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, 2000
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 March 31, 2000, 3,993,592 shares of Common Stock were issued and
outstanding.
<PAGE>
CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of March 31, 2000
and December 31, 1999....................................... 2
Consolidated Statements of Income for the Three-Month
Periods Ended March 31, 2000 and March 31, 1999............. 3
Consolidated Statements of Comprehensive Income for
the Three-Month Periods Ended March 31, 2000 and 1999....... 4
Consolidated Statements of Cash Flows for the Three-Month
Periods Ended March 31, 2000 and March 31, 1999............. 5
Notes to Unaudited Condensed Financial Statements.................... 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.................................................10
SIGNATURES....................................................................11
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOPFED BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
------------------- ------------------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash and due from banks................................. $ 2,458 $ 4,537
Interest-bearing deposits in Federal Home
Loan Bank ("FHLB")................................... 13 251
Federal funds sold...................................... 600 4,100
Investment securities available for sale................ 92,566 71,423
Investment securities held to maturity (Estimated market
values of $9,597 and $10,078 at March 31, 2000
and December 31, 1999, respectively)................. 9,461 9,958
Loans receivable, net................................... 115,143 113,532
Accrued interest receivable............................. 1,865 1,095
Premises and equipment, net............................. 2,445 2,472
Deferred tax assets..................................... 1,418 515
Other assets............................................ 76 23
----------- ----------
Total assets................................... $ 226,045 $ 207,906
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits............................................. $ 163,126 $ 160,905
Advances from FHLB................................... 15,525 --
Federal income taxes................................. 979 369
Advance payments from borrowers for tax
and insurance...................................... 228 156
Other liabilities.................................... 1,306 2,130
----------- ----------
Total liabilities.............................. 181,164 163,560
----------- ----------
Stockholders' Equity:
Common stock......................................... 40 39
Additional paid in capital........................... 25,020 24,214
Retained earnings, substantially restricted.......... 21,279 20,991
Accumulated other comprehensive loss (1,458) (898)
----------- ----------
Total stockholders' equity..................... 44,881 44,346
----------- ----------
Total liabilities and stockholders' equity..... $ 226,045 $ 207,906
=========== ==========
</TABLE>
See accompanying Notes to Unaudited Condensed Financial Statements.
2
<PAGE>
HOPFED BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
----------------------------------------------
2000 1999
---- ----
(Dollars in thousands, except per share data)
Interest income:
<S> <C> <C>
Interest on loans.................................... $ 2,180 $ 2,093
Interest and dividends on investments................ 1,707 1,199
Time deposit interest income......................... 14 208
----------- -------------
Total interest income.............................. 3,901 3,500
Interest expense:
Interest on deposits................................. 1,893 1,773
Interest on advances................................. 185 --
----------- -------------
Total interest expense............................. 2,078 1,773
Net interest income..................................... 1,823 1,727
Provision for loan losses............................... 10 5
----------- -------------
Net interest income after provision for loan losses..... 1,813 1,722
----------- -------------
Noninterest income:
Loan and other service fees.......................... 115 101
Other, net........................................... 12 11
----------- -------------
Total noninterest income........................... 127 112
----------- -------------
Noninterest expenses:
Salaries and benefits................................ 566 624
Federal insurance premium............................ 10 23
Occupancy expense, net............................... 47 47
Data processing...................................... 42 37
Other operating expenses............................. 173 149
----------- -------------
Total noninterest expenses......................... 838 880
----------- -------------
Income before income taxes.............................. 1,102 954
Income tax expense...................................... 375 362
----------- -------------
Net income.............................................. $ 727 $ 592
=========== =============
Basic net income per share.............................. $ .18 $ .16
Diluted net income per share............................ $ .18 $ .16
Dividends per share..................................... $ .11 $ .075
=========== =============
Weighted average:
Common shares................................. 3,993,592 4,033,625
Less: Unallocated ESOP shares................ -- 293,267
----------- -------------
3,993,592 3,740,358
=========== =============
</TABLE>
See accompanying Notes to Unaudited Condensed Financial Statements.
3
<PAGE>
HOPFED BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended March 31
------------------------------------------
2000 1999
---- ----
(In thousands)
<S> <C> <C>
Net income $ 727 $ 592
Other comprehensive income
Unrealized holding losses arising during period
net of tax effect of $288 and $316 for the
three months ended March 31, 2000
and 1999, respectively (559) (614)
Less: reclassification adjustment for gains included
in net income 0 0
----------- ----------
Comprehensive income (loss) $ 168 $ (22)
=========== ==========
</TABLE>
See accompanying Notes to Unaudited Condensed Financial Statements.
4
<PAGE>
HOPFED BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
2000 1999
---- ----
(In thousands)
Cash flows from operating activities:
<S> <C> <C>
Net income ............................................ $ 727 $ 592
Adjustments to reconcile net income to net cash
Provided by operating activities:
Deferred income taxes ............................... (14) 11
Provision for loan losses ........................... 10 5
Depreciation ........................................ 28 28
FHLB stock dividend ................................. (35) (32)
Accretion of investment security discounts .......... (4) (12)
Amortization of investment security premiums ........ 10 7
Earned ESOP shares .................................. -- 25
Decrease (increase) in:
Accrued interest receivable ......................... (770) 108
Other assets ........................................ (53) 114
Increase (decrease) in:
Current income taxes payable ........................ 8 196
Accrued expenses and other liabilities .............. (150) 69
-------- --------
Net cash provided (used) by operating activities .... (243) 1,111
-------- --------
Cash flows from investing activities:
Net decrease in interest earning deposits in FHLB ..... 238 214
Net (increase) decrease in federal funds sold ......... 3,500 (14,450)
Proceeds from maturities of held-to-maturity securities 499 15,201
Proceeds from sale of available-for-sale
Securities .......................................... 2,086 3,292
Purchases of available for sale securities ............ (24,049) (5,266)
Net increase in loans ................................. (1,620) (811)
Purchases of premises/equipment ....................... (2) (4)
-------- --------
Net cash used by investing activities ............... (19,348) (1,824)
-------- --------
Cash flows from financing activities:
Net increase in demand deposits ....................... 962 1,850
Net increase (decrease) in time deposits .............. 1,260 (1,153)
Advances from FHLB .................................... 15,525 --
Increase in advance payments by
borrowers for taxes and insurance ................... 72 65
Net dividends paid .................................... (307) (278)
Payment on loan to ESOP ............................... -- 22
-------- --------
Net cash provided by financing activities ........... 17,512 506
-------- --------
Decrease in cash and cash equivalents .................... (2,079) (207)
Cash and cash equivalents, beginning of period ........... 4,537 1,905
-------- --------
Cash and cash equivalents, end of period ................. 2,458 $ 1,698
======== ========
Supplemental disclosure of cash flow information
Cash paid for income taxes ............................ $ 381 $ --
-------- --------
Cash paid for interest ................................ $ 2,087 $ 1,770
======== ========
</TABLE>
See accompanying Notes to Unaudited Condensed Financial Statements.
5
<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,
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, 2000, are not
necessarily indicative of results that may be expected for the entire
fiscal year ending December 31, 2000.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2000 AND DECEMBER 31, 1999
Total assets increased by $18.1 million, from $207.9 million at December
31, 1999 to $226.0 million at March 31, 2000. Investment securities available
for sale increased from $71.4 million at December 31, 1999 to $92.6 million at
March 31, 2000. Federal funds sold decreased from $4.1 million at December 31,
1999, to $600,000 at March 31, 2000.
At March 31, 2000, investments classified as "held to maturity" were
carried at amortized cost of $9.5 million and had an estimated fair market value
of $9.6 million, and securities classified as "available for sale" had an
estimated fair market value of $92.6 million.
The loan portfolio increased $1.6 million during the three months ended
March 31, 2000. Net loans totaled $115.1 million and $113.5 million at March 31,
2000 and December 31, 1999, respectively. For the three months ended March 31,
2000, the average yield on loans was 7.67%, compared to 7.57% for the year ended
December 31, 1999.
The allowance for loan losses totaled $288,000 at March 31, 2000, an
increase of $10,000 from the allowance of $278,000 December 31, 1999. The ratio
of the allowance for loan losses to loans was .25% and .24% at March 31, 2000
and December 31, 1999, respectively. Also at March 31, 2000, non-performing
loans were $52,000, or .05% of total loans, compared to $58,000, or .05% of
total loans, at December 31, 1999, and the ratio of allowance for loan losses to
non-performing loans at March 31, 2000 and December 31, 1999 was 553.8% and
479.3%, 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.
Minimal losses on loans have been incurred in prior years.
In 1999, the Company determined to retain its deposit base through an
increase in overall deposit rates. At March 31, 2000, deposits increased to
$163.1 million from $160.9 million at December 31, 1999, a net increase of $2.2
million. The average cost of deposits during the period ended March 31, 2000 and
the year ended December 31, 1999 was 4.76% and 4.62%, 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, 2000 AND
1999
NET INCOME. Net income for the three months ended March 31, 2000 was
$727,000, compared to net income of $592,000 for the three months ended March
31, 1999. As discussed
7
<PAGE>
below, the increase in net earnings for the three months primarily resulted from
a $401,000 increase in total interest income.
NET INTEREST INCOME. Net interest income for the three months ended March
31, 2000 was $1.8 million, compared to $1.7 million for the three months ended
March 31, 1999. The increase in net interest income for the three months ended
March 31, 2000 was primarily due to increases of $87,000 and $508,000 in
interest on loans and interest and dividends on investments, respectively. For
the three months ended March 31, 2000, the Bank's average yield on average
interest-earning assets was 7.33%, compared to 6.52% for the three months ended
March 31, 1999, and its average cost of interest-bearing liabilities was 4.84%
for the three months ended March 31, 2000, compared to 4.65% for the three
months ended March 31, 1999. As a result, the Bank's interest rate spread for
the three months ended March 31, 2000 was 2.49%, compared to 1.87% for the three
months ended March 31, 1999, and its net yield on interest-earning assets was
3.43% for the three months ended March 31, 2000, compared to 3.22% for the three
months ended March 31, 1999.
INTEREST INCOME. Interest income increased by $401,000, from $3.5 million
to $3.9 million, or by 11.5%, during the three months ended March 31, 2000
compared to the same period in 1999. This increase primarily resulted from
restructuring of the investment portfolio which produced an increase of $508,000
in interest and dividends on investments. The average balance of securities
available for sale increased $19.6 million from $68.7 million at March 31, 1999
to $88.3 million at March 31, 2000 while the average balance of securities held
to maturity decreased $10.1 million, from $19.8 million at March 31, 1999 to
$9.7 million at March 31, 2000. In addition, average time deposits and other
interest-earning cash deposits decreased $15.9 million, from $17.0 million at
March 31, 1999 to $1.1 million at March 31, 2000. Overall, average total
interest-earning assets decreased $1.9 million, or .87%, from March 31, 1999 to
March 31, 2000. The ratio of average interest-earning assets to average
interest-bearing liabilities decreased from 140.8% for the three months ended
March 31, 1999 to 123.9% for the three months ended March 31, 2000.
INTEREST EXPENSE. Interest expense increased $305,000, or 17.2%, to $2.1
million for the three months ended March 31, 2000, compared to $1.8 million for
the same period in 1999. The increase was attributable to an increase of
$120,000 in interest on deposits and interest on FHLB advances of $185,000. In
January, 2000, the Bank borrowed approximately $16.0 million from the FHLB of
Cincinnati in order to fund increases in loans and investments. The average cost
of average interest-bearing deposits increased from 4.65% at March 31, 1999 to
4.84% at March 31, 2000. Over the same period, the average balance of deposits
increased $6.8 million, from $152.4 million at March 31, 1999 to $159.2 million
at March 31, 2000, or 4.43%.
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
$10,000 provision for loan loss was required for the three months ended March
31, 2000.
8
<PAGE>
NONINTEREST INCOME. There was a $15,000 increase in noninterest income in
the three months ended March 31, 2000 compared to the same period in 1999,
primarily due to a $14,000 increase in loan and other service fees.
NONINTEREST EXPENSES. There was a $42,000 decrease in total noninterest
expenses in the three months ended March 31, 2000 compared to the same period in
1999, primarily due to a $58,000 decrease in salaries and benefits.
INCOME TAXES. The effective tax rate for the three months ended March 31,
2000 was 34.0%, compared to 37.9% for the same period in 1999. The increase in
income tax expense of $13,000 in the three-month period compared to the same
period in 1999 was primarily due to an increase of $148,000 in income before
income taxes.
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, 2000, 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 March 31, 2000, the Bank exceeded all
regulatory capital requirements. The table below presents certain information
relating to the Bank's capital compliance at March 31, 2000.
At March 31, 2000
-----------------
Amount Percent
------ -------
(Dollars in thousands)
Tangible Capital . . . . . . . . . $45,729 20.11%
Core Capital . . . . . . . . . . . $45,729 20.11%
Risk-Based Capital . . . . . . . . $46,017 54.97%
9
<PAGE>
At March 31, 2000, the Bank had outstanding commitments to originate loans
totaling $1,004,000. 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, 2000 totaled
$74.6 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, 2000.
10
<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: May 15, 2000 /s/ Boyd M. Clark
------------------
Boyd M. Clark
Acting President
Date: May 15, 2000 /s/ Peggy R. Noel
------------------
Peggy R. Noel
Executive Vice President, Chief Financial
Officer and Chief Operations Officer
11
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 2,458
<INT-BEARING-DEPOSITS> 13
<FED-FUNDS-SOLD> 600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 92,566
<INVESTMENTS-CARRYING> 9,461
<INVESTMENTS-MARKET> 9,597
<LOANS> 115,143
<ALLOWANCE> 288
<TOTAL-ASSETS> 226,045
<DEPOSITS> 163,126
<SHORT-TERM> 15,525
<LIABILITIES-OTHER> 2,513
<LONG-TERM> 0
0
0
<COMMON> 40
<OTHER-SE> 44,841
<TOTAL-LIABILITIES-AND-EQUITY> 226,045
<INTEREST-LOAN> 2,180
<INTEREST-INVEST> 1,707
<INTEREST-OTHER> 14
<INTEREST-TOTAL> 3,901
<INTEREST-DEPOSIT> 1,893
<INTEREST-EXPENSE> 185
<INTEREST-INCOME-NET> 1,823
<LOAN-LOSSES> 10
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 838
<INCOME-PRETAX> 1,102
<INCOME-PRE-EXTRAORDINARY> 727
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 727
<EPS-BASIC> .182
<EPS-DILUTED> .182
<YIELD-ACTUAL> 3.43
<LOANS-NON> 52
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 278
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 288
<ALLOWANCE-DOMESTIC> 288
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
