HFBC HopFed Bancorp Inc

Pre-Tax Income up 23.6% Year-over-Year

First Quarter Loan Growth of $23.3 Million to $665.2 Million

HopFed Bancorp, Inc. (NASDAQ: HFBC) (the “Company”), the holding company for Heritage Bank USA, Inc. (the “Bank”), today reported operating results for the three month period ended March 31, 2018. For the three month period ended March 31, 2018, net income was $1.1 million, or $0.18 per share, compared to $935,000, or $0.15 per share, for the three month period ended March 31, 2017.

Commenting on the first quarter results, John E. Peck, President and Chief Executive Officer, said, “We are excited to report that loans grew by $23.3 million in the three month period ended March 31, 2018. Economic activity in our market remains strong, providing a robust pipeline of new loan opportunities. For the three month period ended March 31, 2018, net interest income was $7.2 million, an increase of $432,000 compared to the three month period ended March 31, 2017. On a linked quarter basis, our net interest margin improved to 3.45% from 3.41% despite the tax law change that reduced the tax equivalent yield of our municipal bond portfolio by 0.78%. We remain confident in our Company’s future earning potential due to our strong asset quality, the size of our loan pipeline and the strength of our local economy.”

Financial Highlights

• In the three month period ended March 31, 2018, total loans increased $23.3 million, representing an annualized growth rate of 14.5%. At March 31, 2018, total loans originated and outstanding in the Nashville, Tennessee loan production office were $80.5 million, compared to $48.3 million at March 31, 2017.
• Non-accrual loans are $2.0 million, or 0.30% of total loans, at March 31, 2018, compared to $8.9 million, or 1.44% of total loans, at March 31, 2017.

• At March 31, 2018, the Company held 1,340,394 shares of treasury stock with a weighted average cost of $12.44 per share. The Company may purchase an additional 297,966 shares of treasury stock under our current repurchase program. In the three month period ended March 31, 2018, the Company purchased 2,034 shares of treasury stock at a weighted average cost of $14.14 per share.
• At March 31, 2018, the Company’s book value was $13.97 per share and the Tangible Common Equity Ratio was 9.49%. The Company’s book value computation does not include 423,679 unearned ESOP shares.

Results of Operations

In the three month periods ended March 31, 2018, December 31, 2017 and March 31, 2017, net interest income was $7.2 million, $7.0 million and $6.8 million. The improved level of net interest income is largely the result of loan portfolio growth. For the three month period ended March 31, 2018, the average balance of net loans was $647.2, compared to $631.5 million for the three month period ended December 31, 2017 and $615.4 million for the three month period ended March 31, 2017.

For the three month period ended March 31, 2018, the Company’s non-interest income was $1.7 million compared to $2.3 million for the three month periods ended March 31, 2017. In the three month period ended March 31, 2017, the Company received $160,000 of tax free payment on a bank owned life insurance policy and $250,000 from a one-time reimbursement from a vendor. For the three month period ended March 31, 2018, service charge income was $706,000 compared to $804,000 for the three month period ended March 31, 2017, respectively. Beginning January 1, 2017, the Company revised our retail transaction account product offerings which reduced the amount of transaction accounts that were not being assessed a monthly fee. During the first six months of 2017, the Company experienced elevated levels of service charge income as a result of these changes.

On a linked quarter basis, total non-interest income declined by $124,000. The decline in linked quarter non-interest income was largely the result of a $95,000 decline in service charge income and a $55,000 decline in mortgage origination income due to increases in long term interest rates. The decline in linked quarter service charge income is largely a seasonal issue that occurs as consumer spending declines following the fourth quarter holiday season.

For the three month periods ended March 31. 2018 and March 31, 2017, non-interest expenses were $7.5 million and $7.7 million, respectively. For the three months ended March 31, 2018, the increase in professional expenses was largely the result of an $180,000 increase in legal expenses compared to the three month period ended March 31, 2017. The table below outlines the most significant changes in non-interest expenses for the three month period ended March 31, 2018 and March 31, 2017:

              Dollar Percentage

March 31, 2018

March 31, 2017

Change

Change

(Dollars in Thousands, Except Percentages) Salaries and benefits $4,117 $4,236 ($119 ) -2.81 % State deposit tax 169 231 (62 ) -26.84 % Professional services 466 348 118 33.91 % Advertising 308 381 (73 ) -19.16 % Foreclosure, net (6 ) 108 (114 ) -105.56 % Other operating expenses 920 846 74 8.75 %  

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

Results of Operations (continued)

On a linked quarter basis, the Company’s non-interest expenses declined by $266,000. The linked quarter decline in non-interest expense was largely the result of a reduction in legal expenses. On a linked quarter basis, salaries and benefits expenses increased $200,000, or 5.1%. The increase in salaries and benefits expense includes approximately $164,000 related to seasonal vacation accruals and $87,000 related to employee payroll expenses. The table below outlines the most significant changes in non-interest expenses on a linked quarter basis:

             

March 31, 2018

December 31, 2017

Change

Change

(Dollars in Thousands, Except Percentages)   Salaries and benefits $4,117 $3,917 $200 5.11 % Professional services 466 1,095 (629 ) -57.44 % Advertising 308 365 (57 ) -15.62 % Foreclosure, net (6 ) (80 ) 74 -92.50 % Other operating expenses 920 861 59 6.85 %  

Balance Sheet

At March 31, 2018, total assets were $914.0 million, compared to $917.5 million at December 31, 2017. At March 31, 2018, the Company’s brokered deposits were $50.6 million, a reduction of $9.5 million compared to December 31, 2017. For the three month period ended March 31, 2018, a combination of reduced brokered deposits and loan growth resulted in $23.5 million reduction in cash balances compared to December 31, 2017. A summary of loans outstanding by type at March 31, 2018 and December 31, 2017 is as follows:

       

March 31, 2018

December 31, 2017

(Dollars in Thousands)

  One-to-four family first mortgages $167,947 $163,565 Second mortgages (closed end) 1,181 1,184 Home equity lines of credit 34,261 35,697 Multi-family 37,977 37,445 Construction 40,484 30,246 Land 9,096 14,873 Farmland 34,830 36,851 Non-residential real estate 234,900 224,952 Consumer loans 8,514 8,620 Commercial loans 96,527   88,938   Total loans, gross 665,717 642,371   Unearned income, net of fees (539 ) (443 )   Less allowance for loan losses (4,654 ) (4,826 )   Total loans $660,524   $637,102    

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

Asset Quality

For the three month periods ended March 31, 2018 and March 31, 2017, the Company’s net charge-offs totaled $239,000 and $238,000, respectively, or 0.15% of average loan balances. At March 31, 2018, the Company’s non-accrual loans were $2.0 million, or 0.30% of total loans, compared to $8.9 million, or 1.44% of total loans at March 31, 2017. The Company’s level of loans classified as substandard declined from $26.3 million at March 31, 2017 and $14.1 million at March 31, 2018. The table below provides a history of the Company’s significant credit quality metrics:

                   

3/31/2018

12/31/2017

9/30/2017

6/30/2017

3/31/2017

(Dollars in Thousands, Except Percentages)

  Loans past due 30-89 days 432 393 754 2,910 746 Loans past due 90 + days accruing interest --- 88 --- --- --- Total non-accrual loans 2,004 1,285 1,739 8,579 8,944

Total loans classified as substandard or doubtful

14,082 10,780 11,217 24,808 26,345 Total performing TDR loans 3,255 3,163 3,371 3,388 4,237 Total foreclosed assets 3,329 3,369 4,975 1,408 2,111 Quarterly net charge offs 239 (336 ) 2,451 (956 ) 239   Non-accrual loans / Total loans 0.30 % 0.20 % 0.28 % 1.34 % 1.44 % Non-performing assets / Total assets 0.58 % 0.52 % 0.74 % 1.09 % 1.20 % Allowance / Total loans 0.70 % 0.75 % 0.76 % 1.12 % 0.99 % Allowance / Non-accrual loans 232.19 % 375.74 % 275.96 % 83.69 % 68.92 % Substandard loans / Risk based capital 13.94 % 10.72 % 11.08 % 24.28 % 26.15 % Quarterly net charge off ratio (annualized) 0.15 % -0.21 % 1.54 % -0.61 % 0.16 % FTE Employees 227 229 227 230 234  

The Company

HopFed Bancorp, Inc. is the holding company for Heritage Bank USA, Inc. (“Heritage Bank”), a Kentucky state chartered commercial bank. Heritage Bank has eighteen offices in western Kentucky and middle Tennessee and loan production offices in Nashville and Brentwood, Tennessee. The Company offers a broad line of financial services and products with the personalized focus of a community banking organization. More information about HopFed Bancorp and Heritage Bank is located 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 risks, 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.

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

                   

HOPFED BANCORP, INC.

Consolidated Condensed Balance Sheets

(Dollars in Thousands)

   

Assets

3/31/2018

12/31/2017

09/30/17

06/30/17

03/31/17

(unaudited) (unaudited) (unaudited) (unaudited)   Cash and due from banks $18,472 $37,965 $23,469 20,208 30,663 Interest-earning deposits in banks 3,149   7,111   9,842   4,801   19,408   Cash and cash equivalents 21,621 45,076 33,311 25,009 50,071 Federal Home Loan Bank stock, at cost 4,428 4,428 4,428 4,428 4,428 Securities available for sale 180,212 184,791 192,287 205,363 207,580 Loans held for sale 2,706 1,539 1,749 2,386 1,091 Loans receivable 665,178 641,928 630,202 638,422 621,644 Allowance for loan losses (4,654 ) (4,826 ) (4,799 ) (7,180 ) (6,164 ) Accrued interest receivable 3,212 3,589 3,414 3,332 3,121 Foreclosed assets 3,329 3,369 4,975 1,408 2,111 Bank owned life insurance 10,439 10,368 10,287 10,192 10,120 Premises and equipment, net 22,619 22,700 22,945 23,097 23,225 Deferred tax assets 2,127 1,764 2,292 3,025 2,918 Other assets 2,748   2,784   2,973   2,645   3,162   Total assets $913,965   $917,510   $904,064   $912,127   $923,307    

Liabilities:

  Deposits: Non-interest-bearing accounts $139,093 $136,197 $128,184 $132,305 $136,333 Interest-bearing accounts NOW accounts 219,483 208,496 196,315 216,256 217,562 Savings and money market accounts 101,153 104,347 97,929 98,269 100,009 Other time deposits 287,077   304,969   308,801   299,114   311,839   Total deposits 746,806 754,009 731,229 745,944 765,743   Advances from Federal Home Loan Bank 25,000 23,000 31,000 21,000 11,000 Repurchase agreements 41,792 38,353 37,829 41,820 45,492 Subordinated debentures 10,310 10,310 10,310 10,310 10,310 Accrued expenses and other liabilities 3,304   4,426   4,461   4,262   3,301   Total liabilities 827,212   830,098   814,829   823,336   835,846    

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, Except Percentages, Share and Per Share Data)

   

3/31/2018

12/31/2017

09/30/17

06/30/17

03/31/17

(unaudited) (unaudited) (unaudited) (unaudited) Stockholders' equity: Common stock, par value $.01 80 80 80 80 80 Additional paid-in-capital 58,875 58,825 58,777 58,750 58,705 Retained earnings 51,957 51,162 51,646 50,552 49,721 Treasury stock- common , at cost (16,684 ) (16,655 ) (15,931 ) (15,361 ) (15,356 ) Unearned ESOP Shares, at cost (5,759 ) (5,901 ) (6,125 ) (6,269 ) (6,414 )

Accumulated other comprehensive income, net of taxes

(1,716 ) (99 ) 788   1,039   725     Total stockholders' equity 86,753   87,412   89,235   88,791   87,461     Total liabilities and stockholders' equity $913,965   $917,510   $904,064   $912,127   $923,307                        

Additional Capital Information

   

3/31/2018

12/31/2017

09/30/17

06/30/17

03/31/17

(unaudited) (unaudited) (unaudited) (unaudited)   Preferred stock authorized 500,000 500,000 500,000 500,000 500,000 Preferred stock outstanding --- --- --- --- --- Common shares authorized 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 Common shares issued 7,988,983 7,976,131 7,976,131 7,964,076 7,963,378 Common shares outstanding 6,648,589 6,637,771 6,688,674 6,716,809 6,716,549 Treasury shares 1,340,394 1,338,360 1,287,457 1,247,267 1,246,829 Unearned ESOP shares 423,679 434,548 465,861 476,862 488,161

Book value per share (excludes unearned ESOP shares)

$13.97 $14.09 $14.34 $14.23 $14.04   Tier 1 leverage ratio 10.6 % 10.6 % 10.9 % 10.4 % 10.6 % Total risk based capital ratio 15.5 % 16.0 % 16.3 % 16.1 % 16.1 % Common equity tier 1 capital ratio 14.8 % 15.2 % 15.6 % 15.0 % 15.1 %  

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

           

HOPFED BANCORP, INC.

Consolidated Condensed Quarterly Statements of Income

(Dollars in Thousands)

(Unaudited)

   

For the three month periods ended

       

3/31/2018

12/31/2017

09/30/17

06/30/17

03/31/17

Interest and dividend income:

Loans receivable

7,477 7,208 7,260 6,963 6,736 Investment in securities, taxable 1,079 1,081 1,124 1,155 1,118 Nontaxable securities available for sale 213 218 233 280 283 Interest-earning deposits 29 34 18 21 23 Total interest and dividend income 8,798 8,541 8,635 8,419 8,160   Interest expense: Deposits 1,244 1,240 1,206 1,197 1,167 Advances from Federal Home Loan Bank 92 97 89 30 32 Repurchase agreements 154 117 130 119 103 Subordinated debentures 122 112 112 108 104 Total interest expense 1,612 1,566 1,537 1,454 1,406  

Net interest income

7,186 6,975 7,098 6,965 6,754 Provision for loan losses 68 56 71 59 291

 

Net interest income after provision for loan losses

7,118 6,919 7,027 6,906 6,463   Non-interest income: Service charges 706 801 819 800 804 Merchant card income 308 306 299 315 302

Mortgage origination revenue

319 374 335 278 334 Gain (loss) on sale of securities 27 (9) 162 14 2 Income from bank owned life insurance 71 81 95 72 235 Financial services commission 138 117 134 145 140 Other operating income 175 198 186 212 479

Total non-interest income

1,744 1,868 2,030 1,836 2,296  

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 Per Share Data)

(Unaudited)

   

For the three month periods ended

       

3/31/2018

12/31/2017

9/30/2017

6/30/2017

3/31/2017

Non-interest expenses: Salaries and benefits 4,117 3,917 3,919 3,977 4,236 Occupancy 782 700 716 729 775 Data processing 784 779 795 546 764 State deposit tax 169 170 169 200 231 Professional services 466 1,095 409 464 348 Advertising 308 365 240 368 381 Foreclosure, net (6 ) (80 ) (25 ) 6 108 Loss on sale of asset --- (1 ) --- 3 --- Other operating expenses 920   861   945   940 846 Total non-interest expense 7,540   7,806   7,168   7,233 7,689   Income before income tax expense 1,322 981 1,889 1,509 1,070 Income tax expense 196   1,159   486   368 135 Net income 1,126   (178 ) 1,403   1,141 935 Net income per share Basic $0.18   ($0.03 ) $0.22   $0.18 $0.15 Diluted $0.18   ($0.03 ) $0.22   $0.18 $0.15 Dividend per share $0.05   $0.05   $0.05   $0.05 $0.04  

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 Percentages)

(Unaudited)

   

Three month periods ended

       

3/31/18

12/31/17

9/30/17

6/30/17

3/31/17

Average Balance Sheet Data Loans, net of allowance 647,204 631,463 636,955 622,606 615,382 Available for sale taxable securities 160,582 164,667 173,624 177,260 176,824 Available for sale tax free securities 26,856 27,361 29,090 32,919 33,868 Interest bearing deposits held in banks 6,030 8,418 4,351 5,888 9,260 Average earning assets 840,672 831,909 844,020 838,673 835,334 Average non-earning assets 69,290 74,856 64,913 70,359 75,527 Average assets 909,962 906,765 908,933 909,032 908,861 Average interest bearing deposits 612,019 611,371 612,655 628,583 625,104 Repurchase agreements 39,072 34,677 37,978 39,138 41,840 FHLB borrowings 23,656 25,174 26,909 11,176 13,433 Subordinated debentures 10,310 10,310 10,310 10,310 10,310 Total average interest bearing liabilities 685,057 681,532 687,852 689,207 690,687 Average non-interest bearing deposits 133,412 132,624 126,039 128,078 126,809 Average other non-interest bearing liabilities 32,887 3,365 5,628 3,915 3,993 Average total equity 87,336 89,244 89,214 87,832 87,372    

Three month periods ended

  Tax equivalent yield / Cost of:

03/31/18

12/31/17

09/30/17

06/30/17

03/31/17

  Loans, fully tax equivalent 4.62 % 4.58 % 4.57 % 4.48 % 4.38 % Available for sale taxable securities 2.69 % 2.63 % 2.59 % 2.61 % 2.53 % Available for sale tax free securities, fully tax equivalent 3.96 % 4.76 % 4.78 % 5.09 % 5.00 % Average yield of interest bearing deposits 1.92 % 1.62 % 1.65 % 1.43 % 0.99 % Yield on total interest earning assets 4.21 % 4.17 % 4.15 % 4.09 % 3.98 % Cost of total average deposits 0.67 % 0.67 % 0.65 % 0.63 % 0.62 % Cost of average total interest bearing liabilities 0.94 % 0.92 % 0.89 % 0.84 % 0.81 % Fully tax equivalent interest rate spread 3.30 % 3.25 % 3.26 % 3.25 % 3.17 % Fully tax equivalent net interest margin 3.45 % 3.41 % 3.43 % 3.39 % 3.31 % Net income 1,126 225 1,403 1,141 935 Return on Assets 0.49 % 0.10 % 0.62 % 0.50 % 0.41 %

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20180427005159/en/

HopFed Bancorp, Inc.John E. Peck, 270-885-1171President and CEO