HopFed Bancorp, Inc. Reports Fourth Quarter Results

HOPKINSVILLE, Ky.--(BUSINESS WIRE)--HopFed Bancorp, Inc. (NASDAQ: HFBC) (the “Company”), the holding company for Heritage Bank USA, Inc. (the “Bank”), today reported results for the three and twelve month periods ended December 31, 2016. For the three month period ended December 31, 2016, the Company’s net income was $1.1 million, or $0.18 per share, basic and diluted. For the three month period ended December 31, 2015, the Company’s net income was $656,000, or $0.10 per share, basic and diluted. For the twelve month period ended December 31, 2016, the Company’s net income was $2.9 million, or $0.47 per share, basic and diluted. For the twelve month period ended December 31, 2015, the Company’s net income was $2.4 million, or $0.38 per share, basic and diluted.

Commenting on the Company’s results for the three and twelve month periods ended December 31, 2016, John E. Peck, President and Chief Executive Officer, said, “The Company experienced loan growth of $25.2 million and $18.3 million for the three month periods ended December 31, 2016, and September 30, 2016, respectively. In the three month period ended December 31, 2016, the Company’s loan growth largely occurred in our legacy markets. Our improving profitability levels are a direct result of our recent lending success. Entering 2017, our loan pipeline remains robust and we are optimistic about our future.”

Mr. Peck continued, “In the three month period ended December 31, 2016, the Company’s interest bearing checking accounts grew by $27.0 million, or 14.8%. The seasonal increase in transaction account balances is largely the result of our growth in the number of agri-business and municipal clients. In the first quarter of 2017, the Company will change the product lineup of our consumer transaction accounts in an attempt to maximize the profitability of our deposit relationships. This may result in increased volatility in the total outstanding balances of these accounts.”

Financial Highlights

• At December 31, 2016, the Company’s tangible book value was $13.90 per share and tangible common equity ratio was 9.69%. The Company’s tangible book value and common equity ratio computations do not include an estimated 498,346 unallocated shares of common stock held by the Company’s ESOP.
• The Bank’s estimated Tier 1 Leverage Ratio and Total Risk Based Capital Ratio at December 31, 2016, were 10.68% and 16.04%, respectively. The Company’s consolidated Tier 1 Leverage Ratio and Total Risk Based Capital Ratio at December 31, 2016, were 10.79% and 16.19%, respectively.
• The Company purchased 6,001 shares of its common stock in the quarter at a weighted average price of $11.34 per share. For the twelve month period ended December 31, 2016, the Company purchased 160,248 shares of its common stock at a weighted average price of $11.71 per share. At December 31, 2016, the Company owns 1,246,136 shares of treasury stock at a weighted average cost of $12.32 per share.

Asset Quality

At December 31, 2016, the Company’s level of non-accrual loans totaled $9.1 million, as compared to $7.4 million at December 31, 2015. A summary of non-accrual loans at December 31, 2016, and December 31, 2015, is as follows:

	December 31, 2016		December 31, 2015
	(Dollars in Thousands)
One-to-four family mortgages	$	270	$	2,234
Home equity line of credit		402		48
Multi-family		208		1,968
Land		7,675		1,553
Non-residential real estate		---		247
Farmland		---		166
Consumer loans		3		8
Commercial loans		516		1,198
Total non-accrual loans	$	9,074	$	7,422

At December 31, 2016, non-accrual loans plus other real estate and other assets owned totaled $11.5 million, or 1.29% of total assets, compared to $12.4 million, or 1.42% of assets, at September 30, 2016, and $9.2 million, or 1.01% of assets, at December 31, 2015. Net charge offs for the three month period ended December 31, 2016, were $764,000, an annualized charge off rate of 0.52% of average loans. Net charge offs for the twelve month period ended December 31, 2016, were $830,000, or 0.15% of average loans. The increase in loan charge offs for the three month period ended December 31, 2016, was the result of a foreclosure on multi-family properties that were previously in non-accrual status.

A summary of the activity in other real estate owned for the twelve month period ended December 31, 2016, is as follows:

	Activity During 2016
	Balance					Reduction		Gain (Loss)		Balance
	12/31/2015		Foreclosures	Proceeds		in Values		on Sale		12/31/2016
	(Dollars in Thousands)
One-to-four family mortgages	$	55	135	(43	)	---		(12	)	$	135
HELOC		---	68	(34	)	(8	)	2			28
Multi-family		---	1,915	(153	)	---		13			1,775
Land		943	130	(1,108	)	---		35			---
Consumer		---	15	(15	)	---		---			---
Non-residential real estate		738	---	(270	)	---		(9	)		459
Total		1,736	2,263	(1,623	)	(8	)	29			2,397

Asset Quality (continued)

For the twelve month period ended December 31, 2016, the Company’s balance of loans classified as Troubled Debt Restructurings (“TDRs”) increased from $5.5 million to $6.5 million. The increase is the result of one lending relationship in which the Bank revised the customer’s payment terms to provide for interest only payments while the customer attempts to sell the collateral. A summary of the activity in loans classified as TDRs for the twelve month period ended December 31, 2016, is as follows:

	Balance at		New	Loss or	Loan		Removed from (Taken to)	Balance
	12/31/15		TDR	Foreclosure	Amortization		Non-accrual	12/31/16
	(Dollars in Thousands)
Multi-family	$	---	816	---	(1	)	---	$	815
Non-residential real estate		5,536	228	---	(118	)	---		5,646
Total performing TDR		5,536	1,044	---	(119	)	---		6,461

At December 31, 2016, the Company’s level of loans classified as substandard was $29.3 million as compared to $28.1 million at December 31, 2015. At December 31, 2016, the Company’s classified loan to risk-based capital ratio was 29.2%. The Company’s specific reserve for impaired loans was $1.1 million at December 31, 2016, and $630,000 at December 31, 2015. A summary of loans by type, risk classification and related valuation allowance, gross of deferred loan fees of $439,000, at December 31, 2016, is as follows:

								Specific	Allowance
								Allowance	for
December 31, 2016			Special	Impaired Loans				for	Performing
	Pass		Mention	Substandard	Doubtful	Total		Impairment	Loans
	(Dollars in Thousands)
One-to-four family mortgages	$	145,965	744	1,253	---	$	147,962	---	805
Home equity line of credit		35,109	25	550	---		35,684	---	246
Junior liens		1,411	30	11	---		1,452	---	7
Multi-family		31,280	---	3,004	---		34,284	---	419
Construction		39,255	---	---	---		39,255	---	295
Land		15,581	35	8,224	---		23,840	1,036	960
Non-residential real estate		172,834	3	10,542	---		183,379	---	845
Farmland		44,832	674	2,290	---		47,796	---	735
Consumer loans		7,943	---	335	---		8,278	84	118
Commercial loans		85,174	603	3,130	---		88,907	28	534
Total		579,384	2,114	29,339	---		610,837	1,148	4,964

Net Interest Income

For the three month period ended December 31, 2016, the Company’s net interest income was $6.6 million, compared to $6.3 million for the three-month period ended December 31, 2015, and $6.7 million for the three-month period ended September 30, 2016. For the three month period ended December 31, 2016, the Company’s net interest margin was 3.35%, as compared to 3.21% for the three month period ended December 31, 2015, and 3.41% for the three month period ended September 30, 2016. The decline in linked quarter net interest income and net interest margin was largely the result of a $6.3 million decline in the average balance of available for sale taxable securities and a $3.4 million decline in the average balance of available for sale tax free investments.

For the twelve month period ended December 31, 2016, the Company’s net interest income was $26.4 million, as compared to $26.6 million for the twelve month period ended December 31, 2015. For the twelve month period ended December 31, 2016, the Company’s interest expense was $5.3 million as compared to $6.6 million for the twelve month period ended December 31, 2015. For the twelve month period ended December 31, 2016, the Company’s net interest margin was 3.35%, as compared to 3.36% for the twelve month period ended December 31, 2015.

The decline in interest income for the twelve month period ended December 31, 2016, compared to December 31, 2015, is largely the result of a $1.6 million decline in income on taxable securities available for sale. A significant portion of this decline is the result of the collection of $830,000 of non-accrual investment interest in March 2015. For the twelve-month period ended December 31, 2016, the average balance and yield of taxable securities available for sale was $190.8 million at 2.41%, compared to $203.2 million and 3.03% for the twelve month period ended December 31, 2015. For the year ended December 31, 2015, the collection of non-accrual investment interest increased the Company’s yield on taxable securities by 0.41% and our net interest margin by 0.11%.

Non-Interest Income

Non-interest income for the three month periods ended December 31, 2016, September 30, 2016, and December 31, 2015, was $2.0 million, $1.9 million and $1.9 million, respectively. For the twelve month period ended December 31, 2016, non-interest income was $7.9 million as compared to $7.6 million for the twelve month period ended December 31, 2015.

For the three and twelve month periods ended December 31, 2016, service charge income was $694,000 and $2.8 million, respectively, compared to $741,000 and $2.9 million for the three month period and twelve month period ended December 31, 2015, and $719,000 for the three-month period ended September 30, 2016. The decline in service charge income represents a multi-year trend of declining income despite significant growth in both the numbers and balances of transaction accounts and is the result of regulatory changes. This trend was a significant factor in the Company’s decision to revise our transaction deposit account lineup.

For the three month period ended December 31, 2016, mortgage origination revenue was $367,000, compared to $415,000 for the three-month period ended September 30, 2016, and $310,000 for the three month period ended December 31, 2015. The decline in mortgage origination income on a linked quarter basis is largely the result of a 75 basis point increase in the ten-year treasury that occurred in November 2016, reducing the amount of mortgage applications received from buyers.

For the three month period ended December 31, 2016, gains on the sale of securities were $190,000, as compared to $139,000 for the three-month period ended December 31, 2015, and $79,000 for the three month period ended September 30, 2016. In the three month period ended December 31, 2016, the Company used security sales to fund loan growth.

Non-Interest Expense

On a linked quarter basis, the Company’s non-interest expenses declined by $142,000, largely the result of the $156,000 reduction in real estate owned expenses and a $51,000 gain realized on the sale of real estate owned properties. For the three month periods ended December 31, 2016, and December 31, 2015, non-interest expenses were $7.2 million, respectively, as compared to $7.4 million for the three month period ended September 30, 2016.

For the twelve-month period ended December 31, 2016, the Company’s non-interest expenses were $29.9 million, representing a decline of $589,000 as compared to the twelve-month period ended December 31, 2015. For the twelve-month period ended, December 31, 2016, the Company experienced the following significant changes in operating expenses as compared to the twelve-month period ended December 31, 2015:

	Balance			Percentage
	Change			Change
Salary and benefits	$	(410,000	)	-2.6	%
Occupancy		96,000		3.1	%
Data processing		115,000		4.1	%
Professional services		(102,000	)	-6.8	%
Loss on real estate owned		(737,000	)	-102.9	%
Other operating expenses		375,000		19.2	%

Balance Sheet

At December 31, 2016, consolidated assets were $891.5 million, a decline of $11.7 million as compared to December 31, 2015. At December 31, 2016, the Company experienced the following changes in our balance sheet:

	Balance			Percentage
	Change			Change
Cash and cash equivalents	$	(28,949	)	-52.9	%
Securities		(27,697	)	-11.7	%
Gross loans		48,349		8.6	%
Time deposits		(21,586	)	-6.9	%
Total deposits		(6,524	)	-0.9	%
FHLB borrowings		(4,000	)	-26.7	%
Repurchase agreements		1,885		4.1	%

For the twelve month period ended December 31, 2016, a significant portion of the Company’s loan growth occurred in two markets. In Christian County, Kentucky, the Company’s loan growth was $31.4 million, or 30.6%. At December 31, 2016, the Company’s Nashville, Tennessee loan production offices had outstanding loan balances of $42.5 million, representing loan growth of $26.3 million during the twelve month period ended December 31, 2016.

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 changed to Heritage Bank USA, Inc., and its charter 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 loan production offices in Brentwood, Tennessee, and Nashville, Tennessee. The Company offers a broad line of financial services through Heritage Bank Wealth Management of Murray, Kentucky, Hopkinsville, Kentucky, Kingston Springs, Tennessee and Clarksville, Tennessee. Heritage Bank Mortgage Services of Clarksville, Tennessee, offers long term fixed rate single 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 at our 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	December 31, 2016		December 31, 2015
	(unaudited)
Cash and due from banks	$	21,779	46,926
Interest-earning deposits		3,970	7,772
Cash and cash equivalents		25,749	54,698
Federal Home Loan Bank stock, at cost		4,428	4,428
Securities available for sale		209,480	237,177
Loans held for sale		1,094	2,792
Loans receivable, net of allowance for loan losses of $6,112 at December 31, 2016, and $5,700 at December 31, 2015		604,286	556,349
Accrued interest receivable		3,799	4,139
Real estate and other assets owned		2,397	1,736
Bank owned life insurance		10,662	10,319
Premises and equipment, net		23,461	24,034
Deferred tax assets		3,052	2,642
Other assets		3,078	4,840
Total assets	$	891,486	903,154
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Non-interest-bearing accounts	$	131,145	125,070
Interest-bearing accounts:
Interest-bearing checking accounts		209,347	203,779
Savings and money market accounts		99,312	95,893
Other time deposits		293,078	314,664
Total deposits		732,882	739,406
Advances from Federal Home Loan Bank		11,000	15,000
Repurchase agreements		47,655	45,770
Subordinated debentures		10,310	10,310
Advances from borrowers for taxes and insurance		766	614
Dividends payable		288	287
Accrued expenses and other liabilities		2,157	4,137
Total liabilities		805,058	815,524
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)
	December 31, 2016			December 31, 2015
	(unaudited)
Stockholders' equity:
Preferred stock, par value $0.01 per share; authorized 500,000 shares; no shares issued and outstanding at December 31, 2016, and December 31, 2015		---			---
Common stock, par value $.01 per share; authorized 15,000,000 shares; 7,963,378 issued and 6,717,242 outstanding at December 31, 2016, and 7,951,699 issued and 6,865,811 outstanding at December 31, 2015		80			79
Additional paid-in-capital		58,660			58,604
Retained earnings		49,035			47,124
Treasury stock- common (at cost, 1,246,136 shares at December 31, 2016, and 1,085,888 shares at December 31, 2015)		(15,347	)		(13,471	)
Unallocated ESOP shares (at cost, 498,346 at December 31, 2016, and 546,413 shares at December 31, 2015)		(6,548	)		(7,180	)
Accumulated other comprehensive income, net of taxes		548			2,474
Total stockholders' equity		86,428			87,630
Total liabilities and stockholders' equity	$	891,486		$	903,154
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 Twelve Month Periods
	Ended December 31,			Ended December 31,
	2016		2015	2016	2015
Interest income:
Loans receivable	$	6,603	6,405	25,778	25,300
Securities available for sale - taxable		1,051	1,196	4,595	6,149
Securities available for sale - nontaxable		289	384	1,308	1,651
Interest-earning deposits		8	11	46	22
Total interest income		7,951	7,996	31,727	33,122
Interest expense:
Deposits		1,094	1,280	4,240	5,031
Advances from Federal Home Loan Bank		29	83	163	289
Repurchase agreements		87	123	508	491
Subordinated debentures		101	186	388	739
Total interest expense		1,311	1,672	5,299	6,550
Net interest income		6,640	6,324	26,428	26,572
Provision for loan losses		63	291	1,241	1,051
Net interest income after provision for loan losses		6,577	6,033	25,187	25,521
Non-interest income:
Service charges		694	741	2,788	2,925
Merchant card income		311	288	1,224	1,130
Mortgage origination revenue		367	310	1,585	1,175
Gain on sale of securities		190	139	612	691
Income from bank owned life insurance		78	83	343	335
Financial services commission		159	146	614	685
Other operating income		201	178	769	661
Total non-interest income		2,000	1,885	7,935	7,602
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 Twelve Month Periods
	Ended December 31,					Ended December 31,
	2016			2015		2016			2015
Non-interest expenses:
Salaries and benefits	$	3,754			3,662		15,400			15,810
Occupancy		775			799		3,173			3,077
Data processing		767			710		2,942			2,827
State bank tax		247			259		990			1,018
Intangible amortization		---			1		---			33
Professional services		396			329		1,404			1,506
Deposit insurance and examination		113			183		609			586
Advertising		334			319		1,401			1,302
Postage and communications		141			149		625			577
Supplies		151			163		607			527
(Gain) loss on sale of fixed assets		---			1		(72	)		1
(Gain) loss on real estate owned		(51	)		---		(21	)		716
Real estate owned expense		26			105		469			511
Other operating expenses		558			508		2,329			1,954
Total non-interest expense		7,211			7,188		29,856			30,445
Income before income tax		1,366			730		3,266			2,678
Income tax expense		260			74		362			274
Net income	$	1,106		$	656		2,904			2,404
Net income per share:
Basic	$	0.18		$	0.10	$	0.47		$	0.38
Diluted	$	0.18		$	0.10	$	0.47		$	0.38
Dividend per share	$	0.04		$	0.04	$	0.16		$	0.16
Weighted average shares outstanding - basic		6,193,278			6,328,324		6,233,860			6,372,277
Weighted average shares outstanding - diluted		6,193,278			6,328,324		6,233,860			6,372,277
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
	12/31/2016		9/30/2016
Interest income:
Loans receivable	$	6,603	6,569	34
Securities available for sale - taxable		1,051	1,099	(48	)
Securities available for sale - nontaxable		289	326	(37	)
Interest-earning deposits		8	10	(2	)
Total interest income		7,951	8,004	(53	)
Interest expense:
Deposits		1,094	1,044	50
Advances from Federal Home Loan Bank		29	33	(4	)
Repurchase agreements		87	139	(52	)
Subordinated debentures		101	99	2
Total interest expense		1,311	1,315	(4	)
Net interest income		6,640	6,689	(49	)
Provision for loan losses		63	255	(192	)
Net interest income after provision for loan losses		6,577	6,434	143
Non-interest income:
Service charges		694	719	(25	)
Merchant card income		311	308	3
Mortgage origination revenue		367	415	(48	)
Gain on sale of securities		190	79	111
Income from bank owned life insurance		78	104	(26	)
Financial services commission		159	131	28
Other operating income		201	189	12
Total non-interest income		2,000	1,945	55
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
	12/31/2016			9/30/2016
Non-interest expenses:
Salaries and benefits	$	3,754			3,757			(3	)
Occupancy		775			810			(35	)
Data processing		767			744			23
Franchise and deposit tax		247			248			(1	)
Professional services		396			368			28
Deposit insurance and examination		113			164			(51	)
Advertising		334			376			(42	)
Postage and communications		141			157			(16	)
Supplies		151			148			3
Loss (gain) on sale of fixed asset		---			(72	)		72
(Gain) loss on sale of real estate owned		(51	)		22			(73	)
Real estate owned expense		26			182			(156	)
Other operating expenses		558			449			109
Total non-interest expense		7,211			7,353			(142	)
Income before income tax expense		1,366			1,026			340
Income tax expense		260			41			219
Net income	$	1,106		$	985		$	121
Net income per share:
Basic	$	0.18		$	0.16		$	0.02
Diluted	$	0.18		$	0.16		$	0.02
Dividend per share	$	0.04		$	0.04
Weighted average shares outstanding - basic		6,193,278			6,232,465
Weighted average shares outstanding - diluted		6,193,278			6,232,465
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)
The table below adjusts tax-free investment income for the twelve month periods ended December 31, 2016, and December 31, 2015, by $650 and $813 respectively, for a tax equivalent rate using a cost of funds rate of 0.80% for the twelve month period ended December 31, 2016, and 1.00% for the twelve month period ended December 31, 2015. The table adjusts tax-free loan income by $23 and $22 respectively, for the twelve month periods ended December 31, 2016, and December 31, 2015, 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
	12/31/2016		12/31/2016			12/31/2016		12/31/2015		12/31/2015			12/31/2015
Loans	$	570,674	$	25,801		4.52	%	$	552,265	$	25,322		4.59	%
Investments AFS taxable		190,843		4,595		2.41	%		203,160		6,149		3.03	%
Investments AFS tax free		38,981		1,958		5.02	%		52,836		2,464		4.66	%
Federal funds		7,512		46		0.61	%		8,528		22		0.26	%
Total interest earning assets		808,010		32,400		4.01	%		816,789		33,957		4.16	%
Other assets		72,407							75,032
Total assets	$	880,417						$	891,821
Retail time deposits		258,069		2,488		0.96	%		287,601		3,357		1.39	%
Brokered deposits		36,409		398		1.09	%		33,288		378		1.52	%
Now accounts		202,916		1,183		0.58	%		194,432		1,105		0.75	%
MMDA and savings accounts		98,715		171		0.17	%		97,495		191		0.18	%
FHLB borrowings		12,404		163		1.31	%		17,279		289		3.96	%
Repurchase agreements		43,566		508		1.17	%		43,495		491		1.13	%
Subordinated debentures		10,310		388		3.76	%		10,310		739		7.17	%
Total interest bearing liabilities		662,389		5,299		0.80	%		683,900		6,550		0.96	%
Non-interest bearing deposits		125,709							113,350
Other non-interest bearing liabilities		3,274							3,865
Stockholders' equity		89,045							90,706
Total liabilities and stockholders' equity	$	880,417						$	891,821
Net interest income			$	27,101						$	27,407
Interest rate spread						3.21	%						2.90	%
Net interest margin				3.35	%						3.36	%
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 December 31, 2016, and December 31, 2015, by $144 and $189, respectively, for a tax equivalent rate using a cost of funds rate of 0.80% for the three-month period ended December 31, 2016, and 1.00% for the three-month period ended December 31, 2015. The table adjusts tax-free loan income by $5 for three-month period ended December 31, 2016, and $8 for the three-month period ended December 31, 2015, 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
	12/31/2016		12/31/2016			12/31/2016		12/31/2015		12/31/2015			12/31/2015
Loans	$	589,282	$	6,608		4.49	%	$	559,423	$	6,413		4.59	%
Investments AFS taxable		179,483		1,051		2.34	%		186,659		1,196		2.56	%
Investments AFS tax free		35,102		433		4.93	%		49,780		573		4.60	%
Federal funds		5,915		8		0.54	%		15,635		11		0.28	%
Total interest earning assets		809,782		8,100		4.00	%		811,497		8,193		4.04	%
Other assets		70,443							82,070
Total assets	$	880,225						$	893,567
Retail time deposits		258,899		653		1.01	%		282,985		841		1.19	%
Brokered deposits		38,064		104		1.09	%		35,013		99		1.13	%
Now accounts		200,475		295		0.59	%		195,141		295		0.60	%
MMDA and savings accounts		99,325		42		0.17	%		99,698		45		0.18	%
FHLB borrowings		11,000		29		1.05	%		17,174		83		1.93	%
Repurchase agreements		41,717		87		0.83	%		42,810		123		1.15	%
Subordinated debentures		10,310		101		7.22	%		10,310		186		7.22	%
Total interest bearing liabilities		659,790		1,311		0.79	%		683,131		1,672		0.98	%
Non-interest bearing deposits		128,450							116,769
Other non-interest bearing liabilities		3,557							4,347
Stockholders' equity		88,428							89,320
Total liabilities and stockholders' equity	$	880,225						$	893,567
Net interest income			$	6,789						$	6,521
Interest rate spread						3.21	%						3.06	%
Net interest margin				3.35	%						3.21	%
This information is preliminary and based on Company data available at the time of the presentation.