<PAGE>
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, 1998
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: (502) 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, 1998, 4,033,625 shares of Common Stock were issued and
outstanding.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
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PART I. FINANCIAL INFORMATION
---------------------
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of June 30, 1998
and December 31, 1997............................................................. 1
Consolidated Statements of Income for the Three-Month and Six-Month
Periods Ended June 30, 1998 and 1997.............................................. 2
Consolidated Statements of Comprehensive Income for the Three-Month
and Six-Month Periods Ended June 30, 1998 and 1997................................ 3
Consolidated Statements of Cash Flows for the Six-Month
Periods Ended June 30, 1998 and 1997.............................................. 4
Notes to Unaudited Condensed Financial Statements........................................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................................... 6
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.............................................................................. 10
PART II. OTHER INFORMATION
-----------------
Item 4. Submission of Matters to a Vote of Security Holders...................................... 11
SIGNATURES........................................................................................ 12
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
HOPFED BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
June 30, December 31,
ASSETS 1998 1997
---- ----
(Unaudited)
(In thousands)
<S> <C> <C>
Cash and due from banks.......................................... $ 1,433 $ 1,264
Time deposits.................................................... 2,000 2,000
Interest-bearing deposits in Federal
Home Loan Bank ("FHLB")......................................... 22 3,945
Federal funds sold............................................... 20,975 151,095
Investment securities available for sale......................... 49,414 26,699
Investment securities held to maturity
(Estimated market values of $35,623 and
$51,964 at June 30, 1998 and
December 31, 1997, respectively)............................... 35,268 51,566
Loans receivable, net............................................ 104,863 103,470
Accrued interest receivable...................................... 1,241 1,184
Premises and equipment, net...................................... 2,485 2,333
Other assets..................................................... 136 439
--------- ---------
Total assets............................................ $ 217,837 $ 343,995
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits........................................................ $ 156,546 $ 320,633
Federal income taxes............................................ 2,383 2,324
Advance payments from borrowers for taxes and insurance......... 330 171
Other liabilities............................................... 257 931
--------- ---------
Total liabilities....................................... $ 159,516 $ 324,059
========= =========
Shareholders' Equity:
Common stock.................................................... 40 --
Additional paid in capital...................................... 39,375 --
Retained earnings, substantially restricted..................... 18,376 16,613
Less deferred compensation - ESOP............................... (3,227) --
Net unrealized appreciation on investment
securities available for sale.................................. 3,757 3,323
--------- ---------
Total shareholders' equity.............................. 58,321 19,936
--------- ---------
Total liabilities and shareholders' equity............ $ 217,837 $ 343,995
========= =========
</TABLE>
See accompanying Notes to Unaudited Condensed Financial Statements.
1
<PAGE>
HOPFED BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------------------- -----------------------------------
1998 1997 1998 1997
----------------- ---------------- --------------- ----------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest on loans ..................... $ 2,050 $ 1,899 $ 4,092 $ 3,701
Interest and dividends on investments . 1,119 1,314 2,217 2,640
Time deposit interest income .......... 423 158 1,600 302
----------------- ---------------- --------------- ----------------
Total interest income .................... 3,592 3,371 7,909 6,643
================= ================ =============== ================
Interest expense:
Interest on deposits .................. 1,883 2,185 4,292 4,417
Other borrowed funds .................. -- -- -- 9
----------------- ---------------- --------------- ----------------
Total interest expense ................ 1,883 2,185 4,292 4,426
----------------- ---------------- --------------- ----------------
Net interest income ........................ 1,709 1,186 3,617 2,217
Provision for loan losses .................. 5 10 10 10
----------------- ---------------- --------------- ----------------
Net interest income after provision
for loan losses ....................... 1,704 1,176 3,607 2,207
----------------- ---------------- --------------- ----------------
Other income:
Loan and other service fees ........... 129 128 243 231
Other, net ............................ 17 18 38 39
----------------- ---------------- --------------- ----------------
Total other income .................... 146 146 281 270
----------------- ---------------- --------------- ----------------
Net expenses:
Salaries and benefits ................. 355 349 706 722
Federal insurance premium ............. 49 13 78 63
Occupancy expense, net ................ 47 49 87 99
Data processing ....................... 27 25 55 50
Other operating expenses .............. 144 111 274 229
----------------- ---------------- --------------- ----------------
Total other expenses .................. 622 547 1,200 1,163
----------------- ---------------- --------------- ----------------
Income before income taxes ................. 1,228 775 2,688 1,314
Income tax expense ......................... 434 264 925 444
----------------- ---------------- --------------- ----------------
Net income ................................. $ 794 $ 511 $ 1,763 $ 870
================= ================ =============== ================
Earnings (Loss) per share:
Basic ................................. $ 0.21 N/A $ 0.48 N/A
Fully diluted ......................... $ 0.21 N/A $ 0.48 N/A
Weighted Average:
Common shares ......................... 4,033,625 N/A 4,033,625 N/A
Less: unallocated ESOP shares ......... 322,690 N/A 322,690 N/A
----------------- ---------------
$ 3,710,935 $ 3,710,935
================= ===============
</TABLE>
See accompanying Notes to Unaudited Condensed Financial Statements.
2
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HOPFED BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
---------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Net Income $ 794 $ 511 $ 1,763 $ 870
Other comprehensive income, net of tax
Unrealized holding gains arising during period 0 600 434 571
Less: reclassification adjustment for gains
included in net income 0 0 0 0
-------- -------- -------- --------
Comprehensive income $ 794 $ 1,111 $ 2,197 $ 1,441
======== ======== ======== ========
</TABLE>
See Accompanying Notes to Unaudited Condensed Financial Statements.
3
<PAGE>
HOPFED BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-----------------------------
1998 1997
------------ ------------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................ $ 1,763 $ 870
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes ................................. 6 (20)
Provision for loan losses ............................. 10 10
Provision for depreciation ............................ 46 50
FHLB stock dividend ................................... (63) (57)
Accretion of investment security discounts ............ (11) (14)
(Increase) decrease in:
Accrued interest receivable ........................... (57) 46
Other assets .......................................... 303 18
Increase (decrease) in:
Current income taxes payable .......................... (183) --
Accrued expenses and other liabilities ................ (674) (.21)
--------- ---------
Net cash provided by operating activities ............. 1,140 882
--------- ---------
Cash flows from investing activities:
Net (increase) decrease in interest earning deposits
in FHLB ............................................. 3,923 (3)
Net (increase) decrease in federal funds sold ......... 130,120 (10,646)
Proceeds from maturities of held-to-maturity securities 16,309 22,307
Purchases of held-to-maturity securities .............. -- (5,933)
Proceeds from sale of available-for-sale securities ... 4,943 --
Purchases of available-for-sale securities ............ (26,926) --
Proceeds from sale of equipment ....................... 7 --
Net increase in loans ................................. (1,403) (2,951)
Purchases of premises/equipment ....................... (205) (105)
--------- ---------
Net cash provided by investing activities ............. 126,768 2,669
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts ................... (148,687) 301
Net decrease in time deposits ......................... (15,399) (2,687)
Increase in advance payments by
borrowers for taxes and insurance ................... 159 106
Net decrease in other borrowed funds .................. -- (1,317)
Net proceeds from issuance of stock ................... 36,188 --
--------- ---------
Net cash used in financing activities ................. (127,739) (3,597)
--------- ---------
Increase (decrease) in cash and cash equivalents ........... 169 (46)
Cash and cash equivalents, beginning of period ............. 1,264 1,452
--------- ---------
Cash and cash equivalents, end of period ................... $ 1,433 $ 1,406
========= =========
Supplemental disclosures of cash flow information
Cash paid for income taxes ............................ $ 910 $ 220
========= =========
Cash paid for interest ................................ $ 4,789 $ 4,689
========= =========
</TABLE>
See Accompanying Notes to Unaudited Condensed Financial Statements.
4
<PAGE>
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
HopFed Bancorp, Inc. (the "Company") was formed at the direction of
Hopkinsville Federal Savings 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,
a portion of the net proceeds of the conversion, and a note receivable
from the Company's Employee Stock Ownership Plan, and its sole business
is that of the converted Bank and the investment of funds held by it.
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, 1998, are not necessarily
indicative of results that may be expected for the entire fiscal year
ending December 31, 1998.
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, 1997. The accounting policies followed by the
Company are set forth in the Summary of Significant Accounting Policies
in the Company's December 31, 1997 Consolidated Financial Statements.
2. EARNINGS AND DIVIDENDS PER SHARE
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings per Share." This Statement established
standards for computing and presenting earnings per share ("EPS"). This
Statement simplified the standards for computing EPS previously found
in APB Opinion No. 15, "Earnings per Share," and made them comparable
to international EPS standards. It replaced the presentation of primary
EPS with a presentation of basic EPS and requires dual presentation of
basic and diluted EPS on the face of the income statement and
disclosure of a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted
EPS computation. For the three months and six months ended June 30,
1998 the Company's weighted average common shares are the same for the
basic and diluted EPS computations.
5
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3. REPORTING COMPREHENSIVE INCOME
The Company has adopted FASB Statement No. 130, "Reporting
Comprehensive Income." Statement No. 130 requires the reporting of
comprehensive income in addition to net income from operations.
Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information
that historically has not been recognized in the calculation of net
income.
The Company holds securities classified as available-for-sale, which
have unrealized gains. The before tax and after tax amounts, as well as
the tax (expense) benefit is summarized below.
<TABLE>
<CAPTION>
Tax (Expense)/
Before Tax Benefit After Tax
-------------- ------------------ -------------
<S> <C> <C> <C>
For the three months ended June 30, 1998:
Unrealized holding gains 0 0 0
For the three months ended June 30, 1997:
Unrealized holding gains 909 (309) 600
For the six months ended June 30, 1998:
Unrealized holding gains 670 (236) 434
For the six months ended June 30, 1997:
Unrealized holding gains 865 (294) 571
</TABLE>
4. PENDING ACCOUNTING PRONOUNCEMENTS
The FASB has issued SFAS No. 133, "Accounting for Derivative
Instruments and for Hedging Activities." The Statement requires
derivatives to be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement also requires that
changes in the derivatives' fair values be recognized currently in
earnings unless specific hedge accounting criteria are met. This
Statement is effective for fiscal years beginning after June 15, 1999
(prospectively) and is not expected to have a material effect on the
Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Comparison of Financial Condition at June 30, 1998 and December 31, 1997
Total assets decreased by $126.2 million, from $344.0 million at
December 31, 1997 to $217.8 million at June 30, 1998. Federal funds sold
decreased from $151.1 million at December 31, 1997, to $21.0 million at June 30,
1998, primarily due to funds returned in connection with the conversion.
Securities held to maturity declined $16.3 million due to various issues
maturing. These funds were reinvested in securities available for sale, which
increased $22.7 million.
The Bank continued to price its deposits less aggressively in an effort
to reduce its overall cost of funds. At June 30, 1998, deposits decreased to
$156.5 million from $320.6 million at December 31, 1997, a net decrease of
$164.1 million, primarily as a result of completion of the conversion process
and the refunding of excess subscriptions. The Bank's average cost of deposits
for the three and six months ended June 30, 1998 was 4.81% and 4.08%,
respectively, compared to 4.79% for the year ended December 31, 1997. Management
continually evaluates the investment alternatives available to the Bank's
customers and adjusts the pricing on its deposit products to more actively
manage its funding costs while remaining competitive in its market area.
6
<PAGE>
The Bank's loan portfolio increased by $200,000 and $1.4 million during
the three and six months ended June 30, 1998, respectively. Net loans totaled
$104.9 million and $103.5 million at June 30, 1998 and December 31, 1997,
respectively. The increase in the loan activity during the three and six months
ended June 30, 1998 was primarily due to the Bank's continued efforts to
increase its loan originations using funds currently held in investment
securities. For the three and six months ended June 30, 1998, the Bank's average
yield on loans was 7.83% and 7.85%, respectively, compared to 7.67% for the year
ended December 31, 1997.
At June 30, 1998, the Bank's investments classified as "held to
maturity" were carried at amortized cost of $35.3 million and had an estimated
fair market value of $35.6 million, and its securities classified as "available
for sale" had an estimated fair market value of $49.4 million, including Federal
Home Loan Mortgage Corporation stock with an estimated fair market value of $5.7
million.
The allowance for loan losses totaled $248,000 at June 30, 1998, an
increase of $11,000 from the allowance of $237,000 at December 31, 1997. The
ratio of the allowance for loan losses to loans was .24% and 0.23% at June 30,
1998 and December 31, 1997, respectively. Also at June 30, 1998, the Bank's
non-performing loans were $229,000, or .22% of total loans, compared to
$163,000, or .16% of total loans, at December 31, 1997, and the Bank's ratio of
allowance for loan losses to non-performing loans at June 30, 1998 and December
31, 1997 was 108.10% and 145.50%, 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 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. The Bank has had minimal losses on loans in prior
years.
Comparison of Operating Results for the Six Months Ended June 30, 1998 and 1997
Net Income. Net income for the six months ended June 30, 1998 was $1.8
million, compared to net income of $870,000 for the six months ended June 30,
1997. The increase in net earnings for the six months resulted primarily from
net earnings on subscription funds and earnings on equity capital received in
the conversion.
Net Interest Income. Net interest income for the six months ended June
30, 1998 was $3.6 million, compared to $2.2 million for the six months ended
June 30, 1997. The increase in net interest income for the six months ended June
30, 1998 was primarily due to net earnings on subscription funds and earnings on
equity capital received in the conversion. For the six months ended June 30,
1998, the Bank's average yield on total interest-earning assets was 6.14%,
compared to 6.71% for the six months ended June 30, 1997, and its average cost
of interest-bearing liabilities was 4.08% for the six months ended June 30,
1998, compared to 4.89% for the six months ended June 30, 1997. As a result, the
Bank's interest rate spread for the six months ended June 30, 1998 was 2.06%
compared to 1.82% for the six months ended June 30, 1997, and its net yield on
interest-earning assets was 2.79% for the six months ended June 30, 1998,
compared to 2.24% for the six months ended June 30, 1997.
Interest Income. Interest income increased by $1.3 million, from $6.6
million to $7.9 million, or by 19.13%, during the six months ended June 30, 1998
compared to the same period in 1997. This increase resulted from investment of
subscription funds and equity capital received in the conversion, as well as the
continued strategic shift from investment securities to higher-yielding loans.
The average balance of securities held to maturity declined $42.8 million, from
$84.4 million at June 30, 1997 to $41.6 million at June 30, 1998. Overall,
average total interest-earning assets increased $57.9 million, or 29.22%, from
June 30, 1997 to June 30, 1998. The ratio of average interest-earning assets to
average interest-bearing liabilities
7
<PAGE>
increased from 109.35% for the six months ended June 30, 1997 to 121.64% for the
six months ended June 30, 1998.
Interest Expense. Interest expense decreased $134,000, or 3.03%, to
$4.3 million for the six months ended June 30, 1998, compared to $4.4 million
for the same period in 1997. The decrease was attributable to the combined
effect of a lower cost of funds and a decline in interest-bearing liabilities.
The average cost of interest-bearing deposits declined from 4.89% at June 30,
1997 to 4.08% at June 30, 1998. Over the same period, the balance of deposits
decreased $25.3 million, from $179.6 million at June 30, 1997 to $154.3 million
at June 30, 1998, or 14.09%.
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 Bank determined that an additional
$10,100 provision for loan loss was required for the six months ended June 30,
1998, compared to an additional $10,000 provision for the six months ended June
30, 1997.
Non-Interest Expense. There was a $37,000 increase in total non-
interest expense in the six months ended June 30, 1998 compared to the same
period in 1997.
Income Taxes. The Bank's effective tax rate for the six months ended
June 30, 1998 was 34.4%, compared to 33.8% for the same period in 1997. The
increase in income tax expense of $481,000 in the six month period compared to
the same period in 1997 was primarily due to a significant increase in income.
Comparison of Operating Results for the Three Months Ended June 30, 1998 and
1997
Net Income. Net income for the three months ended June 30, 1998 was
$794,000, compared to net income of $511,000 for the three months ended June 30,
1997. The increase in net earnings for the three months resulted primarily from
lower cost of funds and earnings on equity capital received in the conversion.
Net Interest Income. Net interest income for the three months ended
June 30, 1998 was $1.7 million, compared to $1.2 million for the three months
ended June 30, 1997. The increase in net interest income for the three months
ended June 30, 1998 was primarily due to lower cost of funds and earnings on
equity capital received in the conversion. For the three months ended June 30,
1998, the Bank's average yield on total interest-earning assets was 6.69%,
compared to 6.82% for the three months ended June 30, 1997, and its average cost
of interest-bearing liabilities was 4.81% for the three months ended June 30,
1998, compared to 4.85% for the three months ended June 30, 1997. As a result,
the Bank's interest rate spread for the three months ended June 30, 1998 was
1.88%, compared to 1.97% for the three months ended June 30, 1997, and its net
yield on interest-earning assets was 3.19% for the three months ended June 30,
1998, compared to 2.40% for the three months ended June 30, 1997.
Interest Income. Interest income increased by $200,000, from $3.4
million to $3.6 million, or by 6.57%, during the three months ended June 30,
1998 compared to the same period in 1997. This increase resulted from investment
of equity capital received in the conversion, as well as the continued strategic
shift from investment securities to higher-yielding loans. The average balance
of securities held to maturity declined $42.1 million, from $78.6 million at
June 30, 1997 to $36.5 million at June 30, 1998. In addition, average time
deposits and other interest-earning cash deposits increased $14.2 million, from
$15.5 million at June 30, 1997 to $29.7 million at June 30, 1998. Overall,
average total interest-earning assets increased $16.9 million, or 8.60%, from
June 30, 1997 to June 30, 1998. The ratio of average interest-earning assets
8
<PAGE>
to average interest-bearing liabilities increased from 109.65% for the three
months ended June 30, 1997 to 137.25% for the three months ended June 30, 1998.
Interest Expense. Interest expense decreased $302,000, or 13.82%, to
$1.9 million for the three months ended June 30, 1998, compared to $2.2 million
for the same period in 1997. The decrease was primarily attributable to the
decline in average balances of deposits. The average cost of interest-bearing
deposits declined from 4.85% at June 30, 1997 to 4.81% at June 30, 1998. Over
the same period, the average balance of deposits decreased $23.9 million, from
$180.3 million at June 30, 1997 to $156.4 million at June 30, 1998, or 13.26%.
Provision for Loan Losses. The Bank determined that an additional
$5,000 provision for loan loss was required for the three months ended June 30,
1998, compared to an additional $10,000 provision for the three months ended
June 30, 1997.
Non-Interest Expense. There was a $75,000 increase in total
non-interest expense in the three months ended June 30, 1998 compared to the
same period in 1997.
Income Taxes. The Bank's effective tax rate for the three months ended
June 30, 1998 was 35.3%, compared to 34.0% for the same period in 1997. The
increase in income tax expense of $170,000 in the three month period compared to
the same period in 1997 was primarily due to a significant increase in income.
Liquidity and Capital Resources.
The Company has no business other than that of the Bank and investing
the net conversion proceeds retained by it. Management believes that the net
conversion proceeds retained by the Company (approximately $16.7 million at June
30, 1998), earnings on such proceeds and principal and interest payments on the
ESOP loan, together with 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, 1998,
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 3.0%, 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, 1998, the Bank exceeded all
regulatory capital requirements. The table below presents certain information
relating to the Bank's capital compliance at June 30, 1998 and December 31,
1997.
9
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<TABLE>
<CAPTION>
At June 30, 1998 At December 31, 1997
---------------- --------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Tangible Capital ................... $34,581 17.5% $16,613 4.9%
Core Capital ....................... 34,581 17.5 16,613 4.9
Risk-Based Capital ................. 34,828 47.2 16,850 16.5
</TABLE>
At June 30, 1998, the Bank had outstanding commitments to originate
loans totaling $1.84 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, 1998
totaled $65.8 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 six months ended June 30, 1998.
10
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 27, 1998, the Company held its Annual Meeting of Stockholders at
which the following matter was considered and voted on:
Proposal I - Election of Directors
Nominees For Withheld
- -------- --- --------
WD Kelley 2,748,106 33,374
Clifton H. Cochran 2,747,852 33,628
Walton G. Ezell 2,729,618 51,862
There were no abstentions or broker non-votes.
11
<PAGE>
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 13, 1998 /s/ Bruce Thomas
------------------------------------------
Bruce Thomas
President and Chief Executive Officer
Date: August 13, 1998 /s/ Peggy R. Noel
------------------------------------------
Peggy R. Noel
Executive Vice President, Chief Financial
Officer and Chief Operations Officer
12
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