HopFed Bancorp, Inc. Reports First Quarter Results

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:

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:

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:

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

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:

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

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.

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

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

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

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

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

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

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

SOURCE HopFed Bancorp, Inc.

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