HopFed Bancorp, Inc. Reports First Quarter Results

HOPKINSVILLE, Ky., April 22 /PRNewswire-FirstCall/ -- HopFed Bancorp, Inc. (Nasdaq: HFBC) (the "Company") today reported results for the quarter ended March 31, 2010.  For the three month period ended March 31, 2010, net income available for common shareholders was $1,606,000, or $0.45 per share (basic and diluted), compared to net income available to common shareholders of $1,953,000, or $0.55 per share (basic and diluted), for the three month period ended December 31, 2009, and net income available to common shareholders of $1,012,000, or $0.28 per share (basic and diluted), for the quarter ended March 31, 2009.  

Commenting on the first quarter results, John E. Peck, president and chief executive officer, said, "Our Company has achieved near record earnings in each of the last two quarters despite the difficult challenges facing our economy and the banking industry.  We have made significant progress in lowering our cost of funds and increasing our net interest margin. The Company's credit quality remains solid and management has proactively funded the allowance for loan loss account in a manner that we believe will allow us to appropriately resolve credit issues as they come to light."

First Quarter Highlights

• Heritage Bank, the Company's wholly owned subsidiary, remains well capitalized by regulatory standards with a Tier One Capital Ratio in excess of 8.00% and a Total Risk Based Capital Ratio in excess of 13.20%.
• The Company's provision for loan loss expense was $611,000 and $974,000 for the three month periods ended March 31, 2010 and 2009, respectively.  The Company's allowance for loan loss account equaled approximately 80% of the Company's non-performing loans at March 31, 2010.
• The Company's balances in other real estate owned increased to $2.7 million at March 31, 2010, compared to $1.9 million at December 31, 2009.  Despite this increase, the Company continues to resolve issues related to non-performing assets in a timely manner.
• For the quarter ended March 31, 2010, the Company's net interest income increased to $7.3 million as compared to $6.4 million for the quarter ended March 31, 2009.  As compared to the three-month period ended December 31, 2009, net interest income increased by approximately $270,000.

Asset Quality

At March 31, 2010, the Company's non-performing loans totaled $10.8 million, or 1.66% of total loans, as compared to $11.3 million, or 1.72% of total loans at December 31, 2009.  At March 31, 2010, non-performing assets totaled $13.5 million, or 1.29% of total assets, as compared to $13.2 million, or 1.28% of total assets, at December 31, 2009.  At March 31, 2010, the Company's allowance for loan loss balance was $8.6 million, or 1.33% of total loans.  For the three month period ended March 31, 2010, the Company's net charge-offs totaled $822,000, or 0.50% of average loans.  Management continues to identify and resolve problem loans within the Bank's loan portfolio.

Net Interest Income

For the three month period ended March 31, 2010, the Company's net interest income was $7.3 million, compared to $6.4 million for the three month period ended March 31, 2009, and $7.0 million for the three month period ended December 31, 2009.  The improvement in net interest income has been driven by lower levels of interest expense.  The Company anticipates having the opportunity to reduce interest expense on time deposits as a significant amount of time deposits will mature during the second quarter of 2010.  The Company has developed a marketing campaign focused on retaining these deposits at a much lower cost while attempting to cross sell additional services to its customers.  For the quarters ended March 31, 2009, December 31, 2009 and March 31, 2010, the Company's quarterly net interest margin was 2.89%, 3.07% and 3.19%, respectively.

Non-interest Income

Non-interest income for the three month period ended March 31, 2010, was $2.3 million, as compared to $2.4 million in March 31, 2009, and $3.0 million for the three month period ended December 31, 2009.  The decline in non-interest income was largely the result of a $164,000 reduction in gains on the sale of investments during the three month period ended March 31, 2010, as compared to the same period in 2009.  Traditionally, non-interest income is lower in the first quarter of each year. The lower levels of non-interest income appear to be the result of slower loan and deposit volumes and the presence of income tax refunds.

Non-interest Expense

For the three month period ended March 31, 2010, non-interest expenses increased by approximately $400,000 as compared to the three month period ended March 31, 2009.  The increase in the Company's non-interest expenses was largely the result of a $218,000 increase in FDIC assessments and Office of Thrift Supervision examination fees and an $184,000 increase in compensation expense.  As compared to the three month period ended December 31, 2009, non-interest expenses increased by $300,000.  The increased level of non-interest expense is directly attributable to an increase in compensation expenses.  The linked quarter level of compensation expense is strongly influenced by seasonality factors, which accounts for almost 50% of the increased compensation expense.

Balance Sheet  

Total assets were $1.05 billion at March 31, 2010, an increase of $22.0 million from December 31, 2009.  During the same period, the Company's deposits grew by $23.4 million, while gross loans declined by approximately $100,000.  The Company's total borrowings from the Federal Home Loan Bank of Cincinnati declined to $97.5 million at March 31, 2010, from $102.5 million at December 31, 2009.  

The Company's growth in deposits has been generally uniform throughout its marketplace.  In the quarter ended March 31, 2010, deposit pricing within the Company's footprint appears to have been more reasonable as compared to prior periods.  The Company's quality loan demand remained muted as we continue to meet the needs of its current customer base.

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 as well as Fall & Fall Insurance of Fulton, Kentucky, Heritage Solutions of Murray, Kentucky, Hopkinsville, Kentucky, Kingston Springs, Tennessee and Pleasant View, Tennessee, and Heritage Mortgage Services of Clarksville, Tennessee.  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.

Information contained in this press release, other than historical information, may be considered forwardlooking 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.

SOURCE HopFed Bancorp, Inc.

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