HFBC HopFed Bancorp Inc

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, 2019. For the three-month period ended March 31, 2019, the Company’s net income was $623,000, or $0.10 per share basic and diluted, compared to $1.1 million, or $0.18 per share basic and diluted, for the three-month period ended March 31, 2018. The reduction in net income for the three-month period ended March 31, 2019 was largely the result of merger related expenses.

Commenting on the results for the three-month period ended March 31, 2019, John E. Peck, President and Chief Executive Officer, said, “For the three-month period ended March 31, 2019, net loans increased by $7.5 million, representing an annualized growth rate of 4.5%. In the three-month period ended March 31, 2019, retail deposits increased by $10.6 million, allowing the Company to reduce its level of brokered deposits by $9.0 million. In the three-month period ended March 31, 2019, higher short term interest rates drove a $6.0 million increase in retail repurchase accounts. Non-interest expenses (excluding merger related expenses) declined by $392,000 in the three-month period ended March 31, 2019, compared to the three-month period ended March 31, 2018.”

Financial Highlights

• At March 31, 2019, total loans outstanding in the Company’s three loan production offices were $106.2 million compared to $95.5 million at December 31, 2018, and $80.5 million at March 31, 2018.
• At March 31, 2019, non-accrual loans were $1.1 million compared to $1.4 million at December 31, 2018. At March 31, 2019, loans classified as substandard were $16.6 million compared to $14.3 million at December 31, 2018.
• The Company’s net interest margin for the three-month period ended March 31, 2019, was 3.24% compared to 3.35% and 3.45% for the three-month periods ended December 31, 2018 and March 31, 2018, respectively.
• The Company’s book value per share at March 31, 2019, was $14.80. The stated book value excludes 371,693 shares of unearned stock held in the Company’s Employee Stock Ownership Plan (“ESOP”).

Results of Operations

In the three-month periods ended March 31, 2019, December 31, 2018 and March 31, 2018, interest income was $9.5 million, $9.5 million and $8.8 million, respectively. For the three-month period ended March 31, 2019, the average balance of interest bearing assets was $849.3 million, an increase of $8.7 million compared to the three-month period ended March 31, 2018. The improvements in interest income for the three-month period ended March 31, 2019, compared to the three-month period ended March 31, 2018, were more than offset by higher short term interest rates, increasing the Company’s interest expense.

On a linked quarter basis, the Company’s interest expense increased by $249,000. The increase in linked quarter interest expense was the result of an $8.4 million increase in interest bearing liabilities and a 0.12% increase in the total cost of average interest bearing liabilities. The Company’s interest expense increased by $1.1 million for the three-month period ended March 31, 2019, compared to the three-month period ended March 31, 2018. For the three-month period ended March 31, 2019, average interest bearing liabilities were $613.5 million compared to $612.0 million for the three-month period ended March 31, 2018. The total cost of average interest bearing liabilities was 1.57% for the three-month period ended March 31, 2019, compared to 0.94% for the three-month period ended March 31, 2018. For the three-month periods ended March 31, 2019, December 31, 2018 and March 31, 2018, net interest income was $6.8 million, $7.0 million and $7.2 million, respectively.

For the three-month period ended March 31, 2019, non-interest income was $1.6 million, representing declines of $180,000 and $108,000 compared to the three-month periods ended December 31, 2018 and March 31, 2018, respectively. On a linked quarter basis, the decline in non-interest income was broad based. Historically, the Company’s non-interest income is lower in the first quarter of each year and highest in the fourth quarter of each year due to factors such as the number of days in the reporting period and the differences in economic activity during the respective periods. For the three-month period ended March 31, 2019, mortgage origination revenue declined by $70,000 compared to the three-month period ended March 31, 2018, due to weaker loan demand in the Company’s market. For the three-month period ended March 31, 2019, the Company’s service charge and merchant card income declined by a combined $48,000 compared to the three-month period ended March 31, 2018.

For the three-month period ended March 31, 2019, total non-interest expenses were $7.7 million, an increase of $1.0 million on a linked quarter basis and an increase of $204,000 compared to the three-month period ended March 31, 2018. On a linked quarter basis, non-merger related non-interest expenses increased by $424,000 largely due to a $351,000 increase in salaries and benefits expense. The linked quarter increase in salaries and benefits is largely the result of a $57,000 increase in health insurance, a $52,000 increase in payroll taxes and a $210,000 increase in the amount of vacation accruals.

For the three-month period ended March 31, 2019, state deposit taxes increased by $46,000 and data processing expenses increased by $38,000 compared to the three-month period ended March 31, 2018. For the three-month period ended March 31, 2019, no other operating expense line items experienced an increase as compared to the three-month period ended March 31, 2018.

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

Balance Sheet

At March 31, 2019, total assets were $934.3 million compared to $931.4 million at December 31, 2018. At March 31, 2019, net loans totaled $666.3 million, an increase of $7.5 million compared to December 31, 2018. The Company continued to experience growth in retail repurchase agreements, which increased from $53.0 million at December 31, 2018, to $59.0 million at March 31, 2019.

A summary of loans outstanding by type at March 31, 2019 and December 31, 2018 is as follows:

    March 31, 2019 December 31, 2018

(Dollars in Thousands)

  One-to-four family first mortgages $174,274 $175,638 Home equity lines of credit 31,407 32,781 Second mortgages (closed end) 995 1,037 Multi-family 26,377 26,067 Construction 36,723 38,700 Land 18,745 12,175 Non-residential real estate 248,285 242,390 Farmland 33,242 34,041 Consumer loans 8,060 8,442 Commercial loans 93,090 92,466 Total loans, gross 671,198 663,737   Unearned income, net of fees (395) (419)   Less allowance for loan losses (4,553) (4,536)   Total loans 666,250 658,782  

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

Asset Quality

The table below provides a history of the Company’s significant credit quality metrics for the dates listed below:

          3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018 (Unaudited) (Unaudited) (Unaudited) (Unaudited)

(Dollars in Thousands, Except Percentages)

  Loans past due 30-89 days $1,939 $809 $1,780 $1,605 $432 Total non-accrual loans 1,064 1,430 1,841 1,602 2,004 Total loans classified as substandard 16,632 14,323 11,005 11,491 14,082 Total performing TDR loans 3,602 3,530 3,518 3,162 3,255 Total foreclosed assets 3,446 3,598 3,533 3,427 3,329 Quarterly net charge offs 43 102 158 78 240   Non-accrual loans / Total loans 0.16% 0.22% 0.28% 0.24% 0.30% Non-performing assets / Total assets 0.48% 0.54% 0.59% 0.55% 0.58% Allowance / Total loans 0.68% 0.68% 0.68% 0.69% 0.70% Allowance / Non-accrual loans 427.97 317.25% 247.48% 289.48% 232.24% Substandard loans / Risk based capital 15.65% 13.63% 10.68% 11.24% 13.94% Quarterly net charge off ratio (annualized) 0.03% 0.06% 0.09% 0.05% 0.15% Risk Based Capital 105,604 105,055 103,085 102,211 100,997 FTE Employees 210 220 225 226 227  

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 the Tennessee communities of Nashville, Murfreesboro and Brentwood. The Company offers a broad line of financial services and products with the personalized focus of a community banking organization.

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)

(Unaudited)

 

Assets

3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018   Cash and due from banks $35,052 36,339 21,987 16,399 18,472 Interest-earning deposits in banks 12,364 15,711 8,687 2,955 3,149 Cash and cash equivalents 47,416 52,050 30,674 19,354 21,621 Federal Home Loan Bank stock, at cost 4,428 4,428 4,428 4,428 4,428 Securities available for sale 172,168 170,804 159,282 168,983 180,212 Loans held for sale 742 1,248 1,873 1,126 2,706 Loans receivable 670,803 663,318 668,374 676,891 665,178 Allowance for loan losses (4,553) (4,536) (4,553) (4,637) (4,654) Accrued interest receivable 3,666 3,503 3,390 3,253 3,212 Foreclosed assets, net 3,446 3,598 3,533 3,427 3,329 Bank owned life insurance 10,618 10,672 10,587 10,511 10,439 Premises and equipment, net 21,079 21,759 22,072 22,365 22,619 Deferred tax assets 2,165 1,825 2,399 2,320 2,127 Other assets 2,282 2,730 2,816 4,641 2,748 Total assets $934,260 931,399 904,875 912,662 913,965  

Liabilities:

  Deposits: Non-interest-bearing accounts $125,674 129,476 134,297 $136,004 139,093 Interest-bearing accounts Checking accounts 205,420 196,972 185,380 198,691 219,483 Savings and money market accounts 96,504 97,232 97,347 99,552 101,153 Other time deposits 314,229 316,157 309,890 300,941 287,077 Total deposits 741,827 739,837 726,914 735,188 746,806   Advances from Federal Home Loan Bank 26,000 33,000 33,000 38,000 25,000 Repurchase agreements 59,046 53,011 42,043 39,648 41,792 Subordinated debentures 10,310 10,310 10,310 10,310 10,310 Accrued expenses and other liabilities 4,190 4,455 5,170 4,347 3,304 Total liabilities 841,373 840,613 817,437 827,493 827,212  

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)

(Unaudited)

  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018   Stockholders' equity: Common stock, par value $.01 80 80 80 80 80 Additional paid-in-capital 59,210 59,105 59,035 58,948 58,875 Retained earnings 55,757 55,134 53,979 53,179 51,957 Treasury stock- common , at cost (16,706) (16,706) (16,706) (16,706) (16,684) Unearned ESOP Shares, at cost (5,124) (5,268) (5,457) (5,606) (5,759)

Accumulated other comprehensive income, net of taxes

(330) (1,559) (3,493) (2,726) (1,716)   Total stockholders' equity 92,887 90,786 87,438 87,169 86,753   Total liabilities and stockholders' equity $934,260 931,399 904,875 914,662 913,965   Additional Capital Information 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018   Preferred stock authorized 500,000 500,000 500,000 500,000 500,000 Common shares authorized 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 Common shares issued 7,990,867 7,990,867 7,991,170 7,989,655 7,988,983 Common shares outstanding 6,648,887 6,648,887 6,649,190 6,647,675 6,648,589 Treasury shares 1,341,980 1,341,980 1,341,980 1,341,980 1,340,394 Unearned ESOP shares 371,693 382,691 400,768 412,091 423,679

Book value per share (excludes unearned ESOP shares)

$14.80 $14.49 $13.99 $14.01 $13.97   Tier 1 leverage ratio 11.0% 11.0% 10.9% 10.7% 10.6% Total risk based capital ratio 15.3% 16.2% 15.9% 15.6% 15.5% Common equity tier 1 ratio 14.6% 15.5% 15.2% 14.9% 14.8%  

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

   

HOPFED BANCORP, INC.

Consolidated Condensed Quarterly Statement of Income

(Dollars in Thousands)

(Unaudited)

  For the three month periods ended 3/31/2019   12/31/2018   9/30/2018   6/30/2018   3/31/2018 Interest and dividend income:   Loans 8,230 8,210 8,164 7,858 7,477 Investment in securities, taxable 1,035 998 970 1,033 1,079 Nontaxable securities available for sale 195 187 189 208 213 Interest-earning deposits 82 79 21 16 29 Total interest and dividend income 9,542 9,474 9,344 9,115 8,798   Interest expense: Deposits 2,137 1,946 1,694 1,392 1,244 FHLB borrowings 159 187 210 134 92 Repurchase agreements 302 223 188 171 154 Subordinated debentures 147 140 139 138 122 Total interest expense 2,745 2,496 2,231 1,835 1,612   Net interest income 6,797 6,978 7,113 7,280 7,186 Provision for loan losses 60 84 74 62 68  

Net interest income after provision for loan losses

6,737 6,894 7,039 7,218 7,118   Non-interest income: Service charges 667 749 756 727 706 Merchant card income 299 325 316 330 308 Mortgage origination revenue 249 288 338 489 319 Gain on sale of securities --- 40 5 481 27 Income from bank owned life insurance 117 85 75 73 71 Financial services commission 173 178 184 177 138 Other operating income 131 151 219 87 175 Total non-interest income 1,636 1,816 1,893 2,364 1,744  

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 3/31/2019   12/31/2018   9/30/2018   6/30/2018   3/31/2018 Non-interest expenses: Salaries and benefits 4,044 3,693 4,138 4,116 4,117 Occupancy 734 698 785 747 782 Data processing 822 812 807 765 784 State deposit tax 215 212 158 160 169 Professional services 332 257 489 499 466 Advertising 248 229 329 338 308 Foreclosure, net 20 37 20 21 (6) (Gain) loss on sale of asset (27) --- 1 9 --- Merger expenses 596 --- --- --- --- Other 760 786 785 919 920 Total non-interest expense 7,744 6,724 7,512 7,574 7,540   Income before income tax expense 629 1,986 1,420 2,008 1,322 Income tax expense 6 368 180 323 196 Net income 623 1,618 1,240 1,685 1,126 Net income per share Basic $0.10 $0.26 $0.20 $0.28 $0.18 Diluted $0.10 $0.26 $0.20 $0.28 $0.18 Dividend per share --- $0.07 $0.07 $0.07 $0.05  

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)

  For the three month periods ended 3/31/2019   12/31/2018   9/30/2018   6/30/2018   3/31/2018 Average Balance Sheet Data   Loans, net of allowance $661,735 659,174 670,314 666,301 647,204 Available for sale taxable securities 150,770 144,506 146,225 153,723 160,582 Available for sale tax free securities 25,358 24,195 24,533 25,670 26,856 Interest bearing deposits held in banks 11,474 14,062 3,825 3,735 6,030 Average earning assets 849,337 841,937 844,897 849,429 840,672 Average non-earning assets 69,384 67,813 63,618 63,565 69,290 Average assets 918,721 909,750 908,515 912,994 909,962 Average interest bearing deposits 613,505 605,121 596,666 608,312 612,019 Repurchase agreements 48,911 41,333 38,611 38,604 39,072 FHLB borrowings 26,778 33,000 37,989 32,011 23,656 Subordinated debentures 10,310 10,310 10,310 10,310 10,310 Total average interest bearing liabilities 699,504 689,764 683,576 689,237 685,057 Average non-interest bearing deposits 126,487 126,487 131,615 133,075 133,412 Average other non-interest bearing liabilities 4,104 5,399 5,572 4,099 3,887 Average total equity 91,893 88,100 87,752 86,583 87,336   For the three month periods ended Tax equivalent yield / Cost of: 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018   Loans, fully tax equivalent 5.00% 5.00% 4.89% 4.72% 4.62% Available for sale taxable securities 2.75% 2.76% 0.27% 2.69% 2.69% Available for sale tax free securities, fully tax equivalent 3.82% 3.84% 3.86% 4.04% 3.96% Average yield of interest bearing deposits 2.86% 2.25% 1.88% 1.71% 1.92% Yield on total interest earning assets 4.53% 4.52% 4.46% 4.32% 4.21% Cost of total average deposits 1.16% 1.06% 0.93% 0.89% 0.67% Cost of average total interest bearing liabilities 1.57% 1.45% 1.30% 1.06% 0.94% Fully tax equivalent interest rate spread 2.97% 3.09% 3.16% 3.25% 3.30% Fully tax equivalent net interest margin 3.24% 3.35% 3.41% 3.45% 3.45% Net income 623 1,618 1,240 1,685 1,126 ROA 0.27% 0.71% 0.55% 0.74% 0.49% Annualized return on equity 2.71% 7.35% 6.23% 7.78% 5.16% Efficiency ratio 90.89% 75.76% 88.26% 78.12% 83.89%  

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

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John E. PeckPresident and CEO(270) 885-1171