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HopFed Bancorp 10-Q 2005

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
For the quarterly period ended March 31, 2005
Table of Contents

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, 2005

 

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

incorporation or organization)

 

(I.R.S. Employer

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  ¨

 

Indicate by check mark whether the registrant is an accelerated file ( as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

 

As of May 12, 2005, the Registrant had issued and outstanding 3,639,283 shares of the Registrant’s Common Stock.

 



Table of Contents

CONTENTS

 

HOPFED BANCORP, INC.

 

     PAGE

PART I. FINANCIAL INFORMATION

    

Item 1. Financial Statements

    

Consolidated Statements of Financial Condition as of March 31, 2005 (Unaudited) and December 31, 2004

   2

Consolidated Statements of Income (Unaudited) for the Three-Month Periods Ended March 31, 2005 and March 31, 2004

   4

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three-Month Periods Ended March 31, 2005 and March 31, 2004

   5

Consolidated Statements of Cash Flows (Unaudited) for the Three-Month Periods Ended March 31, 2005 and March 31, 2004

   6

Notes to Unaudited Condensed Financial Statements

   7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

   10

Item 3. Quantitative and Qualitative Disclosures About Market Risk

   14

Item 4. Controls and Procedures

   14

PART II OTHER INFORMATION

    

Item 1. Legal Proceedings

   15

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

   15

Item 3. Defaults Upon Senior Securities

   16

Item 4. Submission of Matters to a Vote of Security Holders

   16

Item 5. Other Information

   16

Item 6. Exhibits

   16

SIGNATURES

   17

 

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Table of Contents

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

HOPFED BANCORP, INC.

Consolidated Statements of Financial Condition

 

     March 31,
2005


   

December 31,

2004


 
     (Unaudited)        
     (Dollars in thousands)  
ASSETS                 

Cash and due from banks

   $ 19,133     $ 17,357  

Interest-earning deposits in Federal Home Loan Bank (“FHLB”)

     8       42  

Federal funds sold

     200       850  

Securities available for sale

     153,039       158,181  

Securities held to maturity, market value of $22,518 and $22,721 at March 31, 2005 and December 31, 2004, respectively

     22,732       22,768  

Loans receivable, net of allowance for loan losses of $3,423 at March 31, 2005, and $3,273 at December 31, 2004

     361,184       356,825  

Accrued interest receivable

     2,984       3,053  

Premises and equipment, net

     7,808       6,700  

Deferred tax assets

     1,358       702  

Intangible asset

     1,660       1,755  

Goodwill

     3,689       3,689  

Bank owned life insurance

     6,964       6,896  

Other assets

     1,372       913  
    


 


Total assets

   $ 582,131     $ 579,731  
    


 


LIABILITIES AND STOCKHOLDERS’ EQUITY                 

Liabilities:

                

Deposits:

                

Non-interest bearing accounts

   $ 35,198     $ 32,214  

Interest bearing accounts

                

NOW accounts

     87,787       87,075  

Savings and money market

     65,924       65,350  

Other time deposits

     249,330       251,556  
    


 


Total Deposits

     438,239       436,195  

Subordinated debentures

     10,310       10,310  

Advances from borrowers for taxes and insurance

     300       301  

Advances from FHLB

     81,366       81,319  

Dividends payable

     437       437  

Accrued expenses and other liabilities

     2,838       1,796  
    


 


Total liabilities

     533,490       530,358  
    


 


Stockholders’ equity:

                

Preferred stock, par value $0.01 per share; authorized – 500,000 shares; none issued or outstanding at March 31, 2005 and December 31, 2004.

     —         —    

Common stock par value $0.01 per share: authorized 7,500,000 shares; 4,048,192 issued and 3,639,283 outstanding at March 31, 2005 and December 31, 2004

     40       40  

Additional paid in capital

     25,863       25,863  

Retained earnings, substantially restricted

     29,701       29,145  

Treasury stock (at cost, 408,909 shares at March 31, 2005 and December 31, 2004)

     (4,857 )     (4,857 )

Unearned restricted stock

     (121 )     (131 )

Accumulated other comprehensive income (loss), net of taxes

     (1,985 )     (687 )
    


 


Total stockholders’ equity

     48,641       49,373  
    


 


Total liabilities and stockholders’ equity

   $ 582,131     $ 579,731  
    


 


 

2


Table of Contents

The balance sheet at December 31, 2004 has been derived from the audited financial statements of that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

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Table of Contents

HOPFED BANCORP, INC.

Consolidated Statements of Income

(Unaudited)

 

     For the Three Month Periods
Ended March 31,


     2005

   2004

     (Dollars in thousands, except per share data)

Interest income:

             

Loans receivable

   $ 5,000    $ 4,720

Interest on investments, tax exempt

     208      242

Interest and dividends on investments, taxable

     1,607      1,326

Time deposit interest income

     10      6
    

  

Total interest income

     6,825      6,294
    

  

Interest expense:

             

Deposits

     2,569      2,429

Subordinated debentures

     167      110

Advances from FHLB

     682      426
    

  

Total interest expense

     3,418      2,965
    

  

Net interest income

     3,407      3,329

Provision for loan losses

     300      300
    

  

Net interest income after provision for loan losses

     3,107      3,029
    

  

Non-interest income:

             

Gain on sale of loans

     11      32

Gain on sale of assets

     4      —  

Service charges

     530      381

Gain on the sale of available for sale securities

     —        171

Other, net

     423      208
    

  

Total non-interest income

     968      792
    

  

Non-interest expenses:

             

Salaries and benefits

     1,433      1,256

Intangible amortization

     95      95

Occupancy expense, net

     224      169

Data processing

     281      198

State deposit taxes

     108      116

Loss on sale of fixed assets

     —        7

Other operating expenses

     523      555
    

  

Total non-interest expenses

     2,664      2,396
    

  

Income before income taxes

     1,411      1,425

Income tax expense

     418      478
    

  

Net income

   $ 993    $ 947
    

  

Basic net income per share

   $ .27    $ .26
    

  

Diluted net income per share

   $ .27    $ .26
    

  

Dividends per share

   $ .12    $ .12
    

  

Weighted average shares outstanding, basic

     3,639,283      3,630,396
    

  

Weighted average shares outstanding, diluted

     3,667,361      3,661,397
    

  

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

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Table of Contents

HOPFED BANCORP, INC.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

     For the Three Month
Periods Ended March 31


 
     2005

    2004

 
     (In thousands)  

Net income

   $ 993     $ 947  

Other comprehensive income:

                

Realized gains on the sale of investment securities classified as available for sale, net of tax

     —         (113 )

Unrealized gain on derivatives, net of tax

     119       —    
    


 


Unrealized holding gains (losses) arising during period net of tax effect of $730 and ($518) for the three months ended March 31, 2005 and 2004, respectively

     (1,417 )     1,119  
    


 


Comprehensive income (loss)

   $ (305 )   $ 1,953  
    


 


 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

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Table of Contents

HOPFED BANCORP, INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

    

For the Three Month

Periods Ended March 31,


 
     2005

    2004

 
     (In thousands)  

Cash flows from operating activities:

                

Net cash provided by operating activities

     2,582       902  
    


 


Cash flows from investing activities Purchase of held to maturity securities

     —         (7,114 )

Proceeds from maturities of held to maturity securities

     108       5,192  

Proceeds from sale of available for sale securities

     2,769       15,423  

Purchase of available for sale securities

     —         (18,119 )

Net increase in loans receivable

     (4,821 )     (6,051 )

Purchases of premises and equipment

     (1,199 )     (106 )
    


 


Net cash used by investing activities

     (3,143 )     (10,775 )
    


 


Cash flows from financing activities:

                

Net increase in demand deposits

     4,270       7,571  

Net increase (decrease) in time deposits

     (2,226 )     (3,933 )

Increase (decrease) in advances from borrowers for taxes and insurance

     (1 )     142  

Repayment of advances from Federal Home Loan Bank

     (953 )     (23,717 )

Advances from Federal Home Loan Bank

     1,000       27,951  

Dividends paid

     (437 )     (435 )
    


 


Net cash provided by financing activities

     1,653       7,579  
    


 


Increase (decrease) in cash and cash equivalents

     1,092       (2,294 )

Cash and cash equivalents, beginning of period

     18,249       15,178  
    


 


Cash and cash equivalents, end of period

   $ 19,341     $ 12,884  
    


 


Supplemental disclosure of cash flow information

                

Cash paid for income taxes

   $ —       $ 500  
    


 


Cash paid for interest

   $ 1,581     $ 635  
    


 


 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

6


Table of Contents

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

 

(1) BASIS OF PRESENTATION

 

HopFed Bancorp, Inc. (the “Company”) was formed at the direction of Heritage Bank, formerly 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 accounting principles generally accepted (“GAAP”) in the United States of America 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 U.S. 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, 2005, are not necessarily indicative of results that may be expected for the entire fiscal year ending December 31, 2005.

 

(2) EARNINGS PER SHARE

 

The following schedule reconciles the numerators and denominators of the basic and diluted earnings per share (“EPS”) computations for the three-months ended March 31, 2005 and 2004. Diluted common shares arise from the potentially dilutive effect of the Company’s Stock Options outstanding.

 

     Quarters Ended March 31,

     2005

   2004

Basic EPS:

             

Net income

   $ 993,000    $ 947,000

Average common shares outstanding

     3,639,283      3,630,396
    

  

Earnings per share

   $ 0.27    $ 0.26
    

  

Diluted EPS:

             

Net income

   $ 993,000    $ 947,000

Average common shares outstanding

     3,639,283      3,630,396

Dilutive effect of stock options

     28,078      31,001
    

  

Average diluted shares outstanding

     3,667,361      3,661,397
    

  

Diluted earnings per share

   $ 0.27    $ 0.26
    

  

 

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Table of Contents
(3) STOCK OPTIONS

 

The Company accounts for its stock option plans in accordance with the provision of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock issued to Employees, and related interpretations, as permitted by SFAS 123, Accounting for Stock-Based Compensation. As such, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. SFAS 123 requires entities which continue to apply the provisions of APB Opinion No. 25 to provide pro-forma earnings per share disclosure for stock option grants made in 1995 and subsequent years as if the fair value based method defined in SFAS 123 had been applied. SFAS 148, Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB No. 123, provides that an entity that has transitioned to the accounting treatment prescribed by SFAS 123 may use the intrinsic value method in lieu of the fair value based method for determining the fair value of stock options at the date of grant. SFAS 148 requires disclosure in addition to SFAS 123 if APB Opinion No. 25 is currently being applied.

 

The Company applies Accounting Principles Board Opinion No. 25 (APB), Accounting for Stock Issued to Employees, and related interpretations in the accounting for the plan. No compensation cost has been recognized for the plan because the stock option prices are equal to or greater than the fair value at the grant date. The table below is a reconciliation of reported and pro forma net income and earnings per share had compensation cost for the plan been determined based on the fair value of SFAS 123, Accounting for Stock-Based Compensation, as amended:

 

     For the Quarter Ended
March 31,


 
     2005

    2004

 
     (In thousands)  

Net Income

                

As reported

   $ 993     $ 947  

Deduct: Total stock-based compensation expense determined under fair value based method for all awards granted, net of related tax effects

     (15 )     (21 )
    


 


Pro forma net income

   $ 978     $ 926  
    


 


 

8


Table of Contents
     For the Quarter Ended
March 31,


     2005

   2004

Earnings per share:

             

Basic – as reported

   $ 0.27    $ 0.26

Basic – pro forma

   $ 0.27    $ 0.26

Diluted – as reported

   $ 0.27    $ 0.26

Diluted – pro forma

   $ 0.27    $ 0.26

 

(4) INVESTMENT IN AFFILIATED COMPANIES

 

Investments in affiliated companies accounted for under the equity method consist of 100% of the common stock of Hopfed Capital Trust 1 (“Trust”), a wholly-owned statutory business trust. The Trust was formed on September 25, 2003. Summary financial information for the Trust follows (dollars in thousands):

 

Summary Balance Sheet

 

     At
March 31, 2005


   At
December 31, 2004


Asset - Investment in subordinated debentures issued by Hopfed Bancorp, Inc.

   $ 10,310    $ 10,310
    

  

Liabilities

     —        —  

Stockholder’s equity – Trust preferred securities

   $ 10,000    $ 10,000

Common Stock (100% Owned by Hopfed Bancorp, Inc.)

     310      310
    

  

Total Stockholder’s equity

   $ 10,310    $ 10,310
    

  

Summary Income Statement
     Three months ended March 31,

     2005

   2004

Income – Interest income from subordinated debentures issued by Hopfed Bancorp, Inc.

     150      110
    

  

Net Income

     150      110
    

  

 

Summary Statement of Stockholders’ Equity

 

     Trust
Preferred
Securities


   Common
Stock


   Retained
Earnings


    Total
Stockholders’
Equity


 

Beginning Balances, December 31, 2004

   $ 10,000    $ 310    —       $ 10,310  

Retained earnings:

                            

Net Income

     —        —      150       150  

Dividends

                            

Trust preferred securities

     —        —      (146 )     (146 )

Common paid to Hopfed Bancorp, Inc.

     —        —      (4 )     (4 )
    

  

  

 


Total Retained Earnings

     —        —      —         —    
    

  

  

 


Ending balances, March 31, 2005

   $ 10,000    $ 310    —       $ 10,310  
    

  

  

 


 

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Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Comparison of Financial Condition at March 31, 2005 and December 31, 2004

 

Total assets increased by $2.4 million, from $579.7 million at December 31, 2004 to $582.1 million at March 31, 2005. Securities available for sale decreased from $158.2 million at December 31, 2004 to $153.0 million at March 31, 2005. Federal funds sold decreased from $850,000 at December 31, 2004 to $200,000 at March 31, 2005.

 

At March 31, 2005, investments classified as “held to maturity” were carried at an amortized cost of $22.7 million and had an estimated fair market value of $22.5 million, and securities classified as “available for sale” had an estimated fair market value of $153.0 million.

 

The loan portfolio increased $4.4 million during the three months ended March 31, 2005. Net loans totaled $361.2 million and $356.8 million at March 31, 2005 and December 31, 2004, respectively. For the three months ended March 31, 2005, the average yield on loans was 5.61%, compared to 5.55% for the year ended December 31, 2004.

 

The allowance for loan losses totaled $3.4 million at March 31, 2005, an increase of $150,000 from an allowance of $3.3 million at December 31, 2004. The ratio of the allowance for loan losses to loans was 0.94% and 0.91% at March 31, 2005 and December 31, 2004, respectively. Also at March 31, 2005, non-performing loans were $533,000, or 0.15% of total loans, compared to $653,000, or 0.18% of total loans, at December 31, 2004. Non-performing assets, which include other real estate owned and other assets owned, were $698,000, or 0.12% of total assets at March 31, 2005, compared to $764,000, or 0.13% of assets, at December 31, 2004. The ratio of allowance for loan losses to non-performing loans at March 31, 2005 and December 31, 2004 was 642.4% and 501.2%, 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.

 

At March 31, 2005, deposits increased to $438.2 million from $436.2 million at December 31, 2004, a net increase of $2.0 million. The average cost of deposits during the period ended March 31, 2005, March 31, 2004, and the year ended December 31, 2004 was 2.35%, 2.46%, and 2.27%, 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.

 

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Table of Contents

Comparison of Operating Results for the Three Months Ended March 31, 2005 and 2004

 

Net Income. Net income for the three months ended March 31, 2005 was $ 993,000, compared to net income of $947,000 for the three months ended March 31, 2004.

 

Net Interest Income. Net interest income for the three months ended March 31, 2005 was $3.4 million, compared to $3.3 million for the three months ended March 31, 2004. The increase in net interest income for the three months ended March 31, 2005 was primarily due to an increase in both total loans outstanding and investments. For the three months ended March 31, 2005, the Company’s average tax equivalent yield on average interest-earning assets was 5.15%, compared to 5.12% for the three months ended March 31, 2004, and its average cost of interest-bearing liabilities was 2.75% for the three months ended March 31, 2005, compared to 2.59% for the three months ended March 31, 2004. As a result, the Company’s tax equivalent interest rate spread for the three months ended March 31, 2005 was 2.40%, compared to 2.53% for the three months ended March 31, 2004, and its net yield on interest-earning assets was 2.61% for the three months ended March 31, 2005, compared to 2.75% for the three months ended March 31, 2004.

 

Interest Income. Interest income increased by $531,000 from $6.3 million to $6.8 million, or by 8.4%, during the three months ended March 31, 2005 compared to the same period in 2004. This increase primarily resulted from growth in the loan and investment portfolios. The average balance of loans receivable increased $19.7 million from $337.1 million at March 31, 2004 to $356.8 million at March 31, 2005. The average balance of investment securities increased $20.1 million, from $159.2 million at March 31, 2004 to $179.3 million at March 31, 2005. Average time deposits and other interest-earning cash deposits decreased $ 1.8 million, from $3.2 million at March 31, 2004 to $ 1.4 million at March 31, 2005. The ratio of average interest-earning assets to average interest-bearing liabilities decreased from 109.18% for the three months ended March 31, 2004 to 108.1% for the three months ended March 31, 2005. The decline in the interest earning asset ratio is largely the result of increases in fixed assets due to the purchases of two parcels of land with the intent to construct new retail offices in both locations during 2005 and 2006.

 

Interest Expense. Interest expense increased $453,000 for the three months ended March 31, 2005 as compared to the same period in 2004. The increase was primarily attributable to a higher cost of deposits and borrowings due to increases in short term interest rates. The average cost of average interest-bearing deposits increased from 2.46% at March 31, 2004 to 2.53% at March 31, 2005. Over the same period, the average balance of deposits increased $15.5 million, from $421.0 million at March 31, 2004 to $436.5 million at March 31, 2005 and the average balance of funds borrowed from the Federal Home Loan Bank of Cincinnati (FHLB) increased $28.3 million, from $52.9 million at March 31, 2004 to $81.2 million at March 31, 2005. The average cost of average borrowed funds from the FHLB increased from 3.22% at March 31, 2004 to 3.36% at March 31, 2005. As a result of a sharp increase in the three-month libor, the Company’s interest expense associated with the $10.3 million subordinated debenture issuance increased to 6.48% for the three month period ended March 31, 2005 as compared to 4.27% for the same period in 2004. The interested interest expense associated with the subordinated debentures included approximately $21,000 in cost related to an interest rate swap entered into in October of 2004 to effectively fix the cost of this liability through September of 2008.

 

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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 Company determined that an additional $300,000 provision for loan loss was required for the three months ended March 31, 2005.

 

Non-Interest Income. There was a $176,000 increase in non-interest income in the three months ended March 31, 2005 as compared to the same period in 2004. For the three-month period ended March 31, 2005, service charge income was $530,000, an increase of $149,000 over the same period in 2004. The increase in service charge income is largely the result of a new overdraft protection product. Other income increased over $200,000 during the same period, largely the result of improved operating results from the Company’s insurance and investment subsidiaries. For the three months ended March 31, 2005, gains on the sale of loans were $11,000 as compared to $32,000 in the same period in 2004. For the three months ended March 31, 2005, the Company experienced no gains on the sale of investments as compared to a gain of $171,000 for the same period in 2004.

 

Non-Interest Expenses. There was a $268,000 increase in total non-interest expenses in the three months ended March 31, 2005 compared to the same period in 2004, primarily due to additional compensation and professional services expense. During 2005, the Company anticipates that non-interest expense will increase approximately $300,000 as a result of Management’s efforts to comply with Sarbanes-Oxley requirements. Both professional services and compensation expense will be affected by Sarbanes-Oxley.

 

Income Taxes. The effective tax rate for the three months ended March 31, 2005 was 29.6%, compared to 33.5% for the same period in 2004.

 

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 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, 2005, the Bank exceeded all regulatory capital requirements. The table below presents certain information relating to the Company’s and Bank’s capital compliance at March 31, 2005.

 

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     At March 31, 2005

 
     Company

    Bank

 
     Amount

   Percent

    Amount

   Percent

 
    

(Dollars in thousands)

 

Tangible Capital

   $ 55,584    9.60 %   $ 54,046    9.35 %

Core Capital

   $ 55,584    9.60 %   $ 54,046    9.35 %

Risk-Based Capital

   $ 58,858    17.25 %   $ 57,470    16.88 %

 

At March 31, 2005, the Bank had outstanding commitments to originate loans totaling $9.7 million. 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, 2005 totaled $101.8 million. Management believes that a significant percentage of such deposits will remain with the Bank. At March 31, 2005, the Bank had noncancelable purchase obligations and fixed asset purchases of approximately $6.0 million.

 

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.

 

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Effect of New Accounting Standards

 

In December 2004, the FASB issued SFAS No. 123(R), Accounting for Stock-Based Compensation (SFAS No. 123(R)). SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires that the fair value of such equity instruments be recognized as an expense in the historical financial statements as services are performed. Prior to SFAS No. 123(R), only certain pro forma disclosures of fair value were reported. The provisions of this Statement are effective for the first fiscal year reporting period beginning after June 15, 2005. Accordingly, the Company will adopt SFAS No. 123(R) commencing with the quarter ending March 31, 2006.

 

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’s income and the value of its assets are strongly influenced by changes in interest rates. The Company does not believe that material changes in Company’s interest rate risk profile have occurred during the three months ended March 31, 2005. In general, a moderate increase in interest rates will modestly improve the Company’s net interest margin due to the Company’s high concentration of variable rate mortgage loans. The Company’s interest expense on deposits would increase if market rates increase, as approximately 3.0% to 5.0% of total time deposits mature on a monthly basis and demand deposit accounts may re-price. However, the market value of the Company’s investment portfolio would decline and its average life and modifed duration extend if interest rates increase. A severe increase in rates, generally considered to be an increase of 2.0% or more in one year, would adversely affect both net income and the net present value of the Company’s assets.

 

Item 4. Controls and Procedures.

 

In accordance with Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), an evaluation was carried out with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-14(c) and 15 d-14(c) under the Exchange Act) as of the end of the quarter ended March 31, 2005. Based upon their evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the three months ended March 31, 2005 to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this quarterly report on Form 10-Q was being prepared.

 

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Any control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are achieved. The design of a control system inherently has limitations, including the controls cost relative to their benefits. Additionally, controls can be circumvented. No cost-effective control system can provide absolute assurance that all control issues and instances of fraud will be detected.

 

Effective in 2006, the Company will become subject to Section 404 of The Sarbanes-Oxley Act of 2002. Section 404 requires management to assess and report on the effectiveness of the Company’s internal controls over financial reporting. Additionally, it requires the Company’s independent registered public accounting firm to report on management’s assessment as well as report on its own assessment of the effectiveness of the Company’s internal controls over financial reporting. Management is currently establishing policies and procedures to assess and report on internal controls, and has retained an outside firm to assist it in determining the effectiveness of the Company’s internal controls over financial reporting.

 

There were not changes in the Company’s internal control over financial reporting during the Company’s fiscal quarter ended March 31, 2005 that have materially affected, or are reasaonable likely to materially affect, the Company’s internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None

 

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

 

  (a) None

 

  (b) None

 

  (c) The following table provides information about purchases by the Company during the quarter ended March 31, 2005 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.

 

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ISSUER PURCHASES OF EQUITY SECURITIES

 

Period


   Total number of
shares purchased


   Average Price
paid per share


   Total Number of
shares purchased
as part of
announced plans
or programs


   Maximum
number of
shares that
may yet be
purchased
under the plans
or programs


January 1, 2005 through January 31, 2005

   —      —      —      91,091

February 1, 2005 through February 29, 2005

   —      —      —      91,091

March 1, 2005 through March 31, 2005

   —      —      —      91,091
    
  
  
  

Total

   —      —      —       
    
  
  
    

 

On September 20, 2000, the Company announced that its Board of Directors had approved the repurchase of up to 200,000 shares of its common stock. The stock repurchase program was completed in February 2001. On March 26, 2001, the Company announced that its Board of Directors had approved the repurchase of an additional 300,000 shares. The purchases are being made from time to time on the Nasdaq Stock Market at prices prevailing on that market or in privately negotiated transactions at management’s discretion, depending on market conditions, price of the Company’s common stock, corporate cash requirements and other factors. As of March 31, 2005, a total of 208,909 shares of common stock had been repurchased under the current program. No shares were repurchased during the quarter ended March 31, 2005.

 

Item 3. Defaults Upon Senior Securities

 

None

 

Item 4. Submission of Matters to a Vote of Security Holders

 

None

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

  31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for John E. Peck, Chief Executive Officer.

 

  31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Billy C. Duvall, Chief Financial Officer.

 

  32.1 Certification Pursuant to Section 18 U.S.C. Section 1350 for John E. Peck, Chief Executive Officer.

 

  32.2 Certification Pursuant to Section 18 U.S.C. Section 1350 for Billy C. Duvall, Chief Financial Officer.

 

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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 13, 2005  

/s/ John E. Peck


    John E. Peck
    President and Chief Executive Officer
Date: May 13, 2005  

/s/ Billy C. Duvall


    Billy C. Duvall
    Vice President, Chief Financial Officer and Treasurer

 

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