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News : HopFed Bancorp, Inc.

 



HOPFED BANCORP, INC. REPORTS SECOND QUARTER RESULTS
Jul 26, 2012



HOPKINSVILLE, Ky. (July 26, 2012) - HopFed Bancorp, Inc. (NASDAQ: HFBC) (the "Company"), the holding company for Heritage Bank (the "Bank"), today reported results for the three and six month periods ended June 30, 2012.  For the three month period ended June 30, 2012, the Company's net income available to common shareholders was $903,000, or $0.12 per share, basic and diluted, compared to net income available to common shareholders of $550,000, or $0.07 per share basic and diluted, for the three month period ended June 30, 2011. For the six month period ended June 30, 2012, the Company's net income available to common shareholders was $1.4 million, or $0.18 per share, basic and diluted, compared to a net loss attributable to common shareholders of $1.5 million, or ($0.21) per share basic and diluted, for the six month period ended June 30, 2011.

Commenting on the second quarter results, John E. Peck, President and Chief Executive Officer, said, "The Company's operating results improved modestly during the three month period ended June 30, 2012, as compared to the three months period ended March 31, 2012, and June 30, 2011, due to an increase in gains on the sales of securities and lower provision for loan loss expenses. Slight improvements in our local economy are tempered by drought concerns for our area farmers. At June 30, 2012, the Company had $90.1 million in loans classified as substandard and $297,000 in loans classified as doubtful as compared to $47.5 million classified as substandard and $1.7 million classified as doubtful at December 31, 2012. The Company's main focus for the second half of 2012 will be to reduce its level of adversely classified assets."

Mr. Peck concluded, "The Company continues to improve its deposit mix as we reduce our level of time deposit funding. At June 30, 2012, time deposits account for 62.0% of total deposits, compared to 68.1% at June 30, 2011. Total brokered deposits are $51.2 million, or 6.51% of deposits, compared to $80.0 million at June 30, 2011. In the second half of 2012, the Company will experience an increase in the amount of liabilities that mature, offering the opportunity to further reduce our interest expense."  


Financial Highlights

o The Company and Bank's capital ratios continue to strengthen. At June 30, 2012, the Company's tangible book value was $13.60 and our tangible common equity ratio is 10.14%. The Bank's tier 1 capital and total risk based capital ratios at June 30, 2012, are 10.47% and 19.12%, respectively. The Company's tier 1 capital and total risk based capital ratios are 11.89% and 21.77%, respectively.

o At June 30, 2012, the Company's and Bank's net classified asset to risk based capital ratios were 76.1% and 87.6%, respectively. At December 31, 2011, these ratios were 43.0% for the Company and 49.9% for the Bank.  As compared to March 31, 2012, total classified assets increased by $8.8 million. The increase in classified assets consisted of a $5.0 million increase in loans secured by farmland, a $3.2 million increase in land development loans, a $2.4 million increase in multi-family loans and a $1.7 million increase in commercial real estate loans. 

o At June 30, 2012, the Company's allowance for loan loss totaled $10.6 million, or 1.92% of total loans and 87.23% of non-accrual loans. In the six month period ended June 30, 2012, the Company's net charge offs totaled $2.2 million, or an annualized rate of 0.79% of average loans.

o For the three month period ended June 30, 2012, the Company's net interest margin was 2.87%, as compared to 3.06% for the three month period ended June 30, 2011, and 2.97% for the three month period ended March 31, 2012. The Company's net interest margin continues to decline as outstanding loan balances decline and higher yielding investments continued to be called.

Asset Quality

At June 30, 2012, the Company's level of non-accrual loans totaled $12.1 million, as compared to $6.1 million at December 31, 2011. The increase in non-accrual loans is largely the result of two land development loans totaling $3.2 million and three non-residential real estate loans totaling $3.6 million being placed into non-accrual status.

A summary of non-accrual loans at June 30, 2012, and December 31, 2011, is as follows:

 
The increase in non-interest income for the three month period ended June 30, 2012, as compared to the three month periods ended June 30, 2011, and March 31, 2012, was primarily the result of an increase in gains on the sale of securities. The Company recognized net gains on the sale of securities of $630,000, $329,000 and $44,000 for the three month periods ended June 30, 2012, June 30, 2011, and March 31, 2012, respectively. In the three month period ended June 30, 2012, the sale of securities and resulting gains were utilized to fund the reduction in higher costing time and brokered deposits.

For the three and six month periods ended June 30, 2012, the Company's revenue related to the origination and sale of fixed rate mortgage loans was $263,000 and $466,000, respectively, as compared to $58,000 and $130,000 for the same periods in 2011. The Company has experienced an increase in the amount of refinancing activity on single family homes as long term interest rates have reached historic lows.

Non-interest Expense

Non-interest expenses were $7.4 million, $7.4 million and $7.1 million for the three month periods ended June 30, 2012, June 30, 2011, and March 31, 2012, respectively. For the six months ended June 30, 2012, and June 30, 2011, non-interest expenses were $14.5 million and $14.9 million, respectively.

On a linked quarter basis, professional services expenses increased by $110,000, deposit and examination fees increased by $130,000 and other operating expenses increased by $200,000.  The increase in other operating expenses is the result of expenses related to the Company's annual meeting and reporting requirements as well as increases in training expenses.  No other operating expense item increased by more than $100,000 from March 31, 2012, to June 30, 2012.

For the three and six month periods ended June 30, 2012, and June 30, 2011, the decline in the Company's losses on other real estate owned has largely been offset by increases in salaries and benefits and other operating expenses.

Balance Sheet 

Total assets were $1.03 billion at June 30, 2012, a decrease of $14.7 million as compared to December 31, 2011.  The decline in assets is largely the result of a $32.6 million reduction in time deposit balances. The reduction in time deposits included a $7.1 million decline in brokered deposits.  

For the six month period ended June 30, 2012, gross loans declined by approximately $16.7 million, to $550.9 million as compared to $567.6 million at December 31, 2011.  In the Company's market area, desirable lending opportunities remained limited at this time, making meaningful loan growth challenging. 

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 subsidiary, Fall & Fall Insurance of Fulton, Kentucky. The Company has two additional operating divisions including 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 that are sold into 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 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.




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