HopFed Bancorp, Inc. Reports Third Quarter Results

HOPKINSVILLE, Ky., Oct. 31, 2012

Commenting on the third quarter results, John E. Peck, President and Chief Executive Officer, said, "The Company has reduced the amount of Federal Home Loan Bank borrowings by approximately $20.0 million during the quarter. The reduction in FHLB borrowings, which include prepayment fees of approximately $480,000, reduces our balances outstanding related to wholesale funding. The prepayment penalties were offset by gains on the sales of securities, many of which were experiencing increasing high levels of cash flow and lower net yields due to national mortgage refinancing activity. We remain focused on reducing our cost of funds with approximately $96.8 million in time deposits maturing in the fourth quarter of 2012 with a weighted average cost of approximately 2.00%."

Mr. Peck concluded, "The Company experienced an $11.8 million reduction in classified loans during the quarter due. In addition, we have contracts to sell $2.7 million in non-performing loans scheduled to close during the fourth quarter of 2012 at or near their current book value. The Company continues to market other non-performing assets in an attempt to further reduce our level of classified assets.  The Company continues to find success working with borrowers in an effort to address credit quality issues."

Financial Highlights

• The Company and Bank's capital ratios continue to strengthen. At September 30, 2012, the Company's tangible book value was $13.88 and our tangible common equity ratio is 10.65%. The Bank's tier 1 leverage and total risk based capital ratios at September 30, 2012, are 10.91% and 19.7240700%, respectively. The Company's tier 1 leverage and total risk based capital ratios are 12.33% and 22.34%, respectively.
• At September 30, 2012, the Company's and Bank's net classified asset to risk based capital ratios were 68.78% and 60.37%, respectively. At June 30, 2012, these ratios were 86.50% for the Bank and 76.1% for the Company.  
• At September 30, 2012, the Company's allowance for loan loss totaled $10.5 million, or 1.90% of total loans and 87.23% of non-accrual loans. In the nine month period ended September 30, 2012, the Company's net charge offs totaled $2.5 million, or an annualized rate of 0.61% of average loans.
• For the three month period ended September 30, 2012, the Company's net interest margin was 2.67%, as compared to 3.00% for the three month period ended September 30, 2011, and 2.87% for the three month period ended June 30, 2012. For the three month period ended September 30, 2012, the Company's net interest margin was reduced 0.21% by our decision to liquidate FHLB borrowings and incur $480,000 in prepayment penalties.  

Asset Quality

At September 30, 2012, the Company's level of non-accrual loans totaled $12.6 million, as compared to $6.1 million at December 31, 2011. At September 30, 2012, non-accrual loans total 2.20% of total loans.  The Company has contracted to sell certain non-accrual assets classified as substandard at their current book balance. The sale includes $2.0 million in commercial real estate and $760,000 of land development. We anticipate the sale closing in mid-November 2012. We continue to market one additional commercial real estate property, with a book value of $900,000, through a nationally recognized broker dealer.  All three loans are purchased participation loans outside of our current market area.

A summary of non-accrual loans at September 30, 2012, and December 31, 2011, is as follows: