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HopFed Bancorp, Inc. Reports First Quarter Results

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HopFed Bancorp, Inc. (NASDAQ:HFBC) (the "Company"), the holding company
for Heritage Bank USA, Inc. (the "Bank"), today reported results for the
three month period ended March 31, 2017. For the three month period
ended March 31, 2017, the Company's net income was $935,000, or $0.15
per share basic and diluted, compared to $509,000, or $0.08 per share
basic and diluted, for the three month period ended March 31, 2016.

Commenting on the first quarter results, John E. Peck, President and
Chief Executive Officer, said, "During the three month period ended
March 31, 2017, net loan balances increased by $11.2 million, an
annualized growth rate of 7.4%. The Company's loan pipeline remains
encouraging as we continue to strive to improve our profitability
through disciplined loan growth."

Mr. Peck continued, "The Company's recently implemented changes to our
consumer transaction account product line has been a success. At March
31, 2017, the Company's transaction accounts balances have increased by
$14.1 million despite an overall reduction in the number of accounts due
to the elimination of free checking. The Company's core operating
results continue to improve and we are excited about the future of the
Company," Mr. Peck concluded.

Financial Highlights

  • The Company purchased 693 shares of its common stock in the quarter at
    a weighted average price of $12.58 per share. At March 31, 2017, the
    Company holds 1,246,829 shares in treasury stock with a weighted
    average cost of $12.32 per share.
  • At March 31, 2017, the Company's tangible book value was $14.04 per
    share and tangible common equity ratio was 9.47%. The Company's
    tangible book value and common equity ratio computations do not
    include 488,161 unallocated shares of common stock held by the
    Company's ESOP.
  • The Bank's Tier 1 Leverage Ratio, Common Equity Tier 1 Capital Ratio
    and Total Risk Based Capital Ratio at March 31, 2017 were 10.47%,
    15.01% and 16.00%, respectively. The Company's Tier 1 Leverage Ratio,
    Common Equity Tier 1 Capital Ratio and Total Risk Based Capital Ratio
    at March 31, 2017 were 10.55%, 15.14% and 16.13%, respectively.
  • For the three month period ended March 31, 2017, net loan charge offs
    were $238,000, or 0.15% of average loan balances.

Asset Quality

A summary of non-accrual loans at March 31, 2017 and December 31, 2016
is as follows:

    March 31, 2017     December 31, 2016
(Dollars in Thousands)
 
One-to-four family mortgages $ 248 270
Home equity line of credit 402 402
Land 7,234 7,675
Farmland 454 ---
Non-residential real estate 210 208
Consumer loans 3 3
Commercial loans   393 516
Total non-accrual loans   8,944 9,074
 

A summary of the activity in foreclosed assets for the three month
period ended March 31, 2017 is as follows:

   

Activity During 2017

                   
Balance Reduction Gain (Loss) Balance
12/31/2016     Foreclosure     Sales     in Values     on Sale     3/31/2017
(Dollars in Thousands)
 
One-to-four family mortgages $ 135 --- --- --- --- $ 135
HELOC 28 --- --- --- --- 28
Multi-family 1,775 --- --- --- --- 1,775
Non-residential real estate   459 43 (329 ) --- ---   173
 
Total $ 2,397 43 (329 ) --- --- $ 2,111
 

Asset Quality (continued)

At March 31, 2017, the Company's level of loans classified as
substandard was $26.3 million as compared to $29.3 million at December
31, 2016. At March 31, 2017, the Company's classified loan to risk based
capital ratio was 26.2%. The Company's specific reserve for impaired
loans was $492,000 at March 31, 2017 and $1,148,000 at December 31,
2016. A summary of the level of classified loans at March 31, 2017, is
as follows:

                        Specific     Allowance
March 31, 2017 Special

Impaired Loans

Allowance for For Loans
Pass Mention Substandard

Doubtful

Total Impairment Not Impaired
(Dollars in Thousands)
One-to-four family mortgages 154,341 55 3,230 --- 157,626 --- 1,097
Home equity line of credit 36,132 --- 562 --- 36,694 --- 328
Junior liens 1,324 29 12 --- 1,365 --- 9
Multi-family 37,668 --- 815 --- 38,483 --- 593
Construction 17,386 --- --- --- 17,386 --- 141
Land 12,020 431 7,691 --- 20,142 105 328
Farmland 40,588 693 1,531 --- 42,812 35 631
Non-residential real estate 202,168 1,518 10,247 --- 213,933 53 1,288
Consumer loans 8,261 0 413 --- 8,674 98 142
Commercial loans 82,857 254 1,844 --- 84,955 201 1,115
 
Total 592,745 2,980 26,345 --- 622,070 492 5,672
 

Net Interest Income

For the three month period ended March 31, 2017, the Company's net
interest income was $6.8 million, compared to $6.7 million for the three
month period ended March 31, 2016, and $6.6 million for the three month
period ended December 31, 2016, respectively. For the three month period
ended March 31, 2017, the improved levels of net interest income as
compared to March 31, 2016 is directly attributable to a $54.8 million
increase in the average balance of loans outstanding during the three
month period ended March 31, 2017 as compared to the three month period
ended March 31, 2016. The growth in loan balances for the three month
period ended March 31, 2017 as compared to the three month period ended
March 31, 2016 helped to offset a reduction in the average yield on
loans. For the three month periods ended March 31, 2017 and March 31,
2016, the average yield on loans was 4.38% and 4.62%, respectively. For
the three month period ended March 31, 2017, the Company's net interest
margin was 3.31%, as compared to 3.39% for the three month period ended
March 31, 2016.

For the three month periods March 31, 2017 and March 31, 2016, interest
expense was $1.4 million, respectively. For the three month period
ending March 31, 2017, the average cost of interest bearing liabilities
was 0.81%, as compared to 0.83% for the three month period ended March
31, 2016. The average balance of interest bearing liabilities for the
three month periods ended March 31, 2017 and March 31, 2016 was $690.7
million and $678.7 million, respectively.

Non-interest Income

Non-interest income for the three month period ended March 31, 2017 was
$2.3 million, as compared to $2.0 million for the three month periods
ended March 31, 2016 and December 31, 2016. The most significant reasons
for the increase in non-interest income were increases of income from
bank owned life insurance and other operating income. For the three
month period ended March 31, 2017, income from bank owned life insurance
was $235,000, as compared to $84,000 for the three month period ended
March 31, 2016. The increase in income from bank owned life insurance
was the result of death benefit paid during the three month period ended
March 31, 2017. For the three month period ended March 31, 2017, other
operating income was $479,000, as compared to $176,000 for the three
month period ended March 31, 2016. In the three month period ended March
31, 2017, the Company received approximately $250,000 from one time
licensing fees.

For the three month period ended March 31, 2017, service charge income
increased by $127,000 and $110,000, respectively, as compared to the
three month periods ended March 31, 2016 and December 31, 2016. For the
three month period ended March 31, 2017, the Company's income on the
origination of mortgage loans was $334,000, as compared to $368,000 and
$367,000 for the three month periods ended March 31, 2016 and December
31, 2016.

The Company recognized net gains on the sale of securities of $2,000,
$291,000 and $190,000 for the three month periods ended March 31, 2017,
March 31, 2016 and December 31, 2016, respectively. The decline in
security gains is the result of a growing deposit base, making it
unnecessary for the Company to sell securities to fund loan growth and
increases in short term interest rates.

Non-interest Expense

For the three month period ended March 31, 2017, non-interest expenses
increased by $6,000 as compared to the three month period ended March
31, 2016. For the three month period ended March 31, 2017, the Company's
salaries and benefits expense increased by $248,000 as compared to the
three month period ended March 31, 2016. The increase in compensation
expense for the three month period ended March 31, 2017 as compared to
the three month period ended March 31, 2016 is largely the result of a
$67,000 increase in health insurance benefits due to an increase in
medical insurance cost and a $146,000 increase in overall compensation.
For the three month period ended March 31, 2017, other operating
expenses totaled $846,000, as compared to $1.2 million for the three
month period ended March 31, 2016.

On a linked quarter basis, the Company's other operating expenses
declined by $143,000. On a linked quarter basis, salaries and benefits
increased by $482,000 due to end of year salary increases, additional
payroll taxes resulting from the beginning of a new year, increases in
health insurance benefits and seasonal vacation accruals. On a linked
quarter basis, seasonal changes in vacation accruals accounted for
$231,000 of the increase in salary and benefits expense and health
insurance benefits accounted for $71,000 of the increase in salary and
benefits expense. On a linked quarter basis, foreclosed assets expense
increased by $159,000.

Balance Sheet

At March 31, 2017, consolidated assets were $923.3 million, an increase
of $31.8 million as compared to December 31, 2016. For the three month
period ended March 31, 2017, the Company experienced an $18.8 million
increase in time deposits, a $24.3 million increase in cash balances,
and an $11.2 million increase in net loan balances. For the three month
period ended March 31, 2017, the Company's non-interest bearing and
interest bearing checking accounts increased by $5.2 million and $8.2
million, respectively.

The Company

Heritage Bank USA, Inc. ("Heritage Bank") is a Kentucky state chartered
commercial bank with the Kentucky Department of Financial Institutions
and the Federal Deposit Insurance Corporation as its regulators. HopFed
Bancorp, Inc., the holding company for Heritage Bank, is a non-member
federally chartered commercial bank holding company regulated by the
Federal Reserve Board. Heritage Bank has eighteen offices in western
Kentucky and middle Tennessee and loan production offices in Nashville,
Tennessee and Brentwood, Tennessee. The Company offers a broad line of
financial services through Heritage Wealth Management of
Murray, Kentucky, Hopkinsville, Kentucky, and Pleasant View, Tennessee.
Heritage Mortgage Services of Clarksville, Tennessee, offers long term
fixed rate 1-4 family mortgage loans that are originated for the
secondary market in all communities in the Company's general market
area. Heritage 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 is located 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, 2017 December 31, 2016
(Unaudited)
 
Cash and due from banks $ 30,663 21,779
Interest bearing deposits in banks   19,408 3,970
Cash and cash equivalents 50,071 25,749
Federal Home Loan Bank stock, at cost 4,428 4,428
Securities available for sale 207,580 209,480
Loans held for sale 1,091 1,094

Loans receivable, net of allowance for loan losses of $6,164 at
March 31, 2017 and $6,112 at December 31, 2016

615,480 604,286
Accrued interest receivable 3,121 3,799
Foreclosed assets, net 2,111 2,397
Bank owned life insurance 10,120 10,662
Premises and equipment, net 23,225 23,461
Deferred tax assets 2,918 3,052
Other assets   3,162 3,078
Total assets   923,307 891,486
 

Liabilities and Stockholders' Equity

Liabilities:
Deposits:
Non-interest-bearing accounts $ 136,333 131,145
Interest-bearing accounts
NOW accounts 217,562 209,347
Savings and money market accounts 100,009 99,312
Other time deposits   311,839 293,078
Total deposits 765,743 732,882
 
Advances from Federal Home Loan Bank 11,000 11,000
Repurchase agreements 45,492 47,655
Subordinated debentures 10,310 10,310
Advances from borrowers for taxes and insurance 867 766
Accrued expenses and other liabilities   2,434 2,445
Total liabilities   835,846 805,058
 

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, 2017     December 31, 2016
(Unaudited)

Stockholders' equity

Preferred stock, par value $0.01 per share; authorized - 500,000
shares; no shares issued or outstanding at March 31, 2017 and
December 31, 2016

--- ---

Common stock, par value $.01 per share; authorized 15,000,000
shares; 7,963,378 issued and 6,716,549 outstanding at March 31,
2017 and 7,963,378 issued and 6,717,242 outstanding at December
31, 2016

80 80
Additional paid-in-capital 58,705 58,660
Retained earnings 49,721 49,035

Treasury stock, at cost (1,246,829 shares at March 31, 2017 and
1,246,136 shares at December 31, 2016)

(15,356 ) (15,347 )

Unearned ESOP Shares, at cost (488,161 at March 31, 2017
and 498,346 shares at December 31, 2016)

(6,414 ) (6,548 )
Accumulated other comprehensive income   725   548  
 

Total stockholders' equity

  87,461   86,428  
 

Total liabilities and stockholders' equity

$ 923,307   891,486  
 

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,
   
2017 2016
Interest and dividend income:
Loans $ 6,736 6,465
Investment in securities, taxable 1,118 1,247
Nontaxable securities available for sale 283 353
Interest-bearing deposits   23 16
Total interest and dividend income   8,160 8,081
 
Interest expense:
Deposits 1,167 1,095
FHLB borrowings 32 73
Repurchase agreements 103 143
Subordinated debentures   104 94
Total interest expense   1,406 1,405
 
Net interest income 6,754 6,676
Provision for loan losses   291 458
 

Net interest income after provision for loan losses

  6,463 6,218
 
Non-interest income:
Service charges 804 677
Merchant card 302 291
Mortgage origination income 334 368
Gain on sale of investments 2 291
Income from bank owned life insurance 235 84
Income from financial services 140 133
Other operating income   479 176
Total non-interest income   2,296 2,020
 

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,
   
2017 2016
Non-interest expenses:
Salaries and benefits $ 4,236 3,988
Occupancy expense 775 787
Data processing 764 727
State deposit tax 231 248
Professional services 348 335
Advertising 381 320
Foreclosure, net 108 68
Other operating expenses   846   1,210
Total non-interest expense   7,689   7,683
 
Income before income tax expense 1,070 555
Income tax expense   135   46
 
Net income 935   509
Net income per share:
Basic $ 0.15 $ 0.08
Fully diluted $ 0.15 $ 0.08
Dividend per share $ 0.04 $ 0.04
 
Weighted average shares outstanding - basic   6,218,706   6,297,755
Weighted average shares outstanding - diluted   6,218,706   6,297,755
 

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)

(Unaudited)

 
    For the three-months ended    
    Change from
03/31/17 12/31/16 Prior Quarter
Interest and dividend income:
Loans $ 6,736 6,603 133
Investment in securities, taxable 1,118 1,051 67
Nontaxable securities available for sale 283 289 (6 )
Interest-bearing deposits   23 8 15  

Total interest and dividend income

  8,160 7,951 209  
 
Interest expense:
Deposits 1,167 1,094 73
FHLB borrowings 32 29 3
Repurchase agreements 103 87 16
Subordinated debentures   104 101 3  
Total interest expense   1,406 1,311 95  
 
Net interest income 6,754 6,640 114
Provision for loan losses   291 63 228  
 

Net interest income after provision for loan losses

  6,463 6,577 (114 )
 
Non-interest income:
Service charges 804 694 110
Merchant card 302 311 (9 )
Mortgage origination income 334 367 (33 )
Gain on sale of investments 2 190 (188 )
Income from bank owned life insurance 235 78 157
Income from financial services 140 159 (19 )
Other operating income   479 201 278  
Total non-interest income   2,296 2,000 296  
 

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)

(Unaudited)

 
    For the three-months ended    
    Change from
3/31/17 12/31/16 Prior Quarter
 
Non-interest expenses:
Salaries and benefits $ 4,236 3,754 482
Occupancy expense 775 775 ---
Data processing 764 767 (3 )
State deposit tax 231 247 (16 )
Professional services 348 396 (48 )
Advertising 381 334 47
Foreclosure, net 108 (51 ) 159
Other operating expenses   846   989   (143 )
Total non-interest expense   7,689   7,211   478  
 
Income before income tax expense 1,070 1,366 (296 )
Income tax expense   135   260   (125 )
Net income $ 935   1,106   (171 )
Net income per share
Basic $ 0.15 $ 0.18   (0.03 )
Fully diluted $ 0.15 $ 0.18   (0.03 )
Dividend per share $ 0.04 $ 0.04  
 
Weighted average shares outstanding - basic   6,218,706   6,193,278  
Weighted average shares outstanding - diluted   6,218,706   6,193,278  
 

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, 2017 and March 31, 2016, by $141,000
and $174,000, respectively; for a tax equivalent rate using a cost
of funds rate of 0.81% for the three month period ended March 31,
2017 and 0.83% for the three month period ended March 31, 2016. The
table adjusts tax-free loan income by $9,000 for the three month
period ended March 31, 2017, and $5,000 for the three month period
ended March 31, 2016, 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
3/31/2017 3/31/2017 3/31/2017 3/31/2016 3/31/2016 3/31/2016
(Table Amounts in Thousands, Except Percentages)
Loans receivable, net $ 615,382 6,745 4.38 % $ 560,544 6,470 4.62 %
Taxable securities AFS 176,824 1,118 2.53 % 197,761 1,247 2.52 %
Non-taxable securities AFS 33,868 424 5.00 % 42,098 527 5.01 %
Other interest bearing deposits   9,260   23 0.99 %   9,491   16 0.67 %
 
Total interest earning assets 835,334   8,310 3.98 % 809,894   8,260 4.08 %
 
Other assets   73,527   85,874
 
Total assets $ 908,861 $ 895,768
 
Retail time deposits $ 259,086 664 1.03 % $ 264,308 640 0.97 %
Brokered deposits 46,040 135 1.17 % 35,986 99 1.10 %
Interest bearing checking 219,696 326 0.59 % 213,336 311 0.58 %
Saving / MMDA 100,282 42 0.17 % 97,391 45 0.18 %
FHLB borrowings 13,433 32 0.95 % 13,593 73 2.15 %
Repurchase agreements 41,840 103 0.98 % 43,744 143 1.31 %
Subordinated debentures   10,310   104 4.03 %   10,310   94 3.65 %
 
Total interest bearing liabilities 690,687   1,406 0.81 % 678,668   1,405 0.83 %
 
Non-interest bearing deposits 126,809 122,926
 
Other liabilities 3,993 4,706
 

Stockholders' equity

  87,372   89,468
 

Total liabilities and stockholders' equity

$ 908,861 $ 895,768
 
Net interest income $ 6,904 $ 6,855
 
Net interest spread 3.17 % 3.25 %
 
Net interest margin 3.31 % 3.39 %
 

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

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