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, 2016. For the three month period ended March 31, 2016, the Company’s net income was $509,000, or $0.08 per share basic and diluted, compared to net income of $1.4 million, or $0.20 per share, basic and diluted, for the three month period ended March 31, 2015. In the three month period ended March 31, 2015, the Company recovered $830,000 in previously non-accrual interest income on an investment. The recovery of non-accrual interest added $0.08 per share to the Company’s earnings per share for the three month period ended March 31, 2015.

Commenting on the first quarter results, John E. Peck, President and Chief Executive Officer, said, “The Company’s non-performing loans declined by $2.4 million, to $5.0 million, at March 31, 2016, as compared $7.4 million at December 31, 2015.”

“During the three month period ended March 31, 2016, the Company had $64.4 million in time deposits mature that carried a weighted average cost of 2.52%. The Company successfully reduced the effective cost of these deposits while maintaining an adequate level of liquidity. At March 31, 2016, time deposits totaled $285.3 million, as compared to $314.7 million at December 31, 2015. Despite a significant decline in time deposits during the three month period ended March 31, 2016, total deposits declined by only $14.5 million as compared to December 31, 2016. For the three month period ended March 31, 2016, total interest expense was $1.4 million, as compared to $1.6 million and $1.7 million for the three month periods ended March 31, 2015, and December 31, 2015, respectively, Mr. Peck concluded.”

Financial Highlights

  • The Company purchased 75,657 shares of its common stock in the quarter at a weighted average price of $11.92 per share. At March 31, 2016, the Company holds 1,161,545 shares in treasury stock with a weighted average cost of $12.37 per share.
  • At March 31, 2016, the Company’s tangible book value was $14.17 per share and tangible common equity ratio was 10.01%. The Company’s tangible book value and common equity ratio computations do not include 535,671 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, 2016, were 10.46%, 16.36% and 17.45%, respectively. The Company’s Tier 1 Leverage Ratio, Common Equity Tier 1 Capital Ratio and Total Risk Based Capital Ratio at March 31, 2016, were 10.75%, 16.76% and 17.85%, respectively.

Asset Quality

At March 31, 2016, the Company’s level of non-accrual loans totaled $5.0 million, as compared to $7.4 million at December 31, 2015. A summary of non-accrual loans at March 31, 2016, and December 31, 2015, is as follows:

 
       

March 31, 2016

      

December 31, 2015

(Dollars in Thousands)

 
One-to-four family mortgages $198 2,234
Home equity line of credit 74 48
Multi-family 1,926 1,968
Land 1,515 1,553
Non-residential real estate 28 247
Farmland 166 166
Consumer loans -- 8
Commercial loans

1,122

1,198

Total non-accrual loans

$5,029

7,422

 
 

At March 31, 2016, non-accrual loans plus other real estate owned totaled $6.5 million, or 0.73% of assets, as compared to $9.2 million, or 1.02% of total assets, at December 31, 2015. A summary of the activity in other real estate owned for the three month period ended March 31, 2016, is as follows:

     
Activity During 2016
               

Gain

(Loss)

   

Balance

12/31/2015

   

Foreclosures

   

Sale

Proceeds

   

Reduction

In Values

   

on

Sale

   

Balance

3/31/2016

(Dollars in Thousands)
One-to-four family mortgages $ 55 --- --- --- --- $ 55
Land 943 --- --- --- --- 943
Non-residential real estate 738 --- (270 ) --- (9 ) 459
Consumer   --- 12 (12 ) --- ---     ---
 
Total $ 1,736 12 (282 ) --- (9 ) $ 1,457
 
 

At March 31, 2016, the Company’s level of loans classified as substandard was $27.5 million as compared to $28.1 million at December 31, 2015. At March 31, 2016, the Company’s classified loan to risk based capital ratio was 27.3%. The Company’s specific reserve for impaired loans was $765,000 at March 31, 2016, and $630,000 at December 31, 2015. A summary of the level of classified loans, net of unearned fees, at March 31, 2016, is as follows:

                             
Specific Reserve

 

Reserve for

March 31, 2016

 Special

Impaired Loans

for Performing
Pass Mention Substandard

Doubtful

Total Impairment Loans
(Dollars in Thousands)
One-to-four family mortgages 143,020 102 2,814 --- 145,936 255 964
Home equity line of credit 32,027 23 220 --- 32,270 --- 238
Junior liens 1,573 34 16 --- 1,623 --- 8
Multi-family 26,278 --- 3,033 --- 29,311 201 116
Construction 36,074 --- --- --- 36,074 --- 451
Land 11,657 40 10,571 --- 22,268 108 1,205
Non-residential real estate 137,470 2,737 8,084 --- 148,291 118 949
Farmland 40,949 --- 572 --- 41,521 --- 564
Consumer loans 20,503 --- 284 --- 20,787 69 271
Commercial loans 80,630 311 1,868 --- 82,809 14 632
 
Total 530,181 3,247 27,462 --- 560,890 765 5,398
 
 

Net Interest Income

For the three month period ended March 31, 2016, the Company’s net interest income was $6.7 million, compared to $7.6 million for the three month periods ended March 31, 2015, and $6.3 million at December 31, 2015, respectively. For the three month period ended March 31, 2016, the Company’s net interest margin was 3.39%, as compared to 3.21% for the three month period ended December 31, 2015, and 3.78% for the three month period ended March 31, 2015. In the three month period ended March 31, 2015, the Company’s net interest margin included the receipt of past due investment interest of $830,000, adding an additional 0.40% to the Company’s net interest margin during the three month period ended March 31, 2015.

For the three month period ended March 31, 2016, and March 31, 2015, interest income on loans was $6.5 million and $6.3 million, respectively. For the three month period ended March 31, 2016, the average yield on loans was 4.62%, compared to 4.65% for the three month period ended March 31, 2015, and 4.59% for the three month period ended December 31, 2015. In the three month period ended March 31, 2016, interest income on loans was aided by the reduction in non-accrual loans, which added approximately $80,000 to interest income on loans during the three month period ended March 31, 2016.

For the three month period ended March 31, 2016, interest expense was $1.4 million, declining $267,000 and $228,000 as compared to the three month periods ended December 31, 2015, and March 31, 2015, respectively. For the three month period ended March 31, 2016, the decline the Company’s interest expense on deposits was largely the result of $64.4 million of long term time deposits maturing during the quarter. As a result of these maturities, the average cost of retail time deposits declined from 1.19% for the three month period ended December 31, 2015, to 0.97% for the three month period ended March 31, 2016. For the three month period ending March 31, 2016, the average cost of interest bearing liabilities was 0.83%, as compared to 0.98% and 0.94% for the three month periods ended December 31, 2015, and March 31, 2015, respectively.

For the three months ended March 31, 2016, the Company’s average balance of funds borrowed from the FHLB was $13.6 million and our weighted average cost was 2.15%. For the three month period ended March 31, 2015, the average balance of FHLB borrowings was $23.2 million and our weighted average cost was 1.19%. In March of 2016, the Company had a $4.0 million FHLB borrowing mature at 5.34%. For the three month period ending March 31, 2016, the cost of the Company’s trust preferred security was 3.65%, compared to 7.22% and 7.14% for the three month periods ended December 31, 2015, and March 31, 2015, respectively. The decline in the cost of the trust preferred security is the result of a maturity of an interest rate swap. The interest expense of the trust preferred securities is equal to 3.10% above Three Month London Interbank Offered Rate (“Libor”).

Non-interest Income

Non-interest income for the three month periods ended March 31, 2016, was $2.0 million, as compared to $1.9 million for the three month periods ended December 31, 2015, and March 31, 2015, respectively. For the three month period ended March 31, 2016, service charge income declined by $64,000 and $37,000, respectively, as compared to the three month periods ended December 31, 2015, and March 31, 2015. For the three month period ended March 31, 2016, the Company’s income on the origination of mortgage loans was $368,000, as compared to $310,000 and $177, 000 during the three month periods December 31, 2015, and March 31, 2015, respectively.

The Company recognized net gains on the sale of securities of $291,000, $139,000, and $366,000 for the three month periods ended March 31, 2016, December 31, 2015, and March 31, 2015, respectively. For the three month period ended March 31, 2016, the sale of securities was accomplished to fund the reduction in retail time deposits, which declined by $29.5 million at March 31, 2016, as compared to December 31, 2015.

Non-interest Expense

On a linked quarter basis, the Company’s non-interest expenses increased by $555,000. On a linked quarter basis, salaries and benefits increased by $326,000 due to end of year salary increases, additional payroll taxes resulting from the beginning of a new year and seasonal vacation accruals. On a linked quarter basis, changes in vacation accruals accounted for $199,500 of the increase in salary and benefits expense.

For the three month period ended March 31, 2016, non-interest expenses increased by $213,000 as compared to the three month period ended March 31, 2015. At March 31, 2016, the Company’s compensation and benefits expense declined by $196,000 as compared to March 31, 2015. For the three month period ended March 31, 2016, other operating expenses were $733,000, as compared to $432,000 for the three month period ended March 31, 2015.

Balance Sheet

At March 31, 2016, consolidated assets were $885.8 million, a decline of $17.4 million as compared to December 31, 2015. For the three month period ended March 31, 2016, the Company experienced a $29.5 million decrease in time deposits, a $4.0 million decrease in FHLB borrowings, a $12.5 million decrease in cash balances, and a $1.6 million decline in net loan balances. For the three month period ended March 31, 2016, the Company’s interest bearing checking accounts increased by $13.0 million, to $216.8 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 and a loan production office in Nashville, 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 Balance Sheets
(Dollars in thousands)

 

Assets

     March 31, 2016   December 31, 2015
(unaudited)
 
Cash and due from banks $27,393 46,926
Interest-earning deposits 14,798 7,772
Cash and cash equivalents 42,191 54,698
Federal Home Loan Bank stock, at cost 4,428 4,428
Securities available for sale 237,829 237,177
Loans held for sale 1,339 2,792

Loans receivable, net of allowance for

loan losses of $6,163 at March 31, 2016, and $5,700 at December 31, 2015

554,727 556,349
Accrued interest receivable 3,871 4,139
Real estate and other assets owned 1,457 1,736
Bank owned life insurance 10,403 10,319
Premises and equipment, net 23,975 24,034
Deferred tax assets 1,857 2,642
Other assets 3,753 4,840
Total assets $885,830 903,154
 
 

Liabilities and Stockholders' Equity

Liabilities:
Deposits:
Non-interest-bearing accounts $127,067 125,070
Interest-bearing accounts
Interest-bearing checking accounts 216,817 203,779
Savings and money market accounts 95,906 95,893
Other time deposits 285,163 314,664
Total deposits 724,953 739,406
 

Advances from Federal Home Loan Bank

11,000 15,000
Repurchase agreements 46,940 45,770
Subordinated debentures 10,310 10,310
Advances from borrowers for taxes and insurance 754 614
Dividends payable 286 287
Accrued expenses and other liabilities 2,819 4,137
Total liabilities 797,062 815,524
 
 

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, 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 March 31, 2016, and December 31, 2015

--- ---

Common stock, par value $.01 per share; authorized 15,000,000 shares; 7,962,308 issued and 6,800,763 outstanding at March 31, 2016, and 7,951,699 issued and 6,865,811 outstanding at December 31, 2015

80 79
Additional paid-in-capital 58,618 58,604
Retained earnings 47,382 47,124

Treasury stock- common (at cost, 1,161,545 shares at March 31, 2016, and 1,085,888 shares at December 31, 2015)

(14,372 ) (13,471 )

Unearned ESOP Shares (at cost, 535,671 shares at March 31, 2016, and 546,413 shares at December 31, 2015)

(7,039 ) (7,180 )
Accumulated other comprehensive income, net of taxes 4,099   2,474  
 
Total stockholders' equity 88,768   87,630  
 
Total liabilities and stockholders' equity $885,830   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
Ended March 31,
 
2016 2015
Interest and dividend income:
Loans receivable $6,465 6,290
Investment in securities, taxable 1,247 2,448
Nontaxable securities available for sale 353 453
Interest-earning deposits 16 4
Total interest and dividend income 8,081 9,195
 
Interest expense:
Deposits 1,095 1,260
Advances from Federal Home Loan Bank 73 69
Repurchase agreements 143 120
Subordinated debentures 94 184
Total interest expense 1,405 1,633
 
Net interest income 6,676 7,562
Provision for loan losses 458 215
 

Net interest income after provision for loan losses

6,218 7,347
 
Non-interest income:
Service charges 677 714
Merchant card income 291 270
Mortgage origination revenue 368 177
Gain on sale of securities 291 366
Income from bank owned life insurance 84 71
Financial services commission 133 159
Other operating income 176 156
Total non-interest income 2,020 1,913
 
 

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,
 
2016 2015
Non-interest expenses:
Salaries and benefits $3,988 4,184
Occupancy expense 787 738
Data processing expense 727 692
State deposit tax 248 248
Intangible amortization expense --- 16
Professional services expense 335 329
Deposit insurance and examination expense 173 117
Advertising expense 320 306
Postage and communications expense 155 132
Supplies expense 149 146
Loss (gain) on sale of real estate owned 9 (7 )
Real estate owned expenses 59 137
Other operating expenses 733 432  
Total non-interest expense 7,683 7,470  
 
Income before income tax expense 555 1,790
Income tax expense (benefit) 46 435  
 
Net income $509 1,355  
Net income per share:
Basic $0.08 $0.20  
Fully diluted $0.08 $0.20  
Dividend per share $0.04 $0.04  
 
Weighted average shares outstanding - basic 6,297,755 6,732,456  
Weighted average shares outstanding - diluted 6,297,755 6,732,456  
 
 

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  
Months Ended  
  Change from
3/31/2016 12/31/2015 Prior Quarter
 
Interest and dividend income:
Loans receivable 6,465 6,405 60
Investment in securities, taxable 1,247 1,196 51
Nontaxable securities available for sale 353 384 (31 )
Interest-earning deposits 16 11 5  
Total interest and dividend income 8,081 7,996 85  
 
Interest expense:
Deposits 1,095 1,280 (185 )
Advances from Federal Home Loan Bank 73 83 (10 )
Repurchase agreements 143 123 20
Subordinated debentures 94 186 (92 )
Total interest expense 1,405 1,672 (267 )
 
Net interest income 6,676 6,324 352
Provision for loan losses 458 291 167  
 

Net interest income after provision for loan losses

6,218 6,033 185  
 
Non-interest income:
Service charges 677 741 (64 )
Merchant card income 291 288 3

Mortgage origination revenue

368 310 58
Gain on sale of securities 291 139 152
Income from bank owned life insurance 84 83 1
Financial services commission 133 146 (13 )
Other operating income 176 178 (2 )
Total non-interest income 2,020 1,885 135  
 
 

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  
Months Ended  
  Change from
3/31/2016 12/31/2015 Prior Quarter
 
Non-interest expenses:
Salaries and benefits $3,988 3,662 326
Occupancy expense 787 799 (12 )
Data processing expense 727 710 17
State deposit tax 248 259 (11 )
Intangible amortization expense --- 1 (1 )
Professional services expense 335 329 6
Deposit insurance and examination expense 173 183 (10 )
Advertising expense 320 319 1
Postage and communications expense 155 149 6
Supplies expense 149 163 (14 )
Loss on disposal of equipment --- 1 (1 )
Loss on real estate owned 9 --- 9
Real estate owned expense (refund) 59 105 (46 )
Other operating expenses 733 448 285  
 
Total non-interest expense 7,683 7,128 555  
 
Income (loss) before income tax expense (benefit) 555 790 (235 )
Income tax expense (benefit) 46 134 (88 )
 
Net income (loss) 509 656 (147 )

Net income (loss) per share to common stockholders

Basic $0.08 $0.10 (0.02 )
Fully diluted $0.08 $0.10 (0.02 )
Dividend per share $0.04 $0.04
 
Weighted average shares outstanding - basic 6,297,755 6,328,324
Weighted average shares outstanding - diluted 6,297,755 6,328,324
 
 

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, 2016, and March 31, 2015, by $174,000 and $224,000, respectively; for a tax equivalent rate using a cost of funds rate of 0.83% for the three month period ended March 31, 2016, and 0.95% for the three month period ended March 31, 2015. The table adjusts tax-free loan income by $5,000 for three month periods ended March 31, 2016, and $1,000 for the three month period ended March 31, 2015, 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
3/31/2016 3/31/2016 3/31/2016 3/31/2015 3/31/2015 3/31/2015
(Table Amounts in Thousands, Except Percentages)
Loans $560,544 6,470 4.62 % $541,097 6,291 4.65 %
Investments AFS taxable 197,761 1,247 2.52 % 220,302 2,448 4.44 %
Investment AFS tax free 42,098 527 5.01 % 57,628 677 4.70 %
Federal funds 9,491 16   0.67 % 5,984 4   0.27 %
 
Total interest earning assets 809,894 8,260   4.08 % 825,011 9,420   4.57 %
 
Other assets 85,874 77,419
 
Total assets $895,768 $902,430
 
 
Retail time deposits 264,308 640 0.97 % 292,401 845 1.16 %
Brokered deposits 35,986 99 1.10 % 35,358 96 1.09 %
Interest bearing checking 213,336 311 0.58 % 191,604 269 0.56 %
Saving / MMDA 97,391 45 0.18 % 99,701 50 0.20 %
FHLB borrowings 13,593 73 2.15 % 23,167 69 1.19 %
Repurchase agreements 43,744 143 1.31 % 42,525 120 1.13 %
Subordinated debentures 10,310 94   3.65 % 10,310 184   7.14 %
 
Total interest bearing liabilities 678,668 1,405   0.83 % 695,066 1,633   0.94 %
 
Non-interest bearing deposits 122,926 111,869
Other liabilities 4,706 2,778
 
Stockholders' equity 89,468 92,717
 

Total liabilities and stockholders' equity

$895,768 $902,430
 

Net change in interest earning assets and interest bearing liabilities

6,855   3.25 % 7,787   3.63 %
 
Net yield on interest earning assets 3.39 % 3.78 %
 
 

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