HOPFED BANCORP INC - FORM 8-K - EX-99.1

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8-K - 8-K - HOPFED BANCORP INC	d639132d8k.htm

Exhibit 99.1

LOGO


FOR IMMEDIATE RELEASE	CONTACT:	John E. Peck
		President and CEO
		(270) 885-1171

HOPFED BANCORP, INC. REPORTS OPERATING

RESULTS FOR THE FOURTH QUARTER OF 2018

HOPKINSVILLE, KY (January 31, 2019) – HopFed Bancorp, Inc. (NASDAQ: HFBC) (the “Company”), the holding company for Heritage Bank USA, Inc. (the “Bank”), today reported operating results for the three and twelve month periods ended December 31, 2018. For the three month period ended December 31, 2018, net income was $1.6 million, or $0.26 per share, compared to $1.2 million, or $0.20 per share, for the three month period ended September 30, 2018, and a net loss of $178,000, or ($0.03) per share, for the three month period ended December 31, 2017. For the twelve month period ending December 31, 2018, net income was $5.7 million, or $0.91 per share, compared to $3.3 million, or $0.53 per share, for the twelve month period ended December 31, 2017.

Commenting on the results for the three month period ended December 31, 2018, John E. Peck, President and Chief Executive Officer, said, “Improvements in net income were driven by lower non-interest expenses. For the three month period ended December 31, 2018, non-interest expenses were $6.7 million compared to $7.5 million and $7.8 million for the three month periods ended September 30, 2018 and December 31, 2017, respectively.

The improvements in the Company’s results of operations for the twelve month period ended December 31, 2018 compared to the twelve month period ended December 31, 2017, were the result of higher levels of net interest income, slightly lower levels of non-interest expenses and a reduced federal income tax rate. Operating results for the three and twelve month periods ended December 31, 2017, were negatively affected by passage of The Tax Cut and Jobs Act of 2017 signed into law in December 2017 that provided for significant reductions in the Company’s federal income tax rate. In December of 2017, the reduction in corporate tax rates required the Company to reduce our deferred tax assets by $980,000 through an increase in our federal income tax expense. For the three and twelve month periods ended December 31, 2017, the increase in the Company’s federal income tax expense reduced net income by approximately $0.15 per share.”

Financial Highlights

•

On January 7, 2019, the Company issued a joint press release with First Financial Corporation (“THFF”) announcing the execution of a definitive merger agreement under which the Company will merge with and into THFF. The Company filed an 8-K/A with the Securities and Exchange Commission (“SEC”) on January 9, 2019, providing greater details on the terms of the merger. A copy of the joint press release is available on the Company’s website at www.bankwithheritage.com and the SEC’s website www.sec.gov.

•

At December 31, 2018, net loans totaled $658.8 million, representing an increase of $21.7 million compared to December 31, 2017. At December 31, 2018, total loans originated and outstanding in Company’s three loan production offices were $95.5 million compared to $72.1 million at December 31, 2017.

•

At December 31, 2018, non-accrual loans were $1.4 million compared to $1.3 million at December 31, 2017. At December 31, 2018, loans classified as substandard were $14.3 million compared to $10.8 million at December 31, 2017.

•

The Company’s net interest margin for the three month period ended December 31, 2018, was 3.35% compared to 3.41% for each of the three month periods ended September 30, 2018 and December 31, 2017, respectively. The Company’s net interest margin for the twelve month periods ended December 31, 2018 and December 31, 2017 were 3.41% and 3.38%, respectively.

-MORE-

HFBC Reports Fourth Quarter Results

Page 2

January 31, 2019

Results of Operations

In the three month periods ended December 31, 2018, September 30, 2018 and December 31, 2017, interest income was $9.5 million, $9.3 million and $8.5 million, respectively. The improvements in interest income are the result of a $27.7 million increase in the average balance of loans for the three month period ended December 31, 2018, compared to the three month period ended December 31, 2017. Link quarter improvements in interest income are the result of a 25 basis point increase in the New York Prime Rate. Improvements in interest income were more than offset by higher funding cost due to an increase in short term interest rates. The Company’s interest expense increased by $930,000 for the three month period ended December 31, 2018, compared to the three month period ended December 31, 2017, and by $265,000 on a linked quarter basis. For the three month periods ended December 31, 2018, September 30, 2018 and December 31, 2017, net interest income was $7.0 million, $7.1 million and $7.0 million, respectively.

For the three month period ended December 31, 2018, non-interest income was $1.8 million, representing declines of $77,000 and $52,000 compared to the three month periods ended September 30, 2018 and December 31, 2017, respectively. For the three month period ended December 31, 2018, the decline in non-interest income over comparable periods is largely the result of lower mortgage origination income, which declined by $50,000 on a linked quarter basis and $86,000 compared to the three month period ended December 31, 2017.

For the three month period ended December 31, 2018, total non-interest expenses were $6.7 million, a decline of $788,000 and $1.1 million compared to the three month periods ended September 30, 2018 and December 31, 2017, respectively. For the three and twelve month periods ended December 31, 2018, professional services expense declined by $232,000 on a linked quarter basis and $838,000 compared to three month period ended December 31, 2017. In the twelve month period ended December 31, 2018, professional services expenses declined by $605,000 compared to the twelve month period ended December 31, 2017. The decline in professional services is largely the result of a shareholder lawsuit and shareholder demand letters. All activist shareholder issues were resolved in 2018, thereby reducing our legal expenses. On a linked quarter basis, salary and benefit expense are lower due to seasonal factors and reduced levels of incentive bonuses paid for loan production and growth.

For the twelve month period ended December 31, 2018, interest income was $36.7 million, representing an increase of $2.9 million compared to the twelve month period ended December 31, 2017. The improved level of interest income was largely the result of a $35.8 million increase in the average balance of loans and an increase in the Prime Rate. However, a $2.2 million increase in interest expense limited the overall benefits of higher net interest income levels. For the twelve month period ended December 31, 2018, net interest income was $28.6 million, an increase of $765,000 compared to December 31, 2017.

Total non-interest income declined by $213,000 in the twelve month period ended December 31, 2018, compared to the twelve month period ended December 31, 2017. For the twelve month period ended December 31, 2018, income from bank owned life insurance was $179,000 lower compared to the twelve month period ended December 31, 2017, due to the payment of a death benefit in March 2017. For the twelve month period ended December 31, 2018, other operating income was $632,000, a reduction of $443,000 compared to the twelve month period ended December 31, 2017. A significant portion of this variance is the result of a one-time payment of $225,000 in 2017. For the twelve month period ended December 31, 2018, gains on the sale of securities increased by $384,000 compared to the twelve month period ended December 31, 2017, largely as a result of an issuer calling a trust preferred security in June of 2018 in which the Company previously recognized a $400,000 impairment charge.

This information is preliminary and based on company data available at the time of the presentation.

-MORE-

HFBC Reports Fourth Quarter Results

Page 3

January 31, 2019

Results of Operations (continued)

For the twelve month period ended December 31, 2018, total non-interest expenses were $29.4 million, a decline of $546,000 compared to the twelve month period ended December 31, 2017. For the twelve month period ended December 31, 2018, professional services expense were $1.7 million compared to $2.3 million for the twelve month period ended December 31, 2017. For the twelve month period ended December 31, 2018, data processing expenses were $3.2 million compared to $2.9 million for the twelve month period ended December 31, 2017.

Balance Sheet

At December 31, 2018, total assets were $931.4 million, compared to $917.5 million at December 31, 2017. For the twelve month period ended December 31, 2018, the Company reduced its securities portfolio by $14.0 million to fund loan growth of $21.4 million. The competition for deposits remains aggressive and expensive, resulting in higher interest expense on deposits and a $14.2 million decline in total deposits. Lower deposit balances were offset by a $14.7 million increase in retail repurchase agreements as larger retail customers sought higher rates and alternatives to FDIC insurance coverage limits. A summary of loans outstanding by type at December 31, 2018 and December 31, 2017 is as follows:


	December 31, 2018			December 31, 2017
	(Dollars in Thousands)
One-to-four family first mortgages	$	175,638		$	163,565
Home equity lines of credit		32,781			35,697
Second mortgages (closed end)		1,037			1,184
Multi-family		26,067			37,445
Construction		38,700			30,246
Land		12,175			14,873
Non-residential real estate		242,390			224,952
Farmland		34,041			36,851
Consumer loans		8,442			8,620
Commercial loans		92,466			88,938

Total loans, gross		663,737			642,371

Unearned income, net of fees		(419	)		(443	)

Less allowance for loan losses		(4,536	)		(4,826	)

Total loans		658,782			637,102

This information is preliminary and based on company data available at the time of the presentation.

-MORE-

HFBC Reports Fourth Quarter Results

Page 4

January 31, 2019

Asset Quality

The table below provides a history of the Company’s significant credit quality metrics for the dates listed below:


	12/31/2018			9/30/2018			6/30/2018			3/31/2018			12/31/2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
	(Dollars in Thousands, Except Percentages)
Loans past due 30-89 days		809			1,780			1,605			432			393
Loans past due 90 + days accruing interest		—			—			—			—			88
Total non-accrual loans		1,430			1,841			1,602			2,004			1,285
Total loans classified as substandard		14,323			11,005			11,491			14,082			10,780
Total performing TDR loans		3,530			3,518			3,162			3,255			3,163
Total foreclosed assets		3,598			3,533			3,427			3,329			3,369
Quarterly net charge offs		102			158			78			240			(336	)

Non-accrual loans / Total loans		0.22	%		0.28	%		0.24	%		0.30	%		0.20	%
Non-performing assets / Total assets		0.54	%		0.59	%		0.55	%		0.58	%		0.51	%
Allowance / Total loans		0.68	%		0.68	%		0.69	%		0.70	%		0.75	%
Allowance / Non-accrual loans		317.25	%		247.48	%		289.48	%		232.24	%		375.74	%
Substandard loans / Risk based capital		13.63	%		10.68	%		11.24	%		13.94	%		10.49	%
Quarterly net charge off ratio (annualized)		0.06	%		0.09	%		0.05	%		0.15	%		-0.21	%
Risk Based Capital		105,055			103,085			102,211			100,997			102,739
FTE Employees		220			225			226			227			229

The Company

HopFed Bancorp, Inc. is the holding company for Heritage Bank USA, Inc. (“Heritage Bank”), a Kentucky state chartered commercial bank. Heritage Bank has eighteen offices in western Kentucky and middle Tennessee and loan production offices in the Tennessee communities of Nashville, Murfreesboro and Brentwood. The Company offers a broad line of financial services and products with the personalized focus of a community banking organization. More information about HopFed Bancorp and Heritage Bank is located on its website www.bankwithheritage.com.

Forward-Looking Information

Information contained in this press release, other than historical information, may be considered forward-looking in nature and is subject to various risks, 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. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations. Certain tabular presentations may not reconcile because of rounding.

This information is preliminary and based on company data available at the time of the presentation.

-MORE-

HFBC Reports Fourth Quarter Results

Page 5

January 31, 2019

HOPFED BANCORP, INC.

Consolidated Condensed Balance Sheets

(Dollars in Thousands)

(Unaudited)


Bank owned life insurance		10,672	10,587		10,511	10,439	10,368
Premises and equipment, net		21,759	22,072		22,365	22,619	22,700
Deferred tax assets		1,825	2,399		2,320	2,127	1,764
Other assets		2,730	2,816		4,641	2,748	2,784

Total assets	$	931,399	904,875		912,662	913,965	917,510

Liabilities:

Deposits:
Non-interest-bearing accounts	$	129,476	134,297	$	136,004	139,093	136,197
Interest-bearing accounts
NOW accounts		196,972	185,380		198,691	219,483	208,496
Savings and money market accounts		97,232	97,347		99,552	101,153	104,347
Other time deposits		316,157	309,890		300,941	287,077	304,969

Total deposits		739,837	726,914		735,188	746,806	754,009

Advances from Federal Home Loan Bank		33,000	33,000		38,000	25,000	23,000
Repurchase agreements		53,011	42,043		39,648	41,792	38,353
Subordinated debentures		10,310	10,310		10,310	10,310	10,310
Accrued expenses and other liabilities		4,455	5,170		4,347	3,304	4,426

Total liabilities		840,613	817,437		827,493	827,212	830,098

This information is preliminary and based on company data available at the time of the presentation.

-MORE-

HFBC Reports Fourth Quarter Results

Page 6

January 31, 2019

HOPFED BANCORP, INC.

Consolidated Condensed Balance Sheets, Continued

(Dollars in Thousands, Except Percentages, Share and Per Share Data)

(Unaudited)


	12/31/2018			9/30/2018			6/30/2018			3/31/2018			12/31/2017
Stockholders’ equity:
Common stock, par value $.01		80			80			80			80			80
Additional paid-in-capital		59,105			59,035			58,948			58,875			58,825
Retained earnings		55,134			53,979			53,179			51,957			51,162
Treasury stock- common , at cost		(16,706	)		(16,706	)		(16,706	)		(16,684	)		(16,655	)
Unearned ESOP Shares, at cost		(5,268	)		(5,457	)		(5,606	)		(5,759	)		(5,901	)
Accumulated other comprehensive income, net of taxes		(1,559	)		(3,493	)		(2,726	)		(1,716	)		(99	)

Total stockholders’ equity		90,786			87,438			87,169			86,753			87,412

Total liabilities and stockholders’ equity		931,399			904,875			914,662			913,965			917,510

Additional Capital Information
	12/31/2018			9/30/2018			6/30/2018			3/31/2018			12/31/2017
Preferred stock authorized		500,000			500,000			500,000			500,000			500,000
Common shares authorized		15,000,000			15,000,000			15,000,000			15,000,000			15,000,000
Common shares issued		7,990,867			7,991,170			7,989,655			7,988,983			7,976,131
Common shares outstanding		6,648,887			6,649,190			6,647,675			6,648,589			6,637,771
Treasury shares		1,341,980			1,341,980			1,341,980			1,340,394			1,338,360
Unearned ESOP shares		382,691			400,768			412,091			423,679			434,548
Book value per share (excludes unearned ESOP shares)	$	14.49		$	13.99		$	14.01		$	13.97		$	14.09

Tier 1 leverage ratio		11.0	%		10.9	%		10.7	%		10.6	%		10.6	%
Total risk based capital ratio		16.2	%		15.9	%		15.6	%		15.5	%		16.0	%
Common equity tier 1 ratio		15.5	%		15.2	%		14.9	%		14.8	%		15.2	%

This information is preliminary and based on company data available at the time of the presentation.

-MORE-

HFBC Reports Fourth Quarter Results

Page 7

January 31, 2019

HOPFED BANCORP, INC.

Consolidated Condensed Quarterly Statement of Income

(Dollars in Thousands)

(Unaudited)


	For the three month periods ended											For the year ended December 31,
	12/31/2018		9/30/2018		6/30/2018		3/31/2018		12/31/2017			2018		2017
Interest and dividend income:

Loans receivable		8,210		8,164		7,858		7,477		7,208			31,709		28,167
Investment in securities, taxable		998		970		1,033		1,079		1,081			4,080		4,478
Nontaxable securities available for sale		187		189		208		213		218			797		1,014
Interest-earning deposits		79		21		16		29		34			145		96

Total interest and dividend income		9,474		9,344		9,115		8,798		8,541			36,731		33,755

Interest expense:
Deposits		1,946		1,694		1,392		1,244		1,240			6,276		4,810
Advances from Federal Home Loan Bank		187		210		134		92		97			623		248
Repurchase agreements		223		188		171		154		117			736		469
Subordinated debentures		140		139		138		122		112			539		436

Total interest expense		2,496		2,231		1,835		1,612		1,566			8,174		5,963

Net interest income		6,978		7,113		7,280		7,186		6,975			28,557		27,792
Provision for loan losses		84		74		62		68		56			288		477

Net interest income after provision for loan losses		6,894		7,039		7,218		7,118		6,919			28,269		27,315

Non-interest income:
Service charges		749		756		727		706		801			2,938		3,224
Merchant card income		325		316		330		308		306			1,279		1,222
Mortgage orgination revenue		288		338		489		319		374			1,434		1,321
Gain (loss) on sale of securities		40		5		481		27		(9	)		553		169
Income from bank owned life insurance		85		75		73		71		81			304		483
Financial services commission		178		184		177		138		117			677		536
Other operating income		151		219		87		175		198			632		1,075

Total non-interest income		1,816		1,893		2,364		1,744		1,868			7,817		8,030

This information is preliminary and based on company data available at the time of the presentation.

-MORE-

HFBC Reports Fourth Quarter Results

Page 8

January 31, 2019

HOPFED BANCORP, INC.

Consolidated Condensed Statements of Income, Continued

(Dollars in Thousands, Except Per Share Data)

(Unaudited)


	For the three month periods ended												For the year ended December 31,
	12/31/2018		9/30/2018		6/30/2018		3/31/2018			12/31/2017			2018		2017
Non-interest expenses:
Salaries and benefits		3,693		4,138		4,116		4,117			3,917			16,064		16,049
Occupancy		698		785		747		782			700			3,012		2,920
Data processing		812		807		765		784			779			3,168		2,884
State deposit tax		212		158		160		169			170			699		770
Professional services		257		489		499		466			1,095			1,711		2,316
Advertising		229		329		338		308			365			1,204		1,354
Foreclosure, net		37		20		21		(6	)		(80	)		72		9
Loss on sale of asset		—		1		9		—			(1	)		10		2
Other operating expenses		786		785		919		920			861			3,410		3,592

Total non-interest expense		6,724		7,512		7,574		7,540			7,806			29,350		29,896

Income before income tax expense		1,986		1,420		2,008		1,322			981			6,736		5,449
Income tax expense		368		180		323		196			1,159			1,067		2,148

Net income		1,618		1,240		1,685		1,126			(178	)		5,669		3,301

Net income per share
Basic	$	0.26	$	0.20	$	0.28	$	0.18		($	0.03	)	$	0.91	$	0.53

Diluted	$	0.26	$	0.20	$	0.28	$	0.18		($	0.03	)	$	0.91	$	0.53

Dividend per share	$	0.07	$	0.07	$	0.07	$	0.05		$	0.05		$	0.26	$	0.19

This information is preliminary and based on company data available at the time of the presentation.

-MORE-

HFBC Reports Fourth Quarter Results

Page 9

January 31, 2019

HOPFED BANCORP, INC.

Selected Financial Data

(Dollars in Thousands, Except Percentages)

(Unaudited)


	Three month periods ended										For the year ended
	12/31/2018		9/30/2018		6/30/2018		3/31/2018		12/31/2017		12/31/2018		12/31/2017
Average Balance Sheet Data
Loans, net of allowance	$	659,174		670,314		666,301		647,204		631,463		662,541		626,735
Available for sale taxable securities		144,506		146,225		153,723		160,582		164,667		151,201		173,062
Available for sale tax free securities		24,195		24,533		25,670		26,856		27,361		25,301		30,787
Interest bearing deposits held in banks		14,062		3,825		3,735		6,030		8,418		6,513		6,976
Average earning assets		841,937		844,897		849,429		840,672		831,909		845,556		837,560
Average non-earning assets		67,813		63,618		63,565		69,290		74,856		64,231		69,004
Average assets		909,750		908,515		912,994		909,962		906,765		909,787		906,564
Average interest bearing deposits		605,121		596,666		608,312		612,019		611,371		605,485		619,372
Repurchase agreements		41,333		38,611		38,604		39,072		34,677		39,409		38,388
FHLB borrowings		33,000		37,989		32,011		23,656		25,174		31,707		19,226
Subordinated debentures		10,310		10,310		10,310		10,310		10,310		10,310		10,310
Total average interest bearing liabilities		689,764		683,576		689,237		685,057		681,532		555,781		687,296
Average non-interest bearing deposits		126,487		131,615		133,075		133,412		132,624		131,130		128,397
Average other non-interest bearing liabilities		5,399		5,572		4,099		3,887		3,365		4,740		3,435
Average total equity		88,100		87,752		86,583		87,336		89,244		87,006		87,436


	Three month periods ended															For the year ended
	12/31/2018			9/30/2018			6/30/2018			3/31/2018			12/31/2017			12/31/2018			12/31/2018
Tax equivalent yield / Cost of:
Loans, fully tax equivalent		5.00	%		4.89	%		4.72	%		4.62	%		4.58	%		4.80	%		4.50	%
Available for sale taxable securities		2.76	%		0.27	%		2.69	%		2.69	%		2.63	%		2.70	%		2.59	%
Available for sale tax free securities, fully tax equivalent		3.84	%		3.86	%		4.04	%		3.96	%		4.76	%		3.93	%		4.93	%
Average yield of interest bearing deposits		2.25	%		1.88	%		1.71	%		1.92	%		1.62	%		2.23	%		1.38	%
Yield on total interest earning assets		4.52	%		4.46	%		4.32	%		4.21	%		4.17	%		4.37	%		4.10	%
Cost of total average deposits		1.06	%		0.93	%		0.89	%		0.67	%		0.67	%		0.85	%		0.64	%
Cost of average total interest bearing liabilities		1.45	%		1.30	%		1.06	%		0.94	%		0.92	%		1.19	%		0.87	%
Fully tax equivalent interest rate spread		3.09	%		3.16	%		3.25	%		3.30	%		3.25	%		3.19	%		3.23	%
Fully tax equivalent net interest margin		3.35	%		3.41	%		3.45	%		3.45	%		3.41	%		3.41	%		3.38	%
Net income		1,618			1,240			1,685			1,126			(178	)		5,669			3,301
ROA		0.71	%		0.55	%		0.74	%		0.49	%		0.10	%		0.62	%		0.36	%
Annualized return on equity		7.35	%		6.23	%		7.78	%		5.16	%		1.01	%		6.52	%		3.78	%
Efficiency ratio		75.76	%		88.26	%		78.12	%		83.89	%		87.05	%		80.07	%		82.18	%

This information is preliminary and based on company data available at the time of the presentation.

-END-

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