HopFed Bancorp, Inc. Reports Second Quarter Results

HOPKINSVILLE, Ky.--()--HopFed Bancorp, Inc. (NASDAQ: HFBC) (the “Company”), the holding company for Heritage Bank USA, Inc. (the “Bank”), today reported results for the three and six month periods ended June 30, 2014. For the three month period ended June 30, 2014, the Company’s net income was $925,000, or $0.13 per share, basic and diluted, compared to net income of $1.2 million, or $0.16 per share basic and diluted, for the three month period ended June 30, 2013. For the six month period ended June 30, 2014, the Company’s net income was $1.3 million, or $0.17 per share, basic and diluted, compared to net income of $2.2 million, or $0.29 per share basic and diluted, for the six month period ended June 30, 2013.

Commenting on the second quarter results, John E. Peck, President and Chief Executive Officer, said, “The Company’s net interest income for the three month period ended June 30, 2014, increased by $180,000 and $60,000, respectively, as compared to the three month periods ended June 30, 2013, and March 31, 2014, respectively. At June 30, 2014, net loans totaled $538.1 million, a decline of $5.5 million as compared to December 31, 2013, and an increase of $2.1 million as compared to March 31, 2014.”

Mr. Peck continued, “During the three month period ended June 30, 2014, the Company recaptured $261,000 of provision for loan loss expense into earnings. The provision reduction is possible due to the continued reduction of non-accrual loans and improved charge off trends. At June 30, 2014, non-accrual loans were $8.7 million, or 1.60% of total loans. Also at June 30, 2014, the Company’s allowance for loan loss account total $8.4 million, or 95.6% of non-accrual loans. The Company’s classified loans declined to $37.7 million, approximately 34% of risk based capital. For the six month period ended June 30, 2014, the Company’s net loan charge offs were $448,000, or 0.16% of average loan balances,” Mr. Peck concluded.

Financial Highlights

  • At June 30, 2014, the Company’s tangible book value was $13.51 per share and tangible common equity ratio was 10.52%. The Bank’s estimated Tier 1 Leverage Ratio and Total Risk Based Capital Ratio at June 30, 2014, were 10.95% and 18.60%, respectively. The Company’s consolidated Tier 1 Leverage Ratio and Total Risk Based Capital Ratio at June 30, 2014, were 11.29% and 19.07%, respectively.
  • The Company purchased 62,470 shares of its common stock in the quarter at a weighted average price of $11.50 per share. The Company has purchased a total of 72,856 shares since December 31, 2013, at a weighted average price of $11.51 per share. At June 30, 2014, the Company has purchased 149,324 shares of its common stock under the current repurchase program and is authorized to repurchase an additional 225,676 shares of its common stock under the currently approved repurchase plan.

Asset Quality

At June 30, 2014, the Company’s level of non-accrual loans totaled $8.7 million, as compared to $10.1 million at December 31, 2013. A summary of non-accrual loans at June 30, 2014, and December 31, 2013, is as follows:

       

June 30, 2014

December 31, 2013

(Dollars in Thousands)

 
One-to-four family mortgages $524 $945
Home equity line of credit 29 1
Junior lien --- 2
Construction --- 175
Land 1,217 1,218
Non-residential real estate 6,520 6,546
Farmland 13 703
Consumer loans 1 13
Commercial loans 431 463
Total non-accrual loans $8,735 $10,066
 

At June 30, 2014, non-accrual loans plus other real estate owned totaled $10.2 million, or 1.08% of total assets. At December 31, 2013, non-accrual loans plus other real estate owned totaled $11.7 million, or 1.21% of total assets. A summary of the activity in other real estate owned for the six month period ended June 30, 2014, is as follows:

   

Activity During 2014

Balance             Reduction     Gain (Loss)     Balance
12/31/2013     Foreclosures     Proceeds     in Values     on Sale     6/30/2014
(Dollars in Thousands)
One-to-four family mortgages $350 190 (178) (5) (1) $356
Land 1,124 --- (71) (100) (19) 934
Non-residential real estate 200 --- --- --- --- 200
 
Total $1,674 190 (249) (105) (20) $1,490
 

The Company had no loans classified as performing Troubled Debt Restructurings (“TDRs”) at June 30, 2014, and December 31, 2013. There were no loans added or removed from TDR status during the three month period ended June 30, 2014.

Asset Quality (continued)

At June 30, 2014, the Company’s level of loans classified as substandard was $37.7 million as compared to $42.6 million at December 31, 2013. At June 30, 2014, the Company’s classified loan to risk-based capital ratio was 33.9%. The Company’s specific reserve for impaired loans was $1.5 million at June 30, 2014, and $1.9 million at December 31, 2013. A summary of the level of classified loans at June 30, 2014, is as follows:

                               
Specific Allowance
Allowance for

June 30, 2014

 

Special

Impaired Loans

for Performing

Pass

Mention

Substandard

Doubtful

Total

Impairment

Loans

(Dollars in Thousands)
One-to-four family mortgages $147,030 204 5,147 --- 152,381 303 1,420
Home equity line of credit 32,594 --- 612 --- 33,206 --- 237
Junior liens 2,627 41 20 --- 2,688 --- 25
Multi-family 23,093 2,928 2,221 --- 28,242 --- 330
Construction 13,327 --- --- --- 13,327 --- ---
Land 16,873 370 12,336 --- 29,579 491 574
Non-residential real estate 139,868 4,829 13,434 --- 158,131 636 2,216
Farmland 43,636 343 1,637 --- 45,616 33 841
Consumer loans 15,201 --- 363 --- 15,564 83 465
Commercial loans 65,802 657 1,915 --- 68,374 --- 699
 
Total $500,051 9,372 37,685 --- 547,108 1,546 6,807
 

Net Interest Income

For the three month period ended June 30, 2014, the Company’s net interest income was $6.4 million, compared to $6.3 million for the three month period ended March 31, 2014, and $6.2 million for the three month period ended June 30, 2013. For the three month period ended June 30, 2014, the Company’s net interest margin was 3.02%, as compared to 3.00% for the three month period ended March 31, 2014, and 2.90% for the three month period ended June 30, 2013.

The small increase in net interest income was the result of lower interest expense on deposits, offsetting a decline in interest income. For the three month period ended June 30, 2014, total interest income was $8.7 million, a decline of $260,000 compared to the three month period ended June 30, 2013. For the three month period ended June 30, 2014, the Company’s interest expense on deposits was $1.5 million as compared to $1.9 million for the three month period ended June 30, 2013.

For the six month period ended June 30, 2014, the Company’s net interest income was $12.7 million, as compared to $12.6 million for the six month period ended June 30, 2013. For the six month period ended June 30, 2014, the Company’s interest expense on deposits was $3.0 million as compared to $4.0 million for the six month period ended June 30, 2013. For the six month period ended June 30, 2014, the Company’s net interest margin was 3.01%, as compared to 2.94% for the six month period ended June 30, 2013.

Non-interest Income

Non-interest income for the three month period ended June 30, 2014, was $1.9 million, as compared to $2.8 million for the three month period ended June 30, 2013. The decline in non-interest income for the three month period ended June 30, 2014, as compared to the three month period ended June 30, 2013, was primarily the result of a $548,000 decline in gains on the sale of the securities and a $79,000 decline of mortgage origination income. For the three month period ended June 30, 2014, financial services income declined by $179,000 as compared to the three month period ended June 30, 2013, due to the sale of the Company’s insurance assets in December 2013.

On a linked quarter basis, non-interest income increased by $347,000 in the three month period ended June 30, 2014. The increase was largely the result of lower interest rates, providing for a $75,000 increase in mortgage origination revenue and a $228,000 increase in realized gains on the sale of securities. Also on a linked quarter basis, service charge revenue increased by $70,000.

For the six month period ended June 30, 2014, non-interest income was $3.5 million, a decline of $1.8 million as compared to the six month period ended June 30, 2013. At June 30, 2014, the Company’s recognized gains on the sale of securities of $254,000 as compared to $1.4 million for the six month period ended June 30, 2013. During the same period, mortgage origination income declined by $221,000. The decline in both mortgage origination income and gains on sales of securities for the three and six month period ended June 30, 2014, as compared to the same periods in 2013, was largely the result of a 1.25% increase in the ten year treasury bond during the three month period ended June 30, 2013.

For the six month period ended June 30, 2014, service charge income declined by $164,000 as compared to the six month period ended June 30, 2013. For the six month period ended June 30, 2014, financial services income was $374,000, as compared to $644,000 for the six month period ended June 30, 2013. The decline in financial services income for the three and six month periods ended June 30, 2014, as compared to the same periods in 2013 is largely the result of the Company’s sale of its insurance assets in December 2013. For the three month period ended June 30, 2013, the Company’s financial services income was $347,000, which included the Company’s insurance assets in the amount of $233,000.

Non-interest Expense

On a linked quarter basis, the Company’s non-interest expenses increased by $123,000. The most significant increases in operating expenses were a $152,000 increase in bank franchise taxes, a $54,000 increase in professional services expense and $79,000 in losses on the sale of real estate. The most significant reductions in operating expense line items were to salaries and benefits of $103,000 and $101,000 in occupancy expenses.

For the three month period ended June 30, 2014, non-interest expenses increased by $323,000 as compared to the three month period ended June 30, 2013. At June 30, 2014, the Company’s bank franchise taxes increased by $251,000 and our data processing expenses increased by $90,000, each as compared to the three month period ended June 30, 2013. For the three month period ended June 30, 2014, the Company’s combined losses and expenses related to other real estate owned was $194,000 as compared to $44,000 for the three month period ended June 30, 2013.

Balance Sheet

At June 30, 2014, consolidated assets were $949.9 million, a decline of $23.7 million as compared to December 31, 2013. For the six month period ended June 30, 2014, the Company experienced a $30.9 million decrease in time deposits, a $6.0 million decrease in FHLB borrowings, a $26.0 million decrease in cash balances and a $5.1 million decrease in net loan balances. The Company invested excess liquidity in securities as the balance of available for sale securities increased $12.7 million to $331.6 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. 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 Condensed Balance Sheets

(Dollars in thousands)

 

Assets

June 30, 2014

December 31, 2013

(unaudited)
 
Cash and due from banks $24,125 37,229
Interest-earning deposits 5,766 18,619
Cash and cash equivalents 29,891 55,848
Federal Home Loan Bank stock, at cost 4,428 4,428
Securities available for sale 331,639 318,910
Loans held for sale 464 ---
Loans receivable, net of allowance for loan losses of $8,353
at June 30, 2014, and $8,682 at December 31, 2013 538,099 543,632
Accrued interest receivable 4,518 5,233
Real estate and other assets owned 1,490 1,674
Bank owned life insurance 9,837 9,677
Premises and equipment, net 22,896 23,108
Deferred tax assets 1,942 4,610
Intangible asset 65 130
Other assets 4,677 6,399
Total assets $949,946 973,649
 
 

Liabilities and Stockholders' Equity

Liabilities:
Deposits:
Non-interest-bearing accounts $103,550 105,252
Interest-bearing accounts
Interest-bearing checking accounts 194,659 183,643
Savings and money market accounts 93,939 92,106
Other time deposits 351,121 381,996
Total deposits 743,269 762,997
Advances from Federal Home Loan Bank 40,776 46,780
Repurchase agreements 51,125 52,759
Subordinated debentures 10,310 10,310
Advances from borrowers for taxes and insurance 723 521
Dividends payable 308 326
Accrued expenses and other liabilities 3,475 4,239
Total liabilities $849,986 877,932
 

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

 
 

HOPFED BANCORP, INC.

Consolidated Condensed Balance Sheets, Continued

(Dollars in thousands)

 

June 30, 2014

December 31, 2013

(unaudited)
 

Stockholders' equity:

Preferred stock, par value $0.01 per share; authorized - 500,000 shares; no shares issued and outstanding at June 30, 2014, and December 31, 2013

--- ---

Common stock, par value $.01 per share; authorized 15,000,000 shares; 7,947,525 issued and 7,395,285 outstanding at June 30, 2014, and 7,927,287 issued and 7,447,903 outstanding at December 31, 2013

79 79
Additional paid-in-capital 58,367 58,302
Retained earnings 45,382 44,694

Treasury stock- common (at cost, 552,240 shares at June 30, 2014, and 479,384 shares at December 31, 2013)

(6,767) (5,929)
Accumulated other comprehensive income (loss), net of taxes 2,899 (1,429)
 
Total stockholders' equity 99,960 95,717
 
Total liabilities and stockholders' equity $949,946 973,649
 

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 For the Six Month Periods
Ended June 30, Ended June 30,
       

2014

2013

2014

2013

Interest income:
Loans receivable 6,503 6,676 12,830 13,558
Securities available for sale - taxable 1,694 1,764 3,473 3,596
Securities available for sale - nontaxable 531 547 1,075 1,132
Interest-earning deposits 6 7 14 13
Total interest income 8,734 8,994 17,392 18,299
 
Interest expense:
Deposits 1,488 1,936 2,959 3,982
Advances from Federal Home Loan Bank 428 446 862 890
Repurchase agreements 245 230 494 472
Subordinated debentures 193 182 377 364
Total interest expense 2,354 2,794 4,692 5,708
 
Net interest income 6,380 6,200 12,700 12,591
Provision for loan losses (261) 406 119 782
 

Net interest income after provision for loan losses

6,641 5,794 12,581 11,809
 
Non-interest income:
Service charges 848 937 1,626 1,790
Merchant card income 276 259 535 482
Mortgage origination revenue 133 212 191 412
Gain on sale of securities 241 789 254 1,416
Income from bank owned life insurance 66 87 161 162
Financial services commission 168 347 374 644
Other operating income 213 197 402 405
Total non-interest income 1,945 2,828 3,543 5,311
 

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 For the Six Month Periods
Ended June 30, Ended June 30,
       

2014

2013

2014

2013

Non-interest expenses:
Salaries and benefits 3,692 3,714 7,487 7,562
Occupancy 808 882 1,717 1,727
Data processing 736 646 1,464 1,296
Bank franchise tax 398 147 644 289
Intangible amortization 33 48 65 97
Professional services 341 549 628 942
Deposit insurance and examination 183 179 380 411
Advertising 341 308 655 641
Postage and communications 140 139 283 278
Supplies 158 93 303 229
Loss on real estate owned 102 12 125 47
Real estate owned expense 92 32 222 108
Other operating expenses 423 375 798 771
Total non-interest expense 7,447 7,124 14,771 14,398
 
Income before income tax expense 1,139 1,498 1,353 2,722
Income tax expense 214 332 74 572
 
Net income 925 1,166 1,279 2,150
Net income per share:
Basic $0.13 $0.16 $0.17 $0.29
Diluted $0.13 $0.16 $0.17 $0.29
Dividend per share $0.04 $0.02 $0.08 $0.04
 
Weighted average shares outstanding - basic 7,376,726 7,488,906 7,396,627 7,488,788
Weighted average shares outstanding - diluted 7,376,726 7,488,906 7,396,627 7,488,788
 

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 Change from
Months Ended Prior Quarter
 
6/30/2014 3/31/2014
 
Interest income:
Loans receivable $6,503 6,327 176
Securities available for sale - taxable 1,694 1,779 (85)
Securities available for sale - nontaxable 531 544 (13)
Interest-earning deposits 6 8 (2)
Total interest income 8,734 8,658 76
 
Interest expense:
Deposits 1,488 1,471 17
Advances from Federal Home Loan Bank 428 434 (6)
Repurchase agreements 245 249 (4)
Subordinated debentures 193 184 9
Total interest expense 2,354 2,338 16
 
Net interest income 6,380 6,320 60
Provision for loan losses (261) 380 (641)
 

Net interest income after provision for loan losses

6,641 5,940 701
 
Non-interest income:
Service charges 848 778 70
Merchant card income 276 259 17

Mortgage origination revenue

133 58 75
Gain on sale of securities 241 13 228
Income from bank owned life insurance 66 95 (29)
Financial services commission 168 206 (38)
Other operating income 213 189 24
Total non-interest income 1,945 1,598 347
 

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 Change from
Months Ended Prior Quarter
 

6/30/2014

3/31/2014

 
Non-interest expenses:
Salaries and benefits $3,692 3,795 (103)
Occupancy 808 909 (101)
Data processing 736 728 8
Bank franchise tax 398 246 152
Intangible amortization 33 32 1
Professional services 341 287 54
Deposit insurance and examination 183 197 (14)
Advertising 341 314 27
Postage and communications 140 143 (3)
Supplies 158 145 13
Loss on real estate owned 102 23 79
Real estate owned 92 130 (38)
Other operating 423 375 48
 
Total non-interest expense 7,447 7,324 123
 
Income before income tax expense 1,139 214 925
Income tax expense 214 (140) 354
 
Net income $925 $354 $571
Net income per share:
 
Basic $0.13 $0.05 $0.08
Fully diluted $0.13 $0.05 $0.08
Dividend per share $0.04 $0.04
 
Weighted average shares outstanding - basic 7,376,726 7,416,716
Weighted average shares outstanding - diluted 7,376,726 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

The table below adjusts tax-free investment income for the six month periods ended June 30, 2014, and June 30, 2013, by $524,000 and $545,000, respectively, for a tax equivalent rate using a cost of funds rate of 1.25% for the six month period ended June 30, 2014, and 1.50% for the six month period ended June 30, 2013. The table adjusts tax-free loan income by $6,000 and $4,000, respectively, for six month periods ended June 30, 2014, and June 30, 2013, respectively, 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

6/30/2014

6/30/2014

6/30/2014

6/30/2013

6/30/2013

6/30/2013

(Table Amounts in Thousands, Except Percentages)
Loans $535,830 12,836 4.79% $525,448 13,562 5.16%
Investments AFS taxable 264,596 3,473 2.63% $283,867 3,596 2.53%
Investment AFS tax free 66,303 1,599 4.82% $73,499 1,677 4.56%
Interest bearing deposits 11,225 14 0.25% $9,672 13 0.27%
 
Total interest earning assets 877,954 17,922 4.08% 892,486 18,848 4.22%
 
Other assets 81,908 79,201
 
Total assets $959,862 $971,687
 
Retail time deposits $326,464 1,890 1.16% $378,326 2,877 1.52%
Brokered deposits 44,061 291 1.32% 46,390 362 1.56%
Saving & MMDA 93,630 96 0.21% 83,367 70 0.17%
Now accounts 189,518 682 0.72% 165,564 673 0.81%
FHLB borrowings 43,775 862 3.94% 43,586 890 4.08%
Repurchase agreements 47,670 494 2.07% 40,595 472 2.33%
Subordinated debentures 10,310 377 7.31% 10,310 364 7.06%
 
Total interest bearing liabilities 755,428 4,692 1.24% 768,138 5,708 1.49%
 
Non-interest bearing deposits 101,987 93,857
Other non-interest bearing liabilities 4,525 4,944
 
Stockholders' equity 97,922 104,748
 

Total liabilities and stockholders' equity

$959,862 $971,687
 
Net interest income 13,230 13,140
 
Net interest rate spread 2.84% 2.73%
 
Net interest margin 3.01% 2.94%
 

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 June 30, 2014, and June 30, 2013, by $259,000 and $263,000, respectively, for a tax equivalent rate using a cost of funds rate of 1.20% for the three month period ended June 30, 2014, and 1.50% for the three month period ended June 30, 2013. The table adjusts tax-free loan income by $3,000 for three month period ended June 30, 2014, and $1,000 for the three month period ended June 30, 2013, respectively, 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
6/30/2014 6/30/2014 6/30/2014 6/30/2013 6/30/2013 6/30/2013
(Table Amounts in Thousands, Except Percentages)
Loans $538,895 6,506 4.83% $528,160 6,678 5.06%
Investments AFS taxable 266,815 1,694 2.54% 283,262 1,764 2.49%
Investment AFS tax free 65,323 790 4.84% 71,333 810 4.54%
Interest bearing deposits 9,899 6 0.24% 9,465 7 0.30%
 
Total interest earning assets 880,932 8,996 4.08% 892,220 9,259 4.15%
 
Other assets 76,307 73,757
 
Total assets $957,239 $965,977
 
Retail time deposits 320,957 927 1.16% 371,908 1,378 1.48%
Brokered deposits 42,024 146 1.39% 45,688 178 1.56%
Savings & MMDA 93,932 54 0.23% 86,018 37 0.17%
Now accounts 194,863 361 0.74% 167,038 343 0.82%
FHLB borrowings 41,764 428 4.10% 43,612 446 4.09%
Repurchase agreements 45,997 245 2.13% 38,185 230 2.41%
Subordinated debentures 10,310 193 7.49% 10,310 182 7.06%
 
Total interest bearing liabilities 749,847 2,354 1.26% 762,759 2,794 1.47%
 
Non-interest bearing deposits 103,717 93,616
Other non-interest bearing liabilities 4,522 4,891
 
Stockholders' equity 99,153 104,711
 

Total liabilities and stockholders' equity

$957,239 $965,977
 
Net interest income 6,642 6,465
 
Interest rate spread 2.82% 2.68%
 
Net interest margin 3.02% 2.90%
 

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

 

Contacts

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

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Contacts

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