SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-23667
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HOPFED BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 61-1322555
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Fort Campbell Boulevard, Hopkinsville, Kentucky 42240
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (270) 885-1171
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days. Yes x No
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As of March 31, 2001, 3,839,305 shares of Common Stock were issued and
outstanding.
CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Statements of Financial Condition as of March 31, 2001
(Unaudited) and December 31, 2000................................. 2
Consolidated Statements of Income (Unaudited) for the Three-Month
Periods Ended March 31, 2001 and March 31, 2000................... 3
Consolidated Statements of Comprehensive Income (Unaudited) for
the Three-Month Periods Ended March 31, 2001 and 2000............. 4
Consolidated Statements of Cash Flows (Unaudited) for the Three-Month
Periods Ended March 31, 2001 and March 31, 2000................... 5
Notes to Unaudited Condensed Financial Statements (Unaudited).......... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk....................................................... 9
SIGNATURES...................................................................... 10
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HOPFED BANCORP, INC.
Consolidated Statements of Financial Condition
March 31, December 31,
2001 2000
--------- ------------
(Unaudited)
(In thousands)
ASSETS
Cash and due from banks........................... $ 2,447 $ 2,227
Interest-earning deposits in Federal Home
Loan Bank ("FHLB").............................. 2 50
Federal funds sold................................ 12,230 1,530
Securities available for sale..................... 80,241 84,269
Securities held to maturity, market value of
$7,046 and $7,930 at March 31, 2001 and
December 31, 2000, respectively................. 6,823 7,796
Loans receivable, net of allowance for loan
losses of $768 at March 31, 2001, and $708
at December 31, 2000............................ 134,075 129,154
Accrued interest receivable....................... 1,763 2,285
Premises and equipment, net....................... 2,614 2,442
Deferred tax assets............................... -- 44
Other assets...................................... 223 161
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Total assets................................ $240,418 $229,958
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits......................................... $174,759 $165,604
Advances from borrowers for taxes and insurance.. 224 158
Advances from FHLB............................... 18,000 17,040
Federal income taxes payable..................... 511 --
Dividends payable................................ 422 441
Accrued expenses and other liabilities........... 760 1,353
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Total liabilities............................ 194,676 184,596
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Stockholders' Equity:
Common stock..................................... 40 40
Additional paid in capital....................... 25,714 25,228
Retained earnings, substantially restricted...... 22,160 21,896
Treasury stock (at cost, 200,000 shares at
March 31, 2001 and 149,354 shares at
December 31, 2000............................ (2,254) (1,643)
Accumulated other comprehensive income
(loss) net of taxes.......................... 82 (159)
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Total stockholders' equity................... 45,742 45,362
-------- --------
Total liabilities and stockholders' equity... $240,418 $229,958
======== ========
The balance sheet at December 31, 2000 has been derived from the audited
financial statements of that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying Notes to Unaudited Condensed Financial Statements.
2
HOPFED BANCORP, INC.
Consolidated Statements of Income
(Unaudited)
For the Three Months
Ended March 31,
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2001 2000
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(Dollars in thousands,
except per share data)
Interest income:
Loans receivable............................................ $ 2,660 $ 2,180
Interest and dividends on investments....................... 1,499 1,707
Time deposit interest income................................ 143 14
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Total interest income...................................... 4,302 3,901
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Interest expense:
Deposits.................................................... 2,146 1,893
Advances from FHLB.......................................... 214 185
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Total interest expense..................................... 2,360 2,078
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Net interest income.......................................... 1,942 1,823
Provision for loan losses.................................... 60 10
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Net interest income after provision for loan losses.......... 1,882 1,813
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Noninterest income:
Loan and other service fees................................. 80 115
Other, net.................................................. 18 12
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Total noninterest income................................... 98 127
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Noninterest expenses:
Salaries and benefits....................................... 560 566
Deposit insurance premium................................... 8 10
Occupancy expense, net...................................... 58 47
Data processing............................................. 45 42
Other operating expenses.................................... 263 173
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Total noninterest expenses................................. 934 838
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Income before income taxes................................... 1,046 1,102
Income tax expense........................................... 377 375
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Net income................................................... $ 669 $ 727
========== ==========
Basic net income per share................................... $.17 $.18
Diluted net income per share................................. $.17 $.18
Dividends per share.......................................... $.11 $.11
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Weighted average shares outstanding.......................... 3,856,949 3,993,592
========== =========
See accompanying Notes to Unaudited Condensed Financial Statements.
3
HOPFED BANCORP, INC,
Consolidated Statements of Comprehensive Income
(Unaudited)
For the Three Months Ended March 31
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2001 2000
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(In thousands)
Net income $ 669 $ 727
Other Comprehensive income
Unrealized holding gains (losses) arising
during period net of tax effect of $(124) and
$288 for the three months ended March 31,
2001 and 2000, respectively 241 (559)
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Comprehensive income $ 910 $ 168
===== =====
See accompanying Notes to Unaudited Condensed Financial Statements.
4
HOPFED BANCORP, INC,
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended March 31
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2001 2000
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(In thousands)
Cash flows from operating activities:
Net income.......................................................... $ 669 $ 727
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes.............................................. 44 (14)
Provision for loan losses.......................................... 60 10
Depreciation....................................................... 28 28
FHLB stock dividend................................................ (38) (35)
Amortization (accretion) of investment
premiums and discounts, net...................................... 17 6
Decrease (increase) in:
Accrued interest receivable......................................... 522 (770)
Other assets........................................................ (59) (53)
Increase (decrease) in:
Current income taxes payable........................................ 387 8
Accrued expenses and other liabilities.............................. (72) (150)
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Net cash provided (used) by operating activities.................... 1,558 (243)
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Cash flows from investing activities:
Proceeds from maturities of held-to-maturity securities............. 974 499
Proceeds from sale of available-for-sale securities................. 32,763 2,086
Purchases of available for sale securities.......................... (28,351) (24,049)
Net increase in loans............................................... (4,981) (1,620)
Purchases of premises/equipment..................................... (200) (2)
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Net cash provided (used) by investing activities................... 205 (23,086)
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Cash flows from financing activities:
Net increase in demand deposits..................................... 582 962
Net increase in time deposits....................................... 8,573 1,260
Increase in advances from borrowers for taxes and
insurance.......................................................... 66 72
Net increase in other borrowed funds................................ 960 15,525
Dividends paid...................................................... (406) (307)
Purchase of treasury stock.......................................... (666) ---
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Net cash provided by financing activities.......................... 9,109 17,512
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Increase (decrease) in cash and cash equivalents..................... 10,872 (5,817)
Cash and cash equivalents, beginning of period....................... 3,807 8,888
-------- ---------
Cash and cash equivalents, end of period............................. $ 14,679 3,071
======== =========
Supplemental disclosure of cash flow information
Cash paid for income taxes.......................................... $ --- $ 381
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Cash paid for interest.............................................. $ 2,362 $ 2,087
======== =========
See accompanying Notes to Unaudited Condensed Financial Statements.
5
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
HopFed Bancorp, Inc. (the "Company") was formed at the direction of
Hopkinsville Federal Bank (the "Bank") to become the holding company of the
Bank upon the conversion of the Bank from a federally chartered mutual
savings bank to a federally chartered stock savings bank. The conversion
was consummated on February 6, 1998. The Company's primary assets are the
outstanding capital stock of the converted Bank, and its sole business is
that of the converted Bank.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of
only normal recurring accruals) necessary for fair representation have been
included. The results of operations and other data for the three-month
period ended March 31, 2001, are not necessarily indicative of results that
may be expected for the entire fiscal year ending December 31, 2001.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Comparison of Financial Condition at March 31, 2001 and December 31, 2000
Total assets increased by $10.4 million, from $230.0 million at December 31,
2000 to $240.4 million at March 31, 2001. Securities available for sale
decreased from $84.3 million at December 31, 2000 to $80.2 million at March 31,
2001. Federal funds sold increased from $1.5 million at December 31, 2000, to
$12.2 million at March 31, 2001.
At March 31, 2001, investments classified as "held to maturity" were carried
at an amortized cost of $6.8 million and had an estimated fair market value of
$7.0 million, and securities classified as "available for sale" had an estimated
fair market value of $80.2 million.
The loan portfolio increased $4.9 million during the three months ended March
31, 2001. Net loans totaled $134.1 million and $129.2 million at March 31, 2001
and December 31, 2000, respectively. For the three months ended March 31, 2001,
the average yield on loans was 8.04%, compared to 7.73% for the year ended
December 31, 2000.
The allowance for loan losses totaled $768,000 at March 31, 2001, an increase
of $60,000 from the allowance of $708,000 at December 31, 2000. The ratio of
the allowance for loan losses to loans was .57% and .55% at March 31, 2001 and
December 31, 2000, respectively. Also at March 31, 2001 non-performing loans
were $1.3 million, or .95% of total loans, compared to $434,000, or .34% of
total loans, at December 31, 2000, and the ratio of allowance for loan losses to
non-performing loans at March 31, 2001 and December 31, 2000 was 60.1% and
163.1%, respectively. The determination of the allowance for loan losses is
based on management's analysis, performed on a quarterly basis. Various factors
are considered, including the market value of the underlying collateral, growth
6
and composition of the loan portfolio, the relationship of the allowance for
loan losses to outstanding loans, historical loss experience, delinquency trends
and prevailing economic conditions. Although management believes its allowance
for loan losses is adequate, there can be no assurance that additional
allowances will not be required or that losses on loans will not be incurred.
Minimal losses on loans have been incurred in prior years.
At March 31, 2001, deposits increased to $174.8 million from $165.6 million
at December 31, 2000, a net increase of $9.2 million. The average cost of
deposits during the period ended March 31, 2001 and the year ended December 31,
2000 was 5.18% and 4.98%, respectively. Management continually evaluates the
investment alternatives available to customers and adjusts the pricing on its
deposit products to more actively manage its funding costs while remaining
competitive in its market area.
Comparison of Operating Results for the Three Months Ended March 31, 2001 and
2000
Net Income. Net income for the three months ended March 31, 2001 was
$669,000, compared to net income of $727,000 for the three months ended March
31, 2000. As discussed below, the decrease in net earnings for the three months
primarily resulted from a $96,000 increase in noninterest expenses.
Net Interest Income. Net interest income for the three months ended March
31, 2001 was $1.9 million, compared to $1.8 million for the three months ended
March 31, 2000. The increase in net interest income for the three months ended
March 31, 2001 was primarily due to an increase of $480,000 in interest on
loans. For the three months ended March 31, 2001, the Company's average yield on
average interest-earning assets was 7.54%, compared to 7.33% for the three
months ended March 31, 2000, and its average cost of interest-bearing
liabilities was 5.16% for the three months ended March 31, 2001, compared to
4.84% for the three months ended March 31, 2000. As a result, the Company's
interest rate spread for the three months ended March 31, 2001 was 2.38%,
compared to 2.49% for the three months ended March 31, 2000, and its net yield
on interest-earning assets was 3.39% for the three months ended March 31, 2001,
compared to 3.43% for the three months ended March 31, 2000.
Interest Income. Interest income increased by $401,000 from $3.9 million to
$4.3 million, or by 10.3%, during the three months ended March 31, 2001 compared
to the same period in 2000. This increase primarily resulted from an increase
in the loan portfolio which produced an increase of $480,000 in interest on
loans. The average balance of loans receivable increased $16.9 million from
$113.7 million at March 31, 2000 to $130.6 million at March 31, 2001. The
average balance of investment securities decreased $11.2 million, from $98.0
million at March 31, 2000 to $86.8 million at March 31, 2001. Average time
deposits and other interest-earning cash deposits increased $9.8 million, from
$1.1 million at March 31, 2000 to $10.9 million at March 31, 2001. Overall,
average total interest-earning assets increased $15.5 million, or 7.29%, from
March 31, 2000 to March 31, 2001. The ratio of average interest-earning assets
to average interest-bearing liabilities increased from 123.9% for the three
months ended March 31, 2000 to 124.4% for the three months ended March 31, 2001.
Interest Expense. Interest expense increased $282,000 or 13.6%, to $2.4
million for the three months ended March 31, 2001, compared to $2.1 million for
the same period in 2000. The increase was attributable to an increase of
7
$253,000 in interest on deposits and an increase in interest on FHLB advances of
$29,000. The average cost of average interest-bearing deposits increased from
4.76% at March 31, 2000 to 5.18% at March 31, 2001. Over the same period, the
average balance of deposits increased $7.0 million, from $159.2 million at March
31, 2000 to $166.2 million at March 31, 2001, or 4.40% and the average balance
of borrowed funds increased $4.8 million, from $12.6 million at March 31, 2000
to $17.4 million at March 31, 2001. The average cost of average borrowed funds
decreased from 5.89% at March 31, 2000 to 4.93% at March 31, 2001.
Provision for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and the general economy. Such evaluation
considers numerous factors including, general economic conditions, loan
portfolio composition, prior loss experience, the estimated fair value of the
underlying collateral and other factors that warrant recognition in providing
for an adequate loan loss allowance. The Company determined that an additional
$60,000 provision for loan loss was required for the three months ended March
31, 2001.
Noninterest Income. There was a $29,000 decrease in noninterest income in
the three months ended March 31, 2001 compared to the same period in 2000, due
to a $35,000 decrease in loan and other service fees.
Noninterest Expenses. There was a $96,000 increase in total noninterest
expenses in the three months ended March 31, 2001 compared to the same period in
2000, primarily due to a $90,000 increase in other operating expenses, which
included an increase of $40,000 in professional fees and an increase of $30,000
in operating expenses at a new branch.
Income Taxes. The effective tax rate for the three months ended March 31,
2001 was 36.0%, compared to 34.0% for the same period in 2000. The increase in
the effective rate in the three-month period compared to the same period in 2000
was attributable to non-deductible expenses.
Liquidity and Capital Resources. The Company has no business other than
that of the Bank. Management believes that dividends that may be paid by the
Bank to the Company will provide sufficient funds for its current needs.
However, no assurance can be given that the Company will not have a need for
additional funds in the future. The Bank is subject to certain regulatory
limitations with respect to the payment of dividends to the Company.
The Bank's principal sources of funds for operations are deposits from its
primary market areas, principal and interest payments on loans, proceeds from
maturing investment securities and the net conversion proceeds received by it.
The principal uses of funds by the Bank include the origination of mortgage and
consumer loans and the purchase of investment securities.
The Bank is required by current federal regulations to maintain specified
liquid assets of at least 5% of its net withdrawable accounts plus short-term
borrowings. Short-term liquid assets (those maturing in one year or less) may
not be less than 1% of the Bank's liquidity base. At March 31, 2001, the Bank
met all regulatory liquidity requirements, and management believes that the
liquidity levels maintained are adequate to meet potential deposit outflows,
loan demand and normal operations.
8
The Bank must satisfy three capital standards: a ratio of core capital to
adjusted total assets of 4.0%, a tangible capital standard expressed as 1.5% of
total adjusted assets, and a combination of core and "supplementary" capital
equal to 8.0% of risk-weighted assets. At March 31, 2001, the Bank exceeded all
regulatory capital requirements. The table below presents certain information
relating to the Bank's capital compliance at March 31, 2001.
At March 31, 2001
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Amount Percent
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(Dollars in thousands)
Tangible Capital......... $41,763 17.40%
Core Capital............. $41,763 17 40%
Risk-Based Capital....... $42,531 43.38%
At March 31, 2001, the Bank had outstanding commitments to originate
loans totaling $1,027,000 Management believes that the Bank's sources of funds
are sufficient to fund all of its outstanding commitments. Certificates of
deposits which are scheduled to mature in one year or less from March 31, 2001
totaled $99.6 million. Management believes that a significant percentage of
such deposits will remain with the Bank.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements.
Additional written or oral forward-looking statements may be made by the Company
from time to time in filings with the Securities and Exchange Commission or
otherwise. The words "believe," "expect," "seek," and "intend" and similar
expressions identify forward-looking statements, which speak only as of the
date the statement is made. Such forward-looking statements are within the
meaning of that term in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements may include, but are not limited to, projections of income or loss,
expenditures, acquisitions, plans for future operations, financing needs or
plans relating to services of the Company, as well as assumptions relating to
the foregoing. Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by or underlying the forward-looking statements.
The Company does not undertake, and specifically disclaims, any obligation to
publicly release the results of revisions which may be made to forward-looking
statements to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company monitors whether material changes in market risk have occurred
since year-end. The Company does not believe that material changes in market
risk exposures occurred during the three months ended March 31, 2001.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOPFED BANCORP, INC.
Date: May 14, 2001 /s/ John E. Peck
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John E. Peck
President and Chief Executive Officer
Date: May 14, 2001 /s/ Peggy R. Noel
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Peggy R. Noel
Vice President, Chief Financial
Officer and Treasurer
10