HopFed Bancorp, Inc. Reports Fourth Quarter Results

HOPKINSVILLE, Ky., Jan. 31, 2013

Commenting on the fourth quarter results, John E. Peck, President and Chief Executive Officer, said, "The Company has repurchased 100% of our Preferred Stock from the United States Treasury. The $18.4 million repurchase of Preferred Stock required the accelerated accretion of our warrant discount and a final dividend payment totaling $200,000 in December of 2012. The Warrant allowed the Treasury to purchase 253,667 shares of HopFed Common Stock at an exercise price of $10.88 and was scheduled to expire on December 12, 2018.  On January 16, 2013, the Company repurchased the Warrant issued to the Treasury for $256,257."

Mr. Peck continued, "We have been successful in reducing our cost of time deposits during the fourth quarter of 2012.  For the three month period ended December 31, 2012, the cost of retail time deposits was 1.74%, as compared to 1.92% for the three month period ended September 30, 2012. For the three month period ended December 31, 2012, the Company's cost of deposits was 1.20%, compared to 1.36% for the three month period ended September 30, 2012, and 1.46% for the three month period ended December 31, 2011. As discussed below, the Company's net interest margin improved substantially as compared to the three month period ended September 30, 2012."

Mr. Peck concluded, "The Company experienced a $9.2 million reduction in classified loans during the quarter and $23.7 million in the last two quarters. The Company's credit trends continue to improve and our non-performing asset ratio continues to decline. Reducing the level of adversely classified assets remains a priority for the Company."

Financial Highlights

• The Company and Bank's capital ratios remain strong after the repurchase of all Preferred Stock. At December 31, 2012, the Company's tangible book value was $13.88 per share and our tangible common equity ratio is 10.83%. The Bank's Tier 1 Leverage and Total Risk Based Capital Ratios at December 31, 2012, are 10.62% and 19.07%, respectively. The Company's Tier 1 Leverage and Total Risk Based Capital Ratios are 10.85% and 19.42%, respectively.
• At December 31, 2012, the Bank's and Company's net classified loans to risk based capital ratios were 60.74% and 59.36%, respectively.  At September 30, 2012, these ratios were 68.76% for the Bank and 60.42% for the Company. At June 30, 2012, these ratios were 86.50% for the Bank and 76.1% for the Company. These ratios are improved despite the $18.4 million repurchase of Preferred Stock.
• At December 31, 2012, the Company's allowance for loan loss totaled $10.6 million, or 1.99% of total loans and 138.99% of non-accrual loans. In the twelve month period ended December 31, 2012, the Company's net charge offs totaled $2.9 million, or an annualized rate of 0.52% of average loans.
• For the three month period ended December 31, 2012, the Company's net interest margin was 3.01%, as compared to 2.67% for the three month period ended September 30, 2012, and 3.13% for the three month period ended December 31, 2011.

Asset Quality

At December 31, 2012, the Company's level of non-accrual loans totaled $7.6 million, as compared to $6.1 million at December 31, 2011. At December 31, 2012, non-accrual loans total 1.43% of total loans.