HopFed Bancorp, Inc. Reports Fourth Quarter Results

HOPKINSVILLE, Ky., Jan. 25 /PRNewswire-FirstCall/ -- HopFed Bancorp, Inc. (Nasdaq: HFBC) (the "Company") today reported results for the three and twelve-month periods ended December 31, 2009.  For the three month period ended December 31, 2009, net income available for common shareholders was $1,953,000, or $0.55 per share (basic and diluted), compared to a net loss available to common shareholders of ($2,875,000), or ($0.80) per share (basic and diluted) for the three month period ended September 30, 2009, and net income available to common shareholders of $657,000, or $0.18 per share (basic and diluted) for the three month period ended December 31, 2008.  For the twelve month period ended December 31, 2009, net income available for common shareholders was $944,000, or $0.26 per share (basic and diluted) as compared to net income available to common shareholders of $4,559,000, or $1.28 per share basic and $1.27 per share diluted for the twelve month period ended December 31, 2008.

The results of operations for the three month period ended September 30, 2009, and the twelve month period ended December 31, 2009, were strongly influenced by a $5.0 million goodwill impairment charge that was disclosed in the Company's September 30, 2009, Quarterly Report on Form 10-Q.

Commenting on the fourth quarter results, John E. Peck, president and chief executive officer, said, "We believe the Company's performance in the fourth quarter was outstanding. The Company achieved above average earnings performance in spite of difficult economic headwinds and significant one–time events that had a negative impact on the quarter. The Company has made significant progress in lowering its cost of funds and increasing its net interest margin."

Highlights from the Fourth Quarter

• Heritage Bank, the Company's wholly owned subsidiary, remains well capitalized by regulatory standards with a Tier One Capital Ratio in excess of 8.00% and a Total Risk Based Capital Ratio of 13.2%.

• The Company's provision for loan loss expense was $884,000 and $4.2 million for the three and twelve- month periods ended December 31, 2009, respectively, as compared to $735,000 and $2.4 million for the three and twelve month periods ended December 31, 2008.

• During the quarter, the Company determined that two Private Label CMOs were Other than Temporarily Impaired due to high defaults rates occurring with their portfolios. As a result, the Company incurred a $200,000 charge to reduce the book value of these securities. This action reduced the Company's quarterly and annual net income by $132,000, or $0.04 per share (basic and diluted).

• The Company reduced interest income on loans by approximately $229,000, representing all interest earned but uncollected on loans in non-accrual status. This action reduced the Company's fourth quarter net income by approximately $151,000. The action reduced the Company's fourth quarter net interest margin by 10 basis points and its annual net interest margin by 3 basis points.

Asset Quality

At December 31, 2009, the Company's non-performing loans total $11.3 million, or 1.74% of total loans.  Nonperforming assets totaled $13.2 million, or 1.28% of total assets.  As a result of the problems related to these two credits, the Company incurred an additional $884,000 in provision for loan loss expense.  At December 31, 2009, the Company's allowance for loan loss balance was $8.9 million, or 1.36% to total loans and 78% of nonperforming loans. For the year ended December 31, 2009, the Company's net charge offs totaled $1.5 million, or 0.23% of average loans.

Net Interest Income

For the three and twelve month periods ended December 31, 2009, the Company's net interest income was $7.0 million and $26.8 million, respectively, compared to $5.7 million and $23.1 million, respectively, for the same periods in 2008.  The Company's net interest income for the three month period ended September 30, 2009, was $6.9 million.  The Company's level of net interest income was adversely affected by the elimination of all non-accrual loan interest.  As compared to the third quarter of 2009, interest expense on deposits declined by approximately $440,000 and total interest expense declined by approximately $500,000 despite a $3.95 million increase in the average balance of interest bearing liabilities. For the quarters ended March 31, 2009, June 30, 2009, September 30, 2009 and December 31, 2009, the Company's quarterly net interest margin was 2.89%, 2.93%, 3.02% and 3.07%, respectively. At December 31, 2009, the Company's reversal of all interest on non-accrual loans reduced that Company's quarterly net interest margin by 10 basis points and year to date net interest margin by 3 basis points.

Non-interest Income

Non-interest income for the three month period ended December 31, 2009 was $3.0 million as compared to $2.1 million for the three month period ended September 30, 2009 and $1.8 million for the three month period ended December 31, 2008.  The increase in net interest income was largely the result of $1.1 million in security gains taken during the fourth quarter of 2009. Bank owned life insurance income also experienced a significant one-time increase as management made adjustments to the Company's income accretion rates. Non-interest income was negatively influenced by the $200,000 other than temporary impairment charge on two Private Label CMOs.  Other non-interest income categories are largely unchanged as compared to prior periods.

Non-interest Expense

For the three month periods ended December 31, 2009 and September 30, 2009, non-interest expenses excluding goodwill impairment charges declined by $621,000. For the twelve month period ended December 31, 2009, noninterest expenses excluding goodwill impairment charges increased by $3.1 million, as compared to the twelve month period ended December 31, 2008.  The most significant increase in operating expenses was in deposit insurance and examination fees, which increased by $1.6 million. During the same period, salary and benefits increased by $784,000, data processing expenses increased by $335,000, and other operating expenses increased by $271,000.  At December 31, 2009, the Company prepaid $4.6 million in additional FDIC fees to be expensed over the next three years.

Balance Sheet  

Total assets were $1.03 billion at December 31, 2009, an increase of $62.0 million from December 31, 2008.  During the same period, the Company's deposits grew at an annualized rate of 11.4%, to $794.1 million, while gross loans grew at an annualized rate of 2.6% to $651.2 million.  The Company's total borrowings from the Federal Home Loan Bank of Cincinnati declined to $102.5 million at December 31, 2009, from $130.0 million at December 31, 2008.  

HopFed Bancorp, Inc. is the holding company for Heritage Bank headquartered in Hopkinsville, Kentucky.  The Bank has eighteen offices in western Kentucky and middle Tennessee as well as Fall & Fall Insurance of Fulton, Kentucky, Heritage Solutions of Murray, Kentucky, Hopkinsville, Kentucky, Kingston Springs, Tennessee and Pleasant View, Tennessee, and Heritage Mortgage Services of Clarksville, Tennessee.  The Bank offers a broad line of banking and financial products and services with the personalized focus of a community banking organization.  More information about HopFed Bancorp and Heritage Bank may be found on its website www.bankwithheritage.com.

Information contained in this press release, other than historical information, may be considered forwardlooking in nature and is subject to various risk, uncertainties, and assumptions.  Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected.  Among the key factors that may have a direct bearing on the Company's operating results, performance or financial condition are competition and the demand for the Company's products and services, and other factors as set forth in filings with the Securities and Exchange Commission.

Use of Non-GAAP financial measures

The above table presents computations and other financial information excluding the goodwill impairment charge (nonGAAP). The goodwill impairment charge is included in the financial results presented in accordance with generally accepted accounting principles (GAAP).  The Company believes that the exclusion of goodwill impairment in expressing net operating income (loss), operating expenses and earnings (loss) per share data provides a more meaningful basis for period to period comparisons which will assist investors in analyzing the operating performance and comparable periods in the prior years with the internally prepared projections.  Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited.

SOURCE HopFed Bancorp, Inc.