

---

Construction

---

---

Land

(2,754)

(2,768)

Non-residential real estate

---

(44)

Farmland

---

---

Consumer loans

---

---

Commercial loans

(128)

(119)

Total performing TDR

$4,699

11,038

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

 

Net Interest Income

For the three month period ended March 31, 2013, the Company's net interest income was $6.4 million, compared to $6.9 million for the three month period ended March 31, 2012, and $6.5 million for the three month period ended December 31, 2012.  For the three month period ended March 31, 2013, the Company's net interest margin was 2.99% as compared to 2.98% at March 31, 2012, and 3.01% for the three month period ended December 31, 2012.  As compared to the three month period ended March 31, 2012, the average balance of loans outstanding has declined $28.9 million and the average balance of total interest earning assets has declined by $66.3 million during the three month period ended March 31, 2013.  During the three month period ended March 31, 2013, the average balance of interest bearing liabilities declined $74.8 million as compared to the three month period ended March 31, 2012.

Non-interest Income

Non-interest income for the three month period ended March 31, 2013, was $2.5 million, as compared to $1.9 million for the three month period ended March 31, 2012, and $2.2 million for the three month period ended December 31, 2012. The increase in non-interest income for the three month period ended March 31, 2013, as compared to the three month period ended March 31, 2012, and December 31, 2012, was primarily the result of an increase on gains on the sale of securities. The Company recognized net gains on the sale of securities of $627,000 and $44,000 and $53,000 for the three month periods ended March 31, 2013, March 31, 2012, and December 31, 2012, respectively.

Investors seeking higher returns than those available from time deposits have resulted in increased revenue for the Company's financial services activities. For the three month period ended March 31, 2013, financial services income was $297,000, as compared to $227,000 and $293,000 for the three month periods ended March 31, 2012, and December 31, 2012, respectively. For the three month period ending March 31, 2013, service charge income was $853,000, compared to $938,000 for the three month period ended March 31, 2012, and $966,000 for the three month period ended December 31, 2012. Typically, service charge income is highest in the fourth quarter of each year and lowest in the first quarter of each year as consumer Christmas spending often drives this revenue while a retreat of consumer spending in the first quarter of each year results in lower levels of income. Additionally, customers appear willing to carry higher balances in transaction accounts due to lower interest rates.

Non-interest Expense

Non-interest expenses were $7.3 million and $7.1 million for the three month periods ended March 31, 2013, and March 31, 2012, respectively, and $6.9 million for the three month period ended December 31, 2012.  As compared to the three month period ended March 31, 2013, total operating expenses increased by $175,000 over the same period in 2012. The reduction in the Company's deposit insurance and examination expense is largely the result of a reduced level of brokered and time deposits and the removal of informal regulatory actions. As compared to March 31, 2012, compensation expenses increased by $341,000.

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

 

Balance Sheet 

Total assets were $981.1 million at March 31, 2013, an increase of $13.4 million as compared to December 31, 2012.  The growth in our balance is largely the result of an increase in both interest bearing checking accounts and non-interest bearing checking accounts which increased by $22.2 million and $6.2 million, respectively, as compared to December 31, 2012. For the three month period ended March 31, 2013, total time deposits declined $11.6 million as compared to December 31, 2012.

At March 31, 2013, gross loans outstanding totaled $541.5 million, as compared to $535.6 million at December 31, 2012. The majority of the Company's loan growth occurred in our owner occupied commercial real estate portfolio. The loan growth, coupled with the Company's reduction in classified assets, enhances our ability to further improve net income while providing a lower risk profile.

The Company

HopFed Bancorp, Inc. is the holding company for Heritage Bank headquartered in Hopkinsville, Kentucky.  The Bank has eighteen offices in western Kentucky and middle Tennessee in addition to its subsidiaries, Fall & Fall Insurance of Fulton, Kentucky and Fort Webb LLLP of Bowling Green, Kentucky. The Bank's operations include Heritage Solutions of Murray, Kentucky, Hopkinsville, Kentucky, Kingston Springs, Tennessee 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 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 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.

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

 

HOPFED BANCORP, INC.

Balance Sheet

(Dollars in thousands)





Assets

March 31, 2013


December 31, 2012


(unaudited)







Cash and due from banks 

$33,245


31,563

Interest-earning deposits 

15,235


5,613

Cash and cash equivalents

48,480


37,176

Federal Home Loan Bank stock, at cost 

4,428


4,428

Securities available for sale 

352,973


356,345

Loans receivable, net of allowance for loan losses of $10,579




at March 31, 2013, and $10,648 at December 31, 2012

530,928


524,985

Accrued interest receivable

4,760


5,398

Real estate and other assets owned 

1,480


1,548

Bank owned life insurance 

9,399


9,323

Premises and equipment, net 

22,209


22,557

Deferred tax assets 

175


---

Intangible asset 

243


292

Other assets

6,034


5,637

         Total assets

$981,109


967,689





Liabilities and Stockholders' Equity




Liabilities:




Deposits:  




   Non-interest-bearing accounts

$100,305


94,083

   Interest-bearing accounts




   Interest-bearing checking accounts

169,203


147,047

   Savings and money market accounts

82,529


81,643

   Other time deposits

425,517


437,092

     Total deposits

777,554


759,865





Advances from Federal Home Loan Bank 

43,257


43,741

Repurchase agreements 

40,485


43,508

Subordinated debentures 

10,310


10,310

Advances from borrowers for taxes and insurance

481


396

Dividends payable

180


180

Deferred tax liability

---


568

Accrued expenses and other liabilities 

4,756


4,122

   Total liabilities

877,023


862,690

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

 

HOPFED BANCORP, INC.

Balance Sheet

(Dollars in thousands)



March 31, 2013


December 31, 2012


(unaudited)







Stockholders' equity




Preferred stock, par value $0.01 per share;  




authorized - 500,000 shares; 18,400 shares issued




and no shares outstanding at March 31, 2013, 




and December 31, 2012.

---


---

Common stock, par value $.01 per share; authorized 




15,000,000 shares; 7,905,955 issued and 7,503,039




outstanding at March 31, 2013, and 7,905,728 issued




and 7,502,812 outstanding at December 31, 2012  

79


79

Common stock warrant

---


556

Additional paid-in-capital

76,609


76,288

Retained earnings

42,663


41,829

Treasury stock- preferred (at cost, 18,400 shares at




March 31, 2013, and December 31, 2012)

(18,400)


(18,400)

Treasury stock- common  (at cost, 402,916 shares at




March 31, 2013, and December 31, 2012)

(5,076)


(5,076)

Accumulated other comprehensive income, net of taxes

8,211


9,723





Total stockholders' equity

104,086


104,999





Total liabilities and stockholders' equity

$981,109


967,689

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 Month Periods



Ended March 31,








2013


2012

Interest and dividend income:





Loans receivable


$6,882


7,801

Investment in securities, taxable


1,832


2,375

Investment securities, non-taxable 


585


575

Interest-earning deposits


6


8

Total interest and dividend income


9,305


10,759






Interest expense:





Deposits 


2,046


2,884

Advances from Federal Home Loan Bank


444


573

Repurchase agreements


242


248

Subordinated debentures


182


187

   Total interest expense


2,914


3,892






Net interest income


6,391


6,867

Provision for loan losses 


376


869






Net interest income after





provision for loan losses


6,015


5,998






Non-interest income:





Service charges


853


938

Merchant card income


223


196

Mortgage origination revenue


200


203

Gain on sale of securities


627


44

Income from bank owned life insurance


75


79

Financial services commission


297


227

Other operating income


208


230

Total non-interest income


2,483


1,917

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)



2013


2012

Non-interest expenses:




Salaries and benefits 

$3,848


3,507

Occupancy expense 

845


855

Data processing expense

650


625

State deposit tax

142


162

Intangible amortization expense

49


65

Professional services expense

393


388

Deposit insurance and examination expense

232


419

Advertising expense

333


304

Postage and communications expense

139


141

Supplies expense

136


111

Loss on disposal of equipment

---


6

Loss on sale of real estate owned

35


147

Real estate owned expenses 

76


46

Other operating expenses

396


323

Total non-interest expense

7,274


7,099





Income before income tax expense

1,224


816

Income tax expense 

240


89





Net income 

984


727

Less:




       Dividend on preferred shares

---


229

       Accretion dividend on preferred shares

---


28





Net income available to common shareholders

$984


$470

Net income available to common shareholders




     Per share, basic

$0.13


$0.06

     Per share, diluted

$0.13


$0.06

Dividend per share

$0.02


$0.02





Weighted average shares outstanding - basic 

7,488,445


7,484,475

Weighted average shares outstanding - diluted 

7,488,445


7,484,475

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



3/31/2013


12/31/2012


Prior Quarter








Interest and dividend income:







Loans receivable


$6,882


7,211


(329)

Investment in securities, taxable


1,832


1,899


(67)

Investment in securities, non-taxable


585


571


14

Interest-earning deposits


6


4


2

Total interest and dividend income


9,305


9,685


(380)








Interest expense:







Deposits 


2,046


2,292


(246)

Advances from Federal Home Loan Bank


444


454


(10)

Repurchase agreements


242


242


---

Subordinated debentures


182


181


1

   Total interest expense


2,914


3,169


(255)








Net interest income


6,391


6,516


(125)

Provision for loan losses 


376


500


(124)








Net interest income after







provision for loan losses


6,015


6,016


(1)








Non-interest income:







Service charges


853


966


(113)

Merchant card income


223


222


1

Mortgage origination revenue


200


201


(1)

Gain on sale of securities


627


53


574

Income from bank owned life insurance


75


161


(86)

Financial services commission


297


293


4

Other operating income


208


290


(82)








Total non-interest income


2,483


2,186


297

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)



For the Three




Months Ended








Change from 


3/31/2013


12/31/2012


Prior Quarter







Non-interest expenses:






Salaries and benefits 

$3,848


3,464


384

Occupancy expense 

845


917


(72)

Data processing expense

650


632


18

State deposit tax

142


162


(20)

Intangible amortization expense

49


49


---

Professional services expense

393


284


109

Deposit insurance and examination expense

232


267


(35)

Advertising expense

333


405


(72)

Postage and communications expense

139


118


21

Supplies expense

136


75


61

Loss on sale of real estate owned

35


(21)


56

Real estate owned expenses

76


33


43

Other operating expenses

396


547


(151)







Total non-interest expense

7,274


6,932


342







Income before income tax expense

1,224


1,270


(46)

Income tax expense 

240


165


75







Net income

984


1,105


(121)

Less:






       Dividend on preferred shares

---


318


(318)

       Accretion dividend on preferred shares

---


139


(139)

Net income available to common stockholders

$984


648


336

Net income available to common stockholders






     Per share, basic

$0.13


$0.09


$0.04

     Per share, diluted

$0.13


$0.09


$0.04

Dividend per share

$0.02


$0.02









Weighted average shares outstanding - basic

7,488,445


7,487,726



Weighted average shares outstanding - diluted

7,488,445


7,487,726



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, 2013, and March 31, 2012, by $282,000 and $271,000, respectively; for a tax equivalent rate using a cost of funds rate of 1.50% for the three month period ended March 31, 2013, and 2.00% for the three month period ended March 31, 2012. The table adjusts tax-free loan income by $1,000 for the three month period ended March 31, 2013, and $6,000 for the three month period ended March 31, 2012, for a tax equivalent rate using the same cost of funds rate:





Average

Income and

Average


Average

Income and

Average




Balance

Expense

Rates


Balance

Expense

Rates




3/31/2013

3/31/2013

3/31/2013


3/31/2012

3/31/2012

3/31/2012




(Table Amounts in Thousands, Except Percentages)

Loans



$522,705

6,883

5.27%


$551,579

7,807

5.66%

Investments AFS taxable

284,378

1,832

2.58%


329,819

2,375

2.88%

Investment AFS tax free

75,689

867

4.58%


65,669

846

5.15%

Federal funds


9,882

6

0.24%


11,911

8

0.27%











Total interest earning assets

892,654

9,588

4.30%


958,978

11,036

4.60%











Other assets


85,058




94,246













Total assets


$977,712




$1,053,224













Interest bearing checking

164,074

330

0.80%


143,858

294

0.82%

Saving / MMDA


80,687

33

0.16%


72,434

33

0.18%

Retail time deposits


384,815

1,499

1.56%


457,461

2,289

2.00%

Brokered deposits


47,100

184

1.56%


57,345

268

1.87%

FHLB borrowings


43,558

444

4.08%


62,969

573

3.64%

Repurchase agreements

43,032

242

2.25%


44,043

248

2.25%

Subordinated debentures

10,310

182

7.06%


10,310

187

7.26%











Total interest bearing liabilities

773,576

2,914

1.51%


848,420

3,892

1.83%











Non-interest bearing deposits

94,100




80,503



Other liabilities


4,989




5,164













Stockholders' equity


105,047




119,137













Total liabilities 









  and stockholders' equity

$977,712




$1,053,224













Net change in interest earning








  assets and interest bearing liabilities

6,674

2.79%



7,144

2.77%











Net yield on interest earning assets

2.99%




2.98%


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

 

SOURCE HopFed Bancorp, Inc.

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