×

HopFed Bancorp, Inc. Reports Growth in Net Income and Loans for Third Quarter

Net Income Up 93.4% Year-over-Year to $3.5 Million

Net Loans Increase 7.6% Year-over-Year to $630.2 Million

HOPKINSVILLE, Ky.--(BUSINESS WIRE)-- HopFed Bancorp, Inc. (NASDAQ: HFBC) (the “Company”), the holding company for Heritage Bank USA, Inc. (the “Bank”), today reported growth in net income and loans for the three and nine month periods ended September 30, 2017. For the three month period ended September 30, 2017, net income rose 42.4% to $1.4 million, or $0.22 per share, compared to $985,000, or $0.16 per share, for the three month period ended September 30, 2016. For the nine month period ended September 30, 2017, net income rose 93.4% to $3.5 million, or $0.56 per share, compared to $1.8 million, or $0.29 per share, for the nine month period ended September 30, 2016.

Commenting on the third quarter results, John E. Peck, President and Chief Executive Officer, said, “At September 30, 2017, loans rose 7.6% to $630.2 million and deposits were up 2.7% to $731.2 million compared to September 30, 2016. HopFed’s positive trend of earnings growth continues into the third quarter of 2017 as a result of the growth in the average balance of loans and careful management of non-interest expenses. We are confident that our continued success in providing quality service and value to our communities will translate into improved financial performance.”

Financial Highlights

  • Loans receivable rose 7.6% to $630.2 million at September 30, 2017, compared to $586.3 million at September 30, 2016. Loan growth benefited from solid production from the Company’s loan production office in Nashville, Tennessee. At September 30, 2017, total loans originated and outstanding in the Nashville loan production office were $63.2 million compared to $39.5 million at September 30, 2016.
  • The Company continues to experience a reduction in the level of non-accrual and problem loans. Non-accrual loans declined from $11.7 million, or 1.99% of total loans, at September 30, 2016, to $1.7 million, or 0.28% of total loans, at September 30, 2017. Loans classified as impaired were $31.9 million at September 30, 2016 and $11.2 million at September 30, 2017.
  • The Company continued to repurchase its common stock as part of the Board approved stock repurchase program. For the nine month period ended September 30, 2017, the Company purchased 41,321 shares of its common stock at a weighted average price of $14.14 per share. At September 30, 2017, the Company held 1,287,457 shares in treasury stock with a weighted average cost of $12.37 per share. The Company may purchase an additional 51,229 additional shares of treasury stock under its current repurchase program.

Results of Operations

In the three and nine month periods ended September 30, 2017, net interest income was $7.1 million and $20.8 million, respectively, as compared to $6.7 million and $19.8 million for the three and nine month periods ended September 30, 2016. The improved level of net interest income is the result of the growth in the average balances of loans. For the three month period ended September 30, 2017, the average balance of net loans outstanding was $637.0 million, an increase of $61.9 million compared to the three month period ended September 30, 2016. For the nine month period ended September 30, 2017, the average balance of net loans outstanding was $626.1 million, an increase of $63.3 million as compared to the nine month period ended September 30, 2017. During the three and nine month periods ended September 30, 2017, total interest earning assets have increased by $39.1 million and $34.5 million, respectively. The Company has utilized cash on hand and the cash flow provided by our securities portfolio to fund a meaningful portion of our loan growth.

The improvement in net interest income for the three and nine months ended September 30, 2017 is partially offset by the higher cost of interest bearing liabilities. The total cost of all interest bearing liabilities for the three and nine month periods ended September 30, 2017 is 0.89% and 0.85%, respectively, compared to 0.80% for the three and nine month periods ended September 30, 2016. For the three and nine month periods ended September 30, 2017, the Company’s net interest margin was 3.43% and 3.37%, respectively, compared to 3.41% and 3.36% for the three and nine month periods ended September 30, 2016, respectively.

In the three and nine month periods ended September 30, 2017, the Company has experienced a reduction of both consumer and municipal checking account balances. At September 30, 2017 and December 31, 2016, total non-interest bearing checking account balances were $128.2 million and $136.3 million, representing a decline of $8.1 million. At September 30, 2017 and December 31, 2016, total interest bearing checking account balances were $196.3 million and $209.3 million, representing a decline of $13.0 million. For the nine month period ended September 30, 2017, short term interest rates have increased. Coupled with the competitive nature of select local markets, the Company anticipates continued increases in the cost of funding our loan growth.

For the nine month periods ended September 30, 2017 and September 30, 2016, the Company’s non-interest income was $6.2 million and $5.9 million, respectively. The improved levels of non-interest income is partially attributable to changes made to the Company’s checking account offerings in December of 2016. In the nine month period ended September 30, 2017, the Company has increased fee income on deposit accounts by $329,000 compared to the nine month period ended September 30, 2016. The new checking account product offerings reduces, but does not eliminate, the number of checking accounts not subject to a monthly fee. However, the Company’s new deposit product offerings added several valuable features for customers such as roadside assistance, cell phone insurance and discounts at many local businesses. For the nine month period ended September 30, 2017, other operating income was $877,000, an increase of $309,000 compared to the nine month period ended September 30, 2016. The increase in other operating income was largely due to a one-time payment from a vendor of $225,000.

For the three and nine month periods ended September 30, 2017, total non-interest expenses were $7.2 million and $22.1 million, respectively compared to $7.4 million and $22.6 million for the three and nine month periods ended September 30, 2016, respectively. In the three and nine month periods ended September 30, 2017, the Company’s net foreclosure expenses have declined by $229,000 and $384,000, respectively, compared to the three and nine month periods ended September 30, 2016. For the three and nine month periods ended September 30, 2017, the Company’s salaries and benefits expense was $3.9 million and $12.1 million, respectively. This represents an increase of $162,000 and $486,000, respectively, compared to the three and nine month periods ended September 30, 2016. The Company’s cost of providing health insurance benefits to employees increased by $86,000 and $267,000 in the three and nine month periods ended September 30, 2017 compared to the three and six month periods ended September 30, 2016.

Balance Sheet

At September 30, 2017, total assets were $904.1 million, compared to $891.5 million at December 31, 2016 and $871.9 million at September 30, 2016. Management continues to strive to growth both sides of the Company’s balance sheet at approximately the same pace to maximize our interest rate margin and profitability. The Company’s loan growth has been focused on commercial and residential real estate. The Company continues to utilize the cash from the investment portfolio to supplement liquidity for loan growth. The Company is managing deposit growth to limit the increased cost necessary to attract new deposits while seeking to grow our deposit base at a rate commensurate with our loan demand. In the nine month period ended September 30, 2017, deposit growth has been dependent on time deposit and brokered deposits due to the decline in balances held in both interest bearing and non-interest bearing checking accounts. A summary of loans outstanding by type at September 30, 2017, December 31, 2016 and September 30, 2016 is as follows:

9/30/2017 12/31/2016 9/30/2016
(Dollars in Thousands)
One-to-four family first mortgages $ 167,088 147,962 145,197
Home equity lines of credit 34,995 35,684 34,563
Junior liens 1,402 1,452 1,601
Multi-family 37,321 34,284 32,418
Construction 25,594 39,255 37,775
Land 14,289 23,840 22,999
Farmland 37,262 47,796 46,877
Non-residential real estate 216,056 182,940 170,759
Consumer 8,060 8,717 8,908
Commercial 88,515 88,907 83,684
Total loans, gross 630,582 610,837 586,328

Deferred loan cost, net of fees

(380 ) (439 ) (453 )

Allowance for loan loss

(4,799 ) (6,122 ) (6,812 )

Total loans, net

625,403 604,276 579,063

Asset Quality

In the three month period ended September 30, 2017, the Company foreclosed on its largest problem loan, a $6.7 million lending relationship that included a residential property, two small developed commercial lots and a 67 acre tract of undeveloped land. In September 2017, the Company recognized a $2.6 million charge-off and has listed these properties for sale. For the nine month period ended September 30, 2017, the Company’s net charge-offs totaled $1.7 million for an annualized net charge off ratio of 0.37%.

As a result of improved financial performance of several borrowers and the foreclosure of our largest non-accrual loan, the Company’s non-accrual loans fell to $1.7 million, or 0.28% of total loans at September 30, 2017 compared to $11.7 million, or 1.99% of total loans, at September 30, 2016 and $9.1 million, or 1.49% of total loans, at December 31, 2016. The Company’s level of impaired loans declined from $31.9 million at September 30, 2016 to $11.2 million at September 30, 2017. The table below provides a history of the Company’s significant credit quality metrics:

9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
(Dollars in Thousands, Except Percentages)
Loans past due 30-89 days 754 2,910 746 1,211 586
Loans past due 90 + days accruing interest --- --- --- --- ---
Total non-accrual loans 1,739 8,579 8,944 9,074 11,664
Total loans classified as substandard 11,217 24,808 26,345 29,339 31,927
Troubled debt restructuring - performing 3,371 3,388 4,237 6,461 6,503
Total foreclosed assets 4,975 1,408 2,111 2,397 741
Quarterly net charge offs 2,451 (956 ) 238 765 (33 )
Non-accrual loans / Total loans 0.28 % 1.34 % 1.44 % 1.49 % 1.99 %
Non-performing assets / Total assets 0.74 % 1.09 % 1.20 % 1.29 % 1.42 %
Allowance for loan loss / Total loans 0.76 % 1.12 % 0.99 % 1.00 % 1.16 %
Allowance for loan loss / Non-accrual loans 275.96 % 83.69 % 68.92 % 67.36 % 58.40 %
Classified loans / Risk based capital 11.10 % 24.28 % 26.15 % 29.66 % 31.99 %

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, Tennessee 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.

HOPFED BANCORP, INC.
Consolidated Condensed Balance Sheets
(Dollars in Thousands)

Assets

09/30/17 06/30/17 03/31/17 12/31/16 09/30/16
(unaudited) (unaudited) (unaudited) (unaudited)
Cash and due from banks $ 23,469 20,208 30,663 21,779 24,741
Interest-earning deposits in banks 9,842 4,801 19,408 3,970 4,695
Cash and cash equivalents 33,311 25,009 50,071 25,749 29,436
Federal Home Loan Bank stock, at cost 4,428 4,428 4,428 4,428 4,428
Securities available for sale 192,287 205,363 207,580 209,480 213,289
Loans held for sale 1,749 2,386 1,091 1,094 1,547
Loans receivable 630,202 638,422 621,644 610,398 585,875
Allowance for loan losses (4,799 ) (7,180 ) (6,164 ) (6,112 ) (6,812 )
Accrued interest receivable 3,414 3,332 3,121 3,799 3,603
Foreclosed assets 4,975 1,408 2,111 2,397 741
Bank owned life insurance 10,287 10,192 10,120 10,662 10,581
Premises and equipment, net 22,945 23,097 23,225 23,461 23,579
Deferred tax assets 2,292 3,025 2,918 3,052 2,144
Other assets 2,973 2,645 3,162 3,078 3,495
Total assets $ 904,064 912,127 923,307 891,486 871,906

Liabilities:

Deposits:
Non-interest-bearing accounts $ 128,184 132,305 136,333 131,145 130,327
Interest-bearing accounts
NOW accounts 196,315 216,256 217,562 209,347 182,360
Savings and money market accounts 97,929 98,270 100,009 99,312 98,929
Other time deposits 308,801 299,113 311,839 293,078 300,701
Total deposits 731,229 745,944 765,743 732,882 712,317
Advances from Federal Home Loan Bank 31,000 21,000 11,000 11,000 11,000
Repurchase agreements 37,829 41,820 45,492 47,655 44,465
Subordinated debentures 10,310 10,310 10,310 10,310 10,310
Accrued expenses and other liabilities 4,461 4,262 3,301 3,211 4,952
Total liabilities 814,829 823,336 835,846 805,058 783,044

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)

09/30/17 06/30/17 03/31/17 12/31/16 09/30/16
(unaudited) (unaudited) (unaudited) (unaudited)
Stockholders' equity:
Common stock, par value $.01 80 80 80 80 80
Additional paid-in-capital 58,777 58,750 58,705 58,660 58,658
Retained earnings 51,646 50,552 49,721 49,035 48,176
Treasury stock- common , at cost (15,931 ) (15,361 ) (15,356 ) (15,347 ) (15,279 )
Unearned ESOP Shares, at cost (6,125 ) (6,269 ) (6,414 ) (6,548 ) (6,756 )

Accumulated other comprehensive income, net of taxes

788 1,039 725 548 3,983
Total stockholders' equity 89,235 88,791 87,461 86,428 88,862

Total liabilities and stockholders' equity

$ 904,064 912,127 923,307 891,486 871,906

Additional Capital Information

09/30/17 06/30/17 03/31/17 12/31/16 9/30/2016
(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 7,976,131 7,964,076 7,963,378 7,963,378 7,963,378
Common shares outstanding 6,688,674 6,716,809 6,716,549 6,717,242 6,723,243
Treasury shares 1,287,457 1,247,267 1,246,829 1,246,136 1,240,135
Unearned ESOP shares 466,115 476,862 488,161 498,346 514,187

Book value per share (excludes unearned ESOP shares)

$ 14.34 $ 14.23 $ 14.04 $ 13.90 $ 14.31
Tier 1 leverage ratio 10.9 % 10.4 % 10.6 % 10.8 % 10.9 %
Total risk based capital ratio 16.3 % 16.1 % 16.1 % 16.2 % 16.9 %
Common equity tier 1 capital ratio 15.6 % 15.0 % 15.1 % 15.2 % 15.8 %

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

For the Nine Month

Periods

Ended September 30,

09/30/17 09/30/16 06/30/17 03/31/17 12/31/16 2017 2016
Interest and dividend income:
Loans receivable 7,260 6,569 6,963 6,736 6,603 20,959 19,175
Investment in securities, taxable 1,124 1,099 1,155 1,118 1,051 3,397 3,544
Nontaxable securities available for sale 233 326 280 283 289 796 1,019
Interest-earning deposits 18 10 21 23 8 62 38
Total interest and dividend income 8,635 8,004 8,419 8,160 7,951 25,214 23,776
Interest expense:
Deposits 1,206 1,044 1,197 1,167 1,094 3,570 3,146
Advances from Federal Home Loan Bank 89 33 30 32 29 151 134
Repurchase agreements 130 139 119 103 87 352 421
Subordinated debentures 112 99 108 104 101 324 287
Total interest expense 1,537 1,315 1,454 1,406 1,311 4,397 3,988
Net interest income 7,098 6,689 6,965 6,754 6,640 20,817 19,788
Provision for loan losses 71 255 59 291 63 421 1,178

Net interest income after provision for loan losses

7,027 6,434 6,906 6,463 6,577 20,396 18,610
Non-interest income:
Service charges 819 719 800 804 694 2,423 2,094
Merchant card income 299 308 315 302 311 916 913
Mortgage origination revenue 335 415 278 334 367 947 1,218
Gain on sale of securities 162 79 14 2 190 178 422
Income from bank owned life insurance 95 104 72 235 78 402 265
Financial services commission 134 131 145 140 159 419 455
Other operating income 186 189 212 479 201 877 568
Total non-interest income 2,030 1,945 1,836 2,296 2,000 6,162 5,935

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

For the Nine Month

Periods Ended

September 30,

9/30/2017 9/30/2016 6/30/2017 3/31/2017 12/31/2016 2017 2016
Non-interest expenses:
Salaries and benefits 3,919 3,757 3,977 4,236 3,754 12,132 11,646
Occupancy 716 810 729 775 775 2,220 2,398
Data processing 795 744 546 764 767 2,105 2,175
State deposit tax 169 248 200 231 247 600 743
Professional services 409 368 464 348 396 1,221 1,008
Advertising 240 376 368 381 334 989 1,067
Foreclosure, net (25 ) 204 6 108 (51 ) 89 473
(Gain) loss on sale of asset --- (72 ) 3 --- --- 3 (72 )
Other operating expenses 945 918 940 846 989 2,731 3,207
Total non-interest expense 7,168 7,353 7,233 7,689 7,211 22,090 22,645
Income before income tax expense 1,889 1,026 1,509 1,070 1,366 4,468 1,900
Income tax expense 486 41 368 135 260 989 102
Net income 1,403 985 1,141 935 1,106 3,479 1,798
Net income per share
Basic $ 0.22 $ 0.16 $ 0.18 $ 0.15 $ 0.18 $ 0.56 $ 0.29
Diluted $ 0.22 $ 0.16 $ 0.18 $ 0.15 $ 0.18 $ 0.56 $ 0.29
Dividend per share $ 0.05 $ 0.04 $ 0.05 $ 0.04 $ 0.04 $ 0.14 $ 0.12

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

Nine months ended

9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016 9/30/2017 9/30/2016
Average Balance Sheet Data
Loans, net of allowance 636,955 622,606 615,382 589,282 575,083 626,123 562,870
Available for sale taxable securities 173,624 177,260 176,824 179,483 185,812 175,891 194,657
Available for sale tax free securities 29,090 32,919 33,868 35,102 38,467 31,941 40,283
Other interest bearing deposits 4,351 5,888 9,260 5,915 5,517 6,490 8,168
Average earning assets 844,020 838,673 835,334 809,782 804,879 840,445 805,978
Average non-earning assets 64,913 70,359 75,527 70,443 69,248 69,001 74,212
Average assets 908,933 909,032 908,861 880,225 874,127 909,446 880,190
Average interest bearing deposits 612,655 628,583 625,104 596,763 585,212 622,068 595,889
Total average deposits 738,694 756,661 751,913 725,213 710,810 749,041 720,677
Repurchase agreements 37,978 39,138 41,840 41,717 46,282 39,638 44,186
FHLB borrowings 26,909 11,176 13,433 11,000 14,022 17,222 12,876
Subordinated debentures 10,310 10,310 10,310 10,310 10,310 10,310 10,310
Total average interest bearing liabilities 687,852 689,207 690,687 659,790 655,826 689,238 663,261
Average non-interest bearing deposits 126,039 128,078 126,809 128,450 125,598 126,973 124,788
Average other non-interest bearing liabilities 5,628 3,915 3,993 3,557 3,781 5,374 3,501
Average total equity 89,214 87,832 87,372 88,428 88,922 87,861 88,640

Three month periods ended

Nine months ended

Tax equivalent yield / Cost of: 9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016 9/30/2017 9/30/2016
Loans, fully tax equivalent 4.57 % 4.48 % 4.38 % 4.49 % 4.57 % 4.47 % 4.55 %
Available for sale taxable securities 2.59 % 2.61 % 2.53 % 2.34 % 2.37 % 2.58 % 2.43 %
Available for sale tax free securities, fully tax equivalent 4.78 % 5.09 % 5.00 % 4.93 % 5.07 % 4.97 % 5.05 %
Average yield on other interest bearing deposits 1.65 % 1.43 % 0.99 % 0.54 % 0.73 % 1.27 % 0.62 %
Yield on total interest earning assets 4.15 % 4.09 % 3.98 % 4.00 % 4.06 % 4.07 % 4.02 %
Cost of total average deposits 0.65 % 0.63 % 0.62 % 0.60 % 0.59 % 0.64 % 0.58 %
Cost of average total interest bearing liabilities 0.89 % 0.84 % 0.81 % 0.79 % 0.80 % 0.85 % 0.80 %
Fully tax equivalent interest rate spread 3.26 % 3.25 % 3.17 % 3.21 % 3.26 % 3.22 % 3.22 %
Fully tax equivalent net interest margin 3.43 % 3.39 % 3.31 % 3.35 % 3.41 % 3.37 % 3.36 %
Annualized return on average assets 0.62 % 0.50 % 0.41 % 0.50 % 0.45 % 0.51 % 0.27 %
Annualized return on average equity 6.29 % 5.20 % 4.28 % 5.00 % 4.43 % 5.28 % 2.70 %
Fully tax equivalent efficiency ratio 77.41 % 80.80 % 83.58 % 82.05 % 83.54 % 80.58 % 86.27 %

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

View source version on businesswire.com: http://www.businesswire.com/news/home/20171025005252/en/

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

Source: HopFed Bancorp, Inc.