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 June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 000-23667
-----------------
HOPFED BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 61-1322555
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Fort Campbell Boulevard, Hopkinsville, Kentucky 42240
- ---------------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (270) 885-1171
--------------
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
------ ---
As of June 30, 2001, 3,772,305 shares of Common Stock were issued and
outstanding.
CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of June 30, 2001
and December 31, 2000................................................................... 2
Consolidated Statements of Income for the Three-Month and Six-Month
Periods Ended June 30, 2001 and 2000.................................................... 3
Consolidated Statements of Comprehensive Income for the Three-Month
and Six-Month Periods Ended June 30, 2001 and 2000...................................... 4
Consolidated Statements of Cash Flows for the Six-Month
Periods Ended June 30, 2001 and 2000.................................................... 5
Notes to Unaudited Condensed Financial Statements................................................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................................. 6
Item 3. Quantitative and Qualitative Disclosures About
Market Risk..................................................................................... 11
PART II. OTHER INFORMATION
-----------------
Item 4. Submission of Matters to a Vote of Security Holders.............................................. 11
Item 6. Exhibits and Reports on Form 8-K................................................................ 12
SIGNATURES............................................................................................... 13
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HOPFED BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
June 30, December 31,
ASSETS 2001 2000
------------------- ------------------
(Unaudited)
(In thousands)
Cash and due from banks................................. $ 3,665 $ 2,227
Interest-earning deposits in Federal Home
Loan Bank ("FHLB")................................... 249 50
Federal funds sold...................................... 11,330 1,530
Securities available for sale........................... 76,082 84,269
Securities held to maturity, market value of
$6,195 and $7,930 at June 30, 2001 and
December 31, 2000, respectively...................... 5,946 7,796
Loans receivable, net of allowance for loan
losses of $805 at June 30, 2001, and $708
at December 31, 2000................................. 145,556 129,154
Accrued interest receivable............................. 3,873 2,285
Premises and equipment, net............................. 2,671 2,442
Other assets............................................ 290 205
------------- ------------
Total assets................................... $ 249,662 $ 229,958
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits............................................. $ 184,813 $ 165,604
Advances from borrowers for taxes and insurance...... 277 158
Advances from FHLB................................... 18,000 17,040
Dividends payable ................................... 415 441
Accrued expenses and other liabilities............... 976 1,353
------------- ------------
Total liabilities.............................. 204,481 184,596
------------- ------------
Stockholders' Equity:
Common stock......................................... 40 40
Additional paid in capital........................... 25,714 25,228
Retained earnings, substantially restricted.......... 22,405 21,896
Treasury stock (at cost, 267,000 shares at
June 30, 2001 and 149,354 shares at
December 31, 2000)................................ (3,080) (1,643)
Accumulated other comprehensive income
(loss) net of taxes............................... 102 (159)
------------- -------------
Total stockholders' equity..................... 45,181 45,362
------------- ------------
Total liabilities and stockholders' equity..... $ 249,662 $ 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. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------------------- -------------------------------
2001 2000 2001 2000
----------------- ----------------- ----------- -----------
(Dollars in thousands, except per share data)
Interest income:
Interest on loans...................... $ 2,810 $ 2,125 $ 5,470 $ 4,305
Interest and dividends on investments.. 1,400 1,849 2,899 3,556
Time deposit interest income........... 170 7 313 21
---------- ---------- ---------- ----------
Total interest income........... 4,380 3,981 8,682 7,882
---------- ---------- ---------- ----------
Interest expense:
Interest on deposits................... 2,267 1,930 4,413 3,823
Interest on advances................... 206 292 420 477
---------- ---------- ---------- ----------
Total interest expense............ 2,473 2,222 4,833 4,300
---------- ---------- ---------- ----------
Net interest income......................... 1,907 1,759 3,849 3,582
Provision for loan losses................... 42 10 102 20
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses........................ 1,865 1,749 3,747 3,562
---------- ---------- ---------- ----------
Noninterest income:
Loan and other service fees............ 176 120 256 235
Other, net............................. 4 19 22 31
---------- ---------- ---------- ---------
Total noninterest income........... 180 139 278 266
---------- ---------- ---------- ----------
Noninterest expenses:
Salaries and benefits.................. 490 595 1,050 1,161
Federal insurance premium.............. 15 8 23 18
Occupancy expense, net................. 24 49 82 96
Data processing........................ 47 40 92 82
Other operating expenses............... 441 202 704 375
---------- ---------- ---------- ----------
Total noninterest expenses......... 1,017 894 1,951 1,732
---------- ---------- ---------- ----------
Income before income taxes.................. 1,028 994 2,074 2,096
Income tax expense.......................... 367 355 744 730
---------- ---------- ---------- ----------
Net income ................................. 661 639 1,330 1,366
========== ========== ========== ==========
Basic net income per share.................. $ 0.17 $ .16 $ 0.35 $ .34
Diluted net income per share............... $ 0.17 $ .16 $ 0.35 $ .34
Dividends per share......................... $ 0.11 $ .11 $ 0.22 $ .185
========== ========== ========== ==========
Weighted average shares outstanding......... 3,806,893 3,999,807 3,831,921 3,996,682
========== ========== ========== ==========
See accompanying Notes to Unaudited Condensed Financial Statements.
3
HOPFED BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Unaudited)
For the Three Months For the Six Months
Ended June 30 Ended June 30
---------------------------- ------------------------------
2001 2000 2001 2000
------------- ---------- -------------- -----------
(In thousands)
Net income $ 661 $ 639 $ 1,330 $1,366
Other comprehensive income, net of tax
Unrealized holding gains (losses) arising
during period net of tax effect of ($11)
and ($55) for the three months ended June
30, 2001 and 2000, respectively, and ($134)
and ($343) for the six months ended June
30, 2001 and 2000, respectively 20 (106) 261 (665)
-------- ----- -------- -------
Comprehensive income $ 681 $ 533 $ 1,591 $ 701
======= ==== ======= =======
See accompanying Notes to Unaudited Condensed Financial Statements
4
HOPFED BANCORP, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30,
--------------------------------------
2001 2000
-------------------- -------------
(In thousands)
Cash flows from operating activities:
Net income........................................... $ 1,330 $ 1,366
Adjustments to reconcile net income to net cash
Provided by operating activities:
Loss on impairment of ORE 18 -
Provision for loan losses............................ 102 21
Provision for depreciation........................... 56 55
FHLB stock dividend.................................. (78) (72)
Accretion of investment security discounts........... (4) (9)
Amortization of investment security premiums......... 25 20
MRP Shares........................................... - 974
(Increase) decrease in
Accrued interest receivable.......................... (1,588) (913)
Other assets......................................... (85) (406)
Increase (decrease) in:
Accrued expenses and other liabilities............... (25) (789)
--------- ---------
Net cash used in operating activities................ (249) 247
---------- ---------
Cash flows from investing activities:
Proceeds from maturities of held-to-maturity securities 1,854 1,152
Proceeds from sale of available-for-sale securities.. 54,840 3,606
Purchases of available-for-sale securities........... (46,205) (25,048)
Net increase in loans................................ (16,522) (5,301)
Real estate acquired in settlement of loans.......... - (258)
Purchases of premises/equipment...................... (285) (51)
--------- ----------
Net cash used in investing activities................ (6,318) (25,900)
---------- ----------
Cash flows from financing activities:
Net increase in demand deposits...................... 1,471 756
Net increase (decrease) in time deposits............. 17,738 942
Advances from FHLB................................... 960 18,385
Increase in advance payments by
Borrowers for taxes and insurance................ 119 111
Net dividends paid................................... (847) (747)
Purchase of treasury stock........................... (1,437) --
---------- ---------
Net cash used in financing activities................ 18,004 19,447
--------- ---------
Decrease in cash and cash equivalents..................... 11,437 (6,206)
Cash and cash equivalents, beginning of period............ 3,807 8,716
--------- ---------
Cash and cash equivalents, end of period.................. 15,244 2,510
========= =========
Supplemental disclosures of cash flow information.........
Cash paid for income taxes........................... $ 315 $ 381
========= =========
Cash paid for interest............................... $ 4,405 $ 4,316
========= =========
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
asset is 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
presentation have been included. The results of operations and other
data for the six month period ended June 30, 2001 are not necessarily
indicative of results that may be expected for the entire fiscal year
ending December 31, 2001.
The accompanying unaudited financial statements should be read in
conjunction with the Consolidated Financial Statements and the Notes
thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2000. The accounting policies followed by the
Company are set forth in the Summary of Significant Accounting Policies
in the Company's December 31, 2000 Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison of Financial Condition at June 30, 2001 and December 31, 2000
Total assets increased by $19.7 million, from $230.0 million at
December 31, 2000 to $249.7 million at June 30, 2001. Securities available for
sale decreased from $84.3 million at December 31, 2000 to $76.1 million at June
30, 2001. Federal funds sold increased from $1.5 million at December 31, 2000,
to $11.3 million at June 30, 2001.
At June 30, 2001, investments classified as "held to maturity" were
carried at an amortized cost of $5.9 million and had an estimated fair market
value of $6.2 million, and securities classified as "available for sale" had an
estimated fair market value of $76.1million.
The loan portfolio increased $16.4 million during the six months ended
June 30, 2001. Net loans totaled $145.6 million and $129.2 million at June 30,
2001 and December 31, 2000, respectively. For the six months ended June 30,
2001, the average yield on loans was 7.90%, compared to 7.73% for the year ended
December 31, 2000.
6
The allowance for loan losses totaled $ 805,000 at June 30, 2001, an
increase of $ 97,000 from the allowance of $708,000 December 31, 2000. The ratio
of the allowance for loan losses to loans was 0.55% at each of June 30, 2001 and
December 31, 2000. Also at June 30, 2001, non-performing loans were $ 1,860,000,
or 1.27% 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 June 30, 2001 and December 31, 2000 was 43.3% and 163.1%, respectively.
The determination of the allowance for loan losses is based on management's
analysis, performed on a quarterly basis. The increase in non-performing loans
is largely the result of three significant problem loans. Two loans, totaling
$1.075 million, are non-performing but fully guaranteed by an agency of the
federal government and present no significant risk of loss. The third large
non-performing loan had an outstanding balance of $144,000 at June 30, 2001 and
is 80% guaranteed by the Small Business Administration.
Various factors are considered in determining the necessary allowance
for loan losses, including the market value of the underlying collateral, growth
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 the allowance
for loan losses is adequate, there can be no assurance that additional
provisions for loan losses will not be required or that losses on loans will not
be incurred. Minimal losses on loans have been incurred in prior years.
Real estate owned of $143,000 at June 30, 2001 represents one parcel of
residential property on which the Bank holds a first mortgage and which was
acquired by the Bank in a sale initiated by the second mortgagee.
At June 30, 2001, deposits increased to $ 184.8 million from $165.6
million at December 31, 2000, a net increase of $19.2 million. The average cost
of deposits during the three and six month periods ended June 30, 2001 and the
year ended December 31, 2000 was 5.07%, 5.08% 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 cost while remaining competitive in its market area.
Comparison of Operating Results for the Six Months Ended June 30, 2001 and 2000
Net Income. Net income for the six months ended June 30, 2001 was $1.3
million, compared to net income of $1.4 million for the six months ended June
30, 2000. The decline in net earnings for the six months resulted primarily from
lower investment yields due to a significant number of agency securities being
called during the first six months of 2001.
Net Interest Income. Net interest income for the six months ended June
30, 2001 was $3.8 million, compared to $3.6 million for the six months ended
June 30, 2000. The increase in net interest income for the six months ended June
30, 2001 was primarily due to additional loans outstanding. For the six months
ended June 30, 2001, the Bank's average yield on average interest-earning assets
was 7.49%, compared to 7.30% for the six months ended June 30, 2000, and its
average cost of interest-bearing liabilities was 5.04% for the six months ended
June 30, 2001, compared to 4.93% for the six months ended June 30, 2000. As a
7
result, the Bank's interest rate spread for the six months ended June 30, 2001
was 2.45%, compared to 2.37% for the six months ended June 30, 2000, and its net
yield on interest-earning assets was 3.34% for the six months ended June 30,
2001, compared to 3.32% for the six months ended June 30, 2000.
Interest Income. Interest income increased by $800,000, from $7.9
million to $8.7 million, or by 10.1%, during the six months ended June 30, 2001
compared to the same period in 2000. This increase primarily resulted from
increased loan volume. The average balance of securities available for sale
declined $10.1 million, from $90.3 million at June 30, 2000, to $80.2 million at
June 30, 2001, while the average balance of securities held to maturity declined
$2.6 million, from $9.5 million at June 30, 2000 to $6.9 million at June 30,
2001. In addition, average time deposits and other interest-earning cash
deposits declined $640,000 million, from $790,000 at June 30, 2000 to $150,000
at June 30, 2001. Overall, average total interest-earning assets increased $16.7
million, or 7.75%, from June 30, 2000 to June 30, 2001. The ratio of average
interest-earning assets to average interest-bearing liabilities declined from
123.88% for the six months ended June 30, 2000 to 120.8% for the six months
ended June 30, 2001.
Interest Expense. Interest expense increased $533,000, or 12.4%, to
$4.8 million for the six months ended June 30, 2001, compared to $4.3 million
for the same period in 2000. The increase was attributable to the growth of
deposits. The average cost of average interest-bearing deposits increased from
4.93% for the six months ended June 30, 2000 to 5.08% for the six months ended
June 30, 2001. Over the same periods, the average balance of deposits increased
$14.7 million, from $159.1 million for the six months ended June 30, 2000 to
$173.8 million for the six months ended June 30, 2001, or 9.24%.
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 the 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 Bank determined that an additional
$102,000 provision for loan losses was required for the six months ended June
30, 2001.
Non-Interest Expenses. There was a $219,000 increase in total
non-interest expenses in the six months ended June 30, 2001 compared to the same
period in 2000, primarily due to opening a new branch office in Benton,
Kentucky.
Income Taxes. The effective tax rate for the six months ended June 30,
2001 was 35.9%, compared to 34.8% for the same period in 2000.
Comparison of Operating Results for the Three Months Ended June 30, 2001
and 2000
Net Income. Net income for the three months ended June 30, 2001 was
$661,000, compared to net income of $639,000 for the three months ended June 30,
8
2000. The increase in net income for the three months ended June 30, 2001
resulted primarily from an increase in loans outstanding.
Net Interest Income. Net interest income for the three months ended
June 30, 2001 and June 30, 2000 was $1.9 and $1.8 million, respectively. For the
three months ended June 30, 2001, the average yield on total interest-earning
assets was 7.43%, compared to 7.26% for the three months ended June 30, 2000,
and the average cost of interest-bearing liabilities was 5.03% for the three
months ended June 30, 2001, compared to 5.02% for the three months ended June
30, 2000. As a result, the interest rate spread for the three months ended June
30, 2001 was 2.40%, compared to 2.24% for the three months ended June 30, 2000,
and the net yield on interest-earning assets was 3.23% for the three months
ended June 30, 2001, compared to 3.21% for the three months ended June 30, 2000.
Interest Income. Interest income increased by $400,000, from $4.0
million to $4.4 million, or by 10.00%, during the three months ended June 30,
2001 compared to the same period in 2000. The average balance of securities
available for sale declined $14.1million, from $92.3 million at June 30, 2000 to
$78.2 million at June 30, 2001, while the average balance of securities held to
maturity declined $2.8 million, from $9.2 million at June 30, 2000 to $6.4
million at June 30, 2001. In addition, average time deposits and other
interest-earning cash deposits declined $381,000, from $507,000 at June 30, 2000
to $126,000 at June 30, 2001. The average balance of loans receivable at June
30, 2001 was $143.1 million, an increase of $13.9 million from the average
balance at June 30, 2000. Overall, average total interest-earning assets
increased $16.6 million, or 7.7%, from June 30, 2000 to June 30, 2001. The ratio
of average interest-earning assets to average interest-bearing liabilities
declined from 123.87% for the three months ended June 30, 2000 to 119.9% for the
three months ended June 30, 2001.
Interest Expense. Interest expense increased $251,000, or 11.3%, to
$2.5 million for the three months ended June 30, 2001, compared to $2.2 million
for the same period in 2000. The increase was attributable to increased deposit
balances. The average cost of average interest-bearing deposits increased from
5.02% at June 30, 2000 to 5.07% at June 30, 2001. Over the same period, the
average balance of deposits increased $19.7 million, from $159.1 million at June
30, 2000 to $178.8 million at June 30, 2001, or 12.38%. The average balance of
advances from the FHLB was $18.0 million at June 30, 2001, compared to $17.9
million at June 30, 2000.
Provision for Loan Losses. The Bank determined that an additional
$42,000 provision for loan losses was required for the three months ended June
30, 2001, compared to an additional $10,200 provision for the three months ended
June 30, 2000.
Non-Interest Expenses. There was an approximate $100,000 increase in
total non-interest expenses in the three months ended June 30, 2001 compared to
the same period in 2000, primarily due to opening a new branch office in Benton,
Kentucky.
Income Taxes. The effective tax rate for each of the three months ended
June 30, 2001 and June 30, 2000 was 35.7%.
9
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 initial operations and liquidity 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 June 30, 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.
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 June 30, 2001, the Bank exceeded all
regulatory capital requirements. The table below presents certain information
relating to the Bank's capital compliance at June 30, 2001.
Amount Percent
------ -------
(Dollars in thousands)
Tangible Capital . . . . . . . . . . $ 42,457 17.2%
Core Capital . . . . . . . . . . . . $ 42,457 17.2%
Risk-Based Capital . . . . . . . . . $ 43,262 36.4%
At June 30, 2001, the Bank had outstanding commitments to originate
loans totaling $3.4 million. 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 June 30, 2001
totaled $106.9 million. Management believes that a significant percentage of
such deposits will remain with the Bank.
10
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 is unable to predict future changes in
market rates and their impact on the Company's profitability. The Company does
not believe that material changes in market risk exposures have occurred since
December 31, 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
During the six month period ending June 30, 2001, the Federal Reserve
Bank significantly reduced its fed funds target rate. As a result of the
declining in market interest rates that followed the Federal Reserve Bank's
action, the Bank had a large portion of its bond portfolio called. These funds
were re-invested at a shorter maturity, in fed funds or used to fund the growth
of the loan portfolio. The result was a 140 basis point reduction in investment
yields for the month ending June 30, 2001 as compared to the month ending
December 31, 2000. During the next six months, the Bank's exposure to additional
bonds being called is limited to $2 million dollars. Therefore, the Bank does
not anticipate a significant decline in investment yields from current levels.
The Company monitors interest rate risk using an OTS model to measure
the estimated change in the Bank's net portfolio value (NPV) of its assets
assuming instantaneous parallel shifts in the Treasury yield curve of 100 to 300
basis points in 100 basis points increments. The NPV is defined as the present
value of expected cash flows from existing assets less the present value of
expected cash flows from existing liabilities plus the present value of expected
cash flows from existing liabilities plus the present value of net expected cash
inflows from existing off-balance sheet contracts. The Bank has developed an
Interest Rate Risk Policy that defines acceptable levels of interest rate risk
and requires the quarterly reporting of interest rate risk to the Bank's Board
of Directors.
The information used in the NPV model is obtained by OTS from the Bank
on schedule CMR of the quarterly Thrift Financial Report. The OTS NPV model is a
commonly used measure of interest rate risk in OTS regulated institutions.
The most recent measurement of the Bank's NPV ratio was March 31,
2001. This measurement revealed that the Bank's NPV would be reduced by 156
basis points, to 20.07% given a instantaneous decline of 200 basis points in the
Treasury yield curve. The thrift median at March 31, 2001 for a 200 basis point
decline is 181 basis points to 11.29%. At December 31, 2000, this same measure
indicated that the Bank's NPV would decline 298 basis points under the same
scenario with the thrift median being 168 basis points. The NPV ratio's decline
in a instantaneous 200 basis point shift in the Treasury curve was reduced
during the three month period ending March 31, 2001 as a result of the Bank's
re-investment of called bonds into shorter term investments.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 15, 2001, the Company held its Annual Meeting of Stockholders at
which the following matters were considered and voted on:
Proposal I - Election of Directors:
Nominees For Withheld
- -------- --- --------
WD Kelley 2,561,081 62,439
Clifton H. Cochran 2,575,681 47,839
Walton G. Ezell 2,560,522 62,998
11
There were no abstentions or broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.1 - Employment Agreement by and between HopFed
Bancorp, Inc. and Billy C. Duvall
Exhibit 10.2 - Employment Agreement by and between Hopkinsville
Federal Bank and Billy C. Duvall
(b) None.
12
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: August 14, 2001 /s/ John E. Peck
--------------------------------------
John E. Peck
President and Chief Executive Officer
Date: August 14, 2001 /s/ Billy C. Duvall
--------------------------------------
Billy C. Duvall
Vice President, Chief Financial
Officer and Treasurer
13