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HopFed Bancorp 10-Q 2013

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
Form 10-Q
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 June 30, 2013

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.)

4155 Lafayette Road, 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required and posted pursuant to Rule 405 of Regulation S-T (subsection 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file or a non-accelerated filer. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act: (Check one)

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨      Smaller reporting company filer   x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x.

As of August 12, 2013, the Registrant had outstanding 7,524,371 shares of the Registrant’s Common stock.

 

 

 


Table of Contents

CONTENTS

HOPFED BANCORP, INC.

 

     PAGE  

PART I. FINANCIAL INFORMATION

  
The unaudited consolidated condensed financial statements of the Registrant and its wholly owned subsidiaries are as follows:   
Item 1.  

Financial Statements

  
 

Consolidated Condensed Statements of Financial Condition as of June 30, 2013 (unaudited) and December 31, 2012

     2   
 

Consolidated Condensed Statements of Income for the Three and Six-Month Periods Ended June  30, 2013, and June 30, 2012 (unaudited)

     4   
 

Consolidated Condensed Statements of Comprehensive Income (Loss) for the Three and Six-Month Periods Ended June 30, 2013 and June 30, 2012 (unaudited)

     6   
 

Consolidated Condensed Statement of Stockholders’ Equity for the Six-Month Period Ended June  30, 2013 (unaudited)

     7   
 

Consolidated Condensed Statements of Cash Flows for the Six-Month Periods Ended June  30, 2013, and June 30, 2012 (unaudited)

     8   
 

Notes to Unaudited Consolidated Condensed Financial Statements

     9   
Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     43   
Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

     55   
Item 4.  

Controls and Procedures

     56   

PART II OTHER INFORMATION

  
Item 1.  

Legal Proceedings

     57   
Item 1A.  

Risk Factors

     57   
Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

     57   
Item 3.  

Defaults Upon Senior Securities

     57   
Item 4.  

Mine Safety Disclosure

     57   
Item 5.  

Other Information

     57   
Item 6.  

Exhibits

     58   

SIGNATURES

     59   

 

1


Table of Contents

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

HOPFED BANCORP, INC.

Consolidated Condensed Statements of Financial Condition

(Dollars in Thousands)

 

      June 30, 2013      December 31, 2012  
     (unaudited)         
Assets      

Cash and due from banks

   $ 20,070         31,563   

Interest-earning deposits

     9,633         5,613   
  

 

 

    

 

 

 

Cash and cash equivalents

     29,703         37,176   

Federal Home Loan Bank stock, at cost

     4,428         4,428   

Securities available for sale

     338,936         356,345   

Loans receivable, net of allowance for loan losses of $9,399 at June 30, 2013, and $10,648 at December 31, 2012

     528,282         524,985   

Accrued interest receivable

     4,919         5,398   

Real estate and other assets owned

     1,632         1,548   

Bank owned life insurance

     9,486         9,323   

Premises and equipment, net

     21,853         22,557   

Deferred tax assets

     3,383         —     

Intangible asset

     195         292   

Other assets

     6,578         5,637   
  

 

 

    

 

 

 

Total assets

   $ 949,395         967,689   
  

 

 

    

 

 

 
Liabilities and Stockholders’ Equity      

Liabilities:

     

Deposits:

     

Non-interest-bearing

   $ 94,426         94,083   

Interest-bearing checking

     154,444         147,047   

Savings and money market accounts

     85,735         81,643   

Time deposits

     408,059         437,092   
  

 

 

    

 

 

 

Total deposits

     742,664         759,865   

Federal Home Loan Bank Advances

     45,768         43,741   

Repurchase agreements

     47,072         43,508   

Subordinated debentures

     10,310         10,310   

Advances from borrowers for taxes and insurance

     697         396   

Dividends payable

     177         180   

Deferred tax liability

     —           568   

Accrued expenses and other liabilities

     4,634         4,122   
  

 

 

    

 

 

 

Total liabilities

     851,322         862,690   
  

 

 

    

 

 

 

See accompanying Notes to Unaudited Consolidated Condensed Financial Statements.

 

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Table of Contents

HOPFED BANCORP, INC.

Consolidated Condensed Statements of Financial Condition, Continued

(Dollars in Thousands)

 

     June 30, 2013     December 31, 2012  
     (unaudited)        

Stockholders’ equity:

    

Preferred stock, par value $0.01 per share; authorized - 500,000 shares; 18,400 shares issued and no shares outstanding at June 30, 2013, and December 31, 2012.

   $ —          —     

Common stock, par value $.01 per share; authorized 15,000,000 shares; 7,905,955 issued and 7,503,039 outstanding at June 30, 2013, and 7,905,728 issued and 7,502,812 outstanding at December 31, 2012

     79        79   

Common stock warrant

     —          556   

Additional paid-in-capital

     76,634        76,288   

Retained earnings

     43,679        41,829   

Treasury stock- preferred (at cost, 18,400 shares at June 30, 2013, and December 31, 2012)

     (18,400     (18,400

Treasury stock- common (at cost, 402,916 shares at June 30, 2013, and December 31, 2012)

     (5,076     (5,076

Accumulated other comprehensive income, net of taxes

     1,157        9,723   
  

 

 

   

 

 

 

Total stockholders’ equity

     98,073        104,999   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 949,395        967,689   
  

 

 

   

 

 

 

The consolidated condensed statement of financial condition at December 31, 2012, has been derived from the audited consolidated financial statements as 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 Condensed Financial Statements.

 

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Table of Contents

HOPFED BANCORP, INC.

Consolidated Condensed Statements of Income

(Dollars in Thousands)

(Unaudited)

 

     For the Three Month Periods      For the Six Month Periods  
     Ended June 30,      Ended June 30,  
     2013      2012      2013      2012  

Interest income:

           

Loans receivable

   $ 6,676         7,413         13,558         15,214   

Securities available for sale - taxable

     1,764         2,434         3,596         4,809   

Securities available for sale - nontaxable

     547         547         1,132         1,122   

Interest-earning deposits

     7         6         13         14   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest income

     8,994         10,400         18,299         21,159   
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest expense:

           

Deposits

     1,936         2,755         3,982         5,639   

Advances from Federal Home Loan Bank

     446         565         890         1,138   

Repurchase agreements

     230         237         472         485   

Subordinated debentures

     182         181         364         368   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest expense

     2,794         3,738         5,708         7,630   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     6,200         6,662         12,591         13,529   
  

 

 

    

 

 

    

 

 

    

 

 

 

Provision for loan losses

     406         400         782         1,269   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income after provision for loan losses

     5,794         6,262         11,809         12,260   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-interest income:

           

Service charges

     937         973         1,790         1,911   

Merchant card income

     259         212         482         408   

Mortgage origination revenue

     212         263         412         466   

Gain on sale of securities

     789         630         1,416         674   

Income from bank owned life insurance

     87         79         162         158   

Financial services commission

     347         271         644         498   

Other operating income

     197         211         405         441   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-interest income

     2,828         2,639         5,311         4,556   
  

 

 

    

 

 

    

 

 

    

 

 

 

See accompanying Notes to Unaudited Consolidated Condensed Financial Statements.

 

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Table of Contents

HOPFED BANCORP, INC.

Consolidated Condensed Statements of Income, Continued

(Dollars in Thousands, Except Per Share Amounts)

(Unaudited)

 

     For the Three Month Periods      For the Six Month Periods  
     Ended June 30,      Ended June 30,  
     2013      2012      2013      2012  

Non-interest expenses:

           

Salaries and benefits

     3,714         3,561         7,562         7,068   

Occupancy

     882         884         1,727         1,739   

Data processing

     646         627         1,296         1,252   

State bank tax

     147         162         289         324   

Intangible amortization

     48         65         97         130   

Professional services

     549         498         942         886   

Deposit insurance and examination

     179         434         411         853   

Advertising

     308         324         641         628   

Postage and communications

     139         157         278         298   

Supplies

     93         105         229         216   

Loss on disposal of equipment

     —           2         —           8   

Loss on real estate owned

     12         72         47         219   

Real estate owned expenses

     32         25         108         71   

Other operating expenses

     375         523         771         846   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-interest expense

     7,124         7,439         14,398         14,538   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income tax

     1,498         1,462         2,722         2,278   

Income tax expense

     332         300         572         389   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     1,166         1,162         2,150         1,889   
  

 

 

    

 

 

    

 

 

    

 

 

 

Less:

           

Dividend on preferred shares

     —           231         —           460   

Accretion dividend on preferred shares

     —           28         —           56   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income available to common shareholders

   $ 1,166       $ 903       $ 2,150       $ 1,373   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income available to common shareholders

           

Per share, basic

   $ 0.16       $ 0.12       $ 0.29       $ 0.18   
  

 

 

    

 

 

    

 

 

    

 

 

 

Per share, diluted

   $ 0.16       $ 0.12       $ 0.29       $ 0.18   
  

 

 

    

 

 

    

 

 

    

 

 

 

Dividend per share

   $ 0.02       $ 0.02       $ 0.04       $ 0.04   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding - basic

     7,488,906         7,485,283         7,488,788         7,484,498   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding - diluted

     7,488,906         7,485,283         7,488,788         7,484,498   
  

 

 

    

 

 

    

 

 

    

 

 

 

See accompanying Notes to Unaudited Consolidated Condensed Financial Statements.

 

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Table of Contents

HOPFED BANCORP, INC.

Consolidated Condensed Statements of Comprehensive Income (Loss)

(Dollars in Thousands)

(Unaudited)

 

     For the Three Month     For the Six Month  
     Periods Ended June 30,     Periods Ended June 30,  
     2013     2012     2013     2012  

Net income

   $ 1,166        1,162        2,150        1,889   

Other comprehensive income (loss), net of tax:

        

Unrealized gain (loss) on investment securities available for sale, net of tax effect of $3,405 and ($1,023) for the three month periods ended June 30, 2013, and June 30, 2012, respectively; and $4,003 and ($1,096) for the six month periods ended June 30, 2013, and June 30, 2012, respectively;

     (6,610     1,985        (7,771     2,127   

Unrealized gain on derivatives, net of tax effect of ($40) and ($3) for the three month periods ended June 30, 2013, and June 30, 2012, respectively; and of ($72) and ($20) for the six month periods ending June 30, 2013, and June 30, 2012, respectively;

     77        7        140        40   

Reclassification adjustment for gains included in net income, net of tax effect of $268 and $214 for the three month periods ended June 30, 2013, and June 30, 2012, respectively; and $482 and $229 the six month periods ended June 30, 2013, and June 30, 2012, respectively;

     (521     (416     (935     (445
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   ($ 5,888     2,738        (6,416     3,611   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying Notes to Unaudited Consolidated Condensed Financial Statements.

 

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Table of Contents

HOPFED BANCORP, INC.

Consolidated Condensed Statement of Stockholders’ Equity

For the Six Month Period Ended June 30, 2013

(Dollars in Thousands, Except Share Amounts)

(Unaudited)

 

                                                         Accumulated        
     Shares             Common     Additional            Treasury     Treasury     Other     Total  
     Common
Stock
     Preferred
Stock
     Common
Stock
     Stock
Warrants
    Capital
Surplus
     Retained
Earnings
    Stock
Preferred
    Stock
Common
    Comprehensive
Income
    Stockholders
Equity
 

Balance at December 31, 2012

     7,502,812         18,400       $ 79         556        76,288         41,829        (18,400     (5,076     9,723        104,999   

Restricted stock awards

     227         —           —           —          —           —          —          —          —          —     

Consolidated net income

     —           —           —           —          —           2,150        —          —          —          2,150   

Compensation expense, restricted stock awards

     —           —           —           —          47         —          —          —          —          47   

Net change in unrealized gain on securities available for sale, net of income tax benefit of $4,485

     —           —           —           —          —           —          —          —          (8,706     (8,706

Net change in unrealized loss on derivatives, net of income taxes of $72

     —           —           —           —          —           —          —          —          140        140   

Repurchase of warrant

     —           —           —           (556     299         —          —          —          —          (257

Cash dividend to common stockholders

     —           —           —           —          —           (300     —          —          —          (300
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance June 30, 2013

     7,503,039         18,400       $ 79         —          76,634         43,679        (18,400     (5,076     1,157        98,073   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying Notes to Unaudited Consolidated Condensed Financial Statements

 

7


Table of Contents

HOPFED BANCORP, INC.

Consolidated Condensed Statements of Cash Flows

(Dollars in Thousands)

(Unaudited)

 

     For the Six Month Periods
Ended June 30,
 
     2013     2012  

Cash flows from operating activities:

    

Net cash provided by operating activities

   $ 4,484      $ 5,980   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Proceeds from sales, calls and maturities of securities available for sale

     73,375        85,553   

Purchase of securities available for sale

     (69,182     (92,013

Net (increase) decrease in loans

     (4,672     13,915   

Proceeds from sale of foreclosed assets

     462        1,573   

Purchase of premises and equipment

     (74     (301
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (91     8,727   
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net increase in demand deposits

     343        4,388   

Net increase (decrease) in time and other deposits

     (17,544     (18,574

Increase in advances from borrowers for taxes and insurance

     301        394   

Advances from Federal Home Loan Bank

     8,000        3,000   

Repayment of advances from Federal Home Loan Bank

     (5,973     (1,835

Net increase (decrease) in repurchase agreements

     3,564        (5,348

Cash used to repurchase warrant

     (257     —     

Dividend paid on preferred stock

     —          (460

Dividends paid on common stock

     (300     (299
  

 

 

   

 

 

 

Net cash used in financing activities

     (11,866     (18,734
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (7,473     (4,027

Cash and cash equivalents, beginning of period

     37,176        48,760   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 29,703        44,733   
  

 

 

   

 

 

 

Supplemental disclosures of Cash Flow Information:

    

Interest paid

   $ 2,932        3,525   
  

 

 

   

 

 

 

Income taxes paid

   $ 495        990   
  

 

 

   

 

 

 

Supplemental disclosures of non-cash investing and financing activities:

    

Loans charged off

   $ 2,370        2,428   
  

 

 

   

 

 

 

Foreclosures and in substance foreclosures of loans during period

   $ 593        873   
  

 

 

   

 

 

 

Net unrealized gains (losses) on investment securities classified as available for sale

   ($ 13,191     2,548   
  

 

 

   

 

 

 

Increase (decrease) in deferred tax asset related to unrealized gains on investments

   $ 4,485        (866
  

 

 

   

 

 

 

Dividends declared and payable

   $ 150        150   
  

 

 

   

 

 

 

Issue of unearned restricted stock

   $ 2        74   
  

 

 

   

 

 

 

See accompanying Notes to Unaudited Consolidated Condensed Financial Statements

 

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Table of Contents

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

 

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

On June 5, 2013, Heritage Bank changed its legal name to Heritage Bank USA, Inc. and became a Kentucky state chartered commercial bank regulated by the Kentucky Department of Financial Institutions and the Federal Deposit Insurance Corporation. On June 5, 2013, HopFed Bancorp, Inc, become a commercial bank holding company regulated by the Board of Governors of the Federal Reserve System (“the FED”). 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 Bank owns 100% of the stock of Fall and Fall Insurance Agency (“Fall & Fall”) of Fulton, Kentucky. Fall & Fall sells life and casualty insurance to both individuals and businesses. The majority of Fall & Fall’s customer base is within the geographic footprint of the Bank.

The Bank operates a mortgage division, Heritage Mortgage Services, in Clarksville, Tennessee with agents located in several of its markets. The Bank has a financial services division, Heritage Wealth Management, with offices in Murray, Kentucky, Kingston Springs, Tennessee and Pleasant View, Tennessee. Agents of Heritage Wealth Management travel throughout western Kentucky and middle Tennessee offering fixed and variable annuities, mutual funds and brokerage services.

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 six month period ended June 30, 2013, are not necessarily indicative of results that may be expected for the entire fiscal year ending December 31, 2013.

The accompanying unaudited financial statements should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The accounting policies followed by the Company are set forth in the Summary of Significant Accounting Policies in the Company’s December 31, 2012, Consolidated Financial Statements.

 

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Table of Contents
(2) INCOME PER SHARE

The following schedule reconciles the numerators and denominators of the basic and diluted income per share (“IPS”) computations for the three and six month periods ended June 30, 2013, and June 30, 2012. Diluted common shares arise from the potentially dilutive effect of the Company’s stock options and warrant outstanding.

 

     Three Month Periods Ended  
     June 30,  
     2013      2012  

Basic IPS:

     

Net income available to common stockholders

   $ 1,166,000       $ 903,000   

Average common shares outstanding

     7,488,906         7,485,283   
  

 

 

    

 

 

 

Net income per share available to common shareholders, basic

   $ 0.16       $ 0.12   
  

 

 

    

 

 

 

Diluted IPS

     

Net income available to common stockholders

   $ 1,166,000       $ 903,000   

Average common shares outstanding

     7,488,906         7,485,283   

Dilutive effect of stock options

     —           —     
  

 

 

    

 

 

 

Average diluted shares outstanding

     7,488,906         7,485,283   
  

 

 

    

 

 

 

Net income per share available to common shareholders, diluted

   $ 0.16       $ 0.12   
  

 

 

    

 

 

 

 

     Six Month Periods Ended  
     June 30,  
     2013      2012  

Basic IPS:

     

Net income available to common stockholders

   $ 2,150,000       $ 1,373,000   

Average common shares outstanding

     7,488,788         7,484,498   
  

 

 

    

 

 

 

Net income per share available to common shareholders, basic

   $ 0.29       $ 0.18   
  

 

 

    

 

 

 

Diluted IPS

     

Net income available to common stockholders

   $ 2,150,000       $ 1,373,000   

Average common shares outstanding

     7,488,788         7,484,498   

Dilutive effect of stock options

     —           —     
  

 

 

    

 

 

 

Average diluted shares outstanding

     7,488,788         7,484,498   
  

 

 

    

 

 

 

Net income per share available to common shareholders, diluted

   $ 0.29       $ 0.18   
  

 

 

    

 

 

 

 

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Table of Contents
(3) STOCK COMPENSATION

The Company incurred compensation cost related to the HopFed Bancorp, Inc. 2004 Long Term Incentive Plan of $25,000 and $47,000 for the three and six month periods ended June 30, 2013, and $27,000 and $54,000 for the three and six month periods ended June 30, 2012, respectively. The Company issued 227 shares of restricted stock during the three and six month periods ended June 30, 2013, and 8,826 and 10,392 shares of restricted stock for the three and six month periods ended June 30, 2012, respectively. The table below provides a detail of the Company’s future compensation expense related to restricted stock vesting at June 30, 2013:

 

Year Ending December 31,

   Future
Expense
 

2013

   $ 31,156   

2014

     49,481   

2015

     27,062   

2016

     7,791   
  

 

 

 

Total

   $ 115,490   
  

 

 

 

The compensation committee may make additional awards of restricted stock, thereby increasing the future expense related to this plan. In addition, award vesting may be accelerated due to certain events as outlined in the restricted stock award agreement. Any acceleration of vesting will change the timing of, but not the aggregate amount of, compensation expense incurred.

At the 2013 HopFed Bancorp, Inc. Annual Shareholder Meeting, shareholders approved a management recommendation to create the HopFed Bancorp, Inc. 2013 Long Term Incentive Plan (“the 2013 Plan”). The 2013 Plan provides for up to 300,000 shares to be granted to Directors and employees of the Company and the Bank. The details of the plan are discussed in the Company’s Definitive Proxy Statement dated April 5, 2013, and SEC Form S-8 dated June 28, 2013. The 2013 Plan replaces the Company’s 2004 Long Term Incentive Plan. The Company will not issue additional awards under the 2004 Long Term Incentive Plan.

 

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Table of Contents
(4) SECURITIES

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluations. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At June 30, 2013, the Company has 87 securities with unrealized losses. The carrying amount of securities and their estimated fair values at June 30, 2013, were as follows:

 

     June 30, 2013  
            Gross      Gross     Estimated  
     Amortized      Unrealized      Unrealized     Fair  
     Cost      Gains      Losses     Value  
     (Dollars in Thousands)  

Restricted:

          

FHLB stock

   $ 4,428         —           —          4,428   
  

 

 

    

 

 

    

 

 

   

 

 

 

Unrestricted:

          

U.S. government and agency securities:

          

Agency debt securities

   $ 119,837         3,007         (1,427     121,417   

Corporate bonds

     2,000         —           (16     1,984   

Taxable municipal bonds

     19,395         339         (334     19,400   

Tax free municipal bonds

     65,395         2,550         (772     67,173   

Trust preferred securities

     2,000         —           (511     1,489   

Mortgage-backed securities:

          

GNMA

     20,167         768         (117     20,818   

FNMA

     77,307         927         (1,369     76,865   

FHLMC

     3,441         88         —          3,529   

NON-AGENCY CMOs

     13,931         —           (487     13,444   

AGENCY CMOs

     12,795         189         (167     12,817   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 336,268         7,868         (5,200     338,936   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

12


Table of Contents

The carrying amount of securities and their estimated fair values at December 31, 2012, was as follows:

 

     December 31, 2012  
            Gross      Gross     Estimated  
     Amortized      Unrealized      Unrealized     Fair  
     Cost      Gains      Losses     Value  
     (Dollars in Thousands)  

Restricted:

          

FHLB stock

   $ 4,428         —           —          4,428   
  

 

 

    

 

 

    

 

 

   

 

 

 

Unrestricted:

          

U.S. government and agency securities:

          

Agency debt securities

   $ 147,659         5,202         (83     152,778   

Taxable municipal bonds

     12,535         1,209         (8     13,736   

Tax free municipal bonds

     68,331         5,756         (40     74,047   

Trust preferred securities

     2,000         —           (511     1,489   

Mortgage-backed securities:

          

GNMA

     19,172         1,244         (19     20,397   

FNMA

     64,805         2,558         (58     67,305   

FHLMC

     4,519         153         —          4,672   

SLMA CMO

     5,412         80         —          5,492   

AGENCY CMOs

     16,055         426         (52     16,429   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 340,488         16,628         (771     356,345   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents

The scheduled maturities of debt securities available for sale at June 30, 2013, were as follows:

 

            Estimated  
     Amortized      Fair  
     Cost      Value  

Due within one year

   $ 951       $ 925   

Due in one to five years

     14,375         14,586   

Due in five to ten years

     35,929         35,566   

Due after ten years

     51,913         52,526   
  

 

 

    

 

 

 
     103,168         103,603   

Amortizing agency bonds

     105,459         107,860   

Mortgage-backed securities

     127,641         127,473   
  

 

 

    

 

 

 

Total unrestricted securities available for sale

   $ 336,268       $ 338,936   
  

 

 

    

 

 

 

The scheduled maturities of debt securities available for sale at December 31, 2012, were as follows:

 

            Estimated  
     Amortized      Fair  
     Cost      Value  

Due within one year

   $ 345       $ 346   

Due in one to five years

     11,499         11,682   

Due in five to ten years

     30,007         32,316   

Due in more than ten years

     53,222         57,290   
  

 

 

    

 

 

 
     95,073         101,634   

Amortizing agency bonds

     135,452         140,416   

Mortgage-backed securities

     109,963         114,295   
  

 

 

    

 

 

 

Total unrestricted securities available for sale

   $ 340,488       $ 356,345   
  

 

 

    

 

 

 

 

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Table of Contents

The estimated fair value and unrealized loss amounts of temporarily impaired investments as of June 30, 2013, are as follows:

 

     Less than 12 months     12 months or longer     Total  
     Estimated
Fair Value
     Unrealized
Losses
    Estimated
Fair Value
     Unrealized
Losses
    Estimated
Fair Value
     Unrealized
Losses
 
     (Dollars in Thousands)  

Available for sale

               

U.S. government and agency securities:

               

Agency debt securities

   $ 30,007         (1,427     —           —          30,007         (1,427

Corporate bonds

     1,984         (16     —           —          1,984         (16

Taxable municipals

     8,451         (334     —           —          8,451         (334

Tax free municipals

     13,329         (772     —           —          13,329         (772

Trust preferred securities

     —           —          1,489         (511     1,489         (511

Mortgage-backed securities:

               

GNMA

     4,513         (93     1,005         (24     5,518         (117

FNMA

     44,606         (1,369     —           —          44,606         (1,369

FHLMC

     —           —          —           —          —           —     

NON-AGENCY CMOs

     5,304         (459     5,166         (28     10,470         (487

AGENCY CMOs

     1,878         (167     —           —          1,878         (167
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Available for Sale

   $ 110,072         (4,637     7,660         (563     117,732         (5,200
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

The estimated fair value and unrealized loss amounts of temporarily impaired investments as of December 31, 2012, were as follows:

 

     Less than 12 months     12 months or longer     Total  
     Estimated
Fair Value
     Unrealized
Losses
    Estimated
Fair Value
     Unrealized
Losses
    Estimated
Fair Value
     Unrealized
Losses
 
     (Dollars in Thousands)  

Available for sale

               

U.S. government and agency securities:

               

Agency debt securities

   $ 12,317         (83     —           —          12,317         (83

Taxable municipal bonds

     885         (8     —           —          885         (8

Tax free municipal bonds

     5,315         (40     —           —          5,315         (40

Trust preferred securities

     —           —          1,489         (511     1,489         (511

Mortgage-backed securities:

               

GNMA

     —           —          1,415         (19     1,415         (19

FNMA

     7,077         (58     —           —          7,077         (58

FHLMC

     —           —          —           —          —           —     

NON-AGENCY CMOs

     —           —          —           —          —           —     

AGENCY CMOs

     3,691         (52     —           —          3,691         (52
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Available for Sale

   $ 29,285         (241     2,904         (530     32,189         (771
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

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Table of Contents

At June 30, 2013, securities with a book value of approximately $151.6 million and a market value of approximately $152.0 million were pledged to various municipalities for deposits in excess of FDIC limits as required by law. The Federal Home Loan Bank of Cincinnati has issued letters of credit in the Bank’s name totaling $13.5 million secured by the Bank’s loan portfolio to secure additional municipal deposits.

At June 30, 2013, securities with a book and market value of $31.1 million were sold under agreements to repurchase from various customers. Furthermore, the Company has two wholesale repurchase agreements with third parties secured by investments with a combined book value of $16.9 million and a market value of $16.6 million. One repurchase agreement is in the amount of $6.0 million and has a maturity of September 18, 2016 and is currently callable on a quarterly basis and has a fixed rate of interest of 4.36%. The second repurchase agreement, in the amount of $10.0 million, has a maturity of September 5, 2014, is currently callable quarterly and has a fixed rate of interest of 4.28%.

 

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Table of Contents
(5) LOANS

Set forth below is selected data relating to the composition of the loan portfolio by type of loan at June 30, 2013 and December 31, 2012. At June 30, 2013 and December 31, 2012, there were no concentrations of loans exceeding 10% of total loans other than as disclosed below:

 

     June 30, 2013     June 30, 2013     December 31, 2012     December 31, 2012  
     Amount     Percent     Amount     Percent  
     (Dollars in thousands, except percentages)  

Real estate loans:

  

One-to-four family (closed end) first mortgages

   $ 157,880        29.4   $ 162,335        30.3

Second mortgages (closed end)

     3,912        0.7     4,336        0.8

Home equity lines of credit

     35,982        6.7     37,083        6.9

Multi-family

     29,965        5.6     33,056        6.2

Construction

     8,994        1.7     18,900        3.5

Land

     39,145        7.3     45,906        8.6

Farmland

     50,300        9.4     46,799        8.7

Non-residential real estate

     147,491        27.4     122,637        22.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

     473,669        88.2     471,052        87.9

Consumer loans

     12,832        2.4     13,886        2.6

Commercial loans

     51,155        9.4     50,549        9.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other loans

     63,987        11.8     64,435        12.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Total loans, gross

     537,656        100.0     535,487        100.0
    

 

 

     

 

 

 

Deferred loan cost, net of income

     25          146     

Less allowance for loan losses

     (9,399       (10,648  
  

 

 

     

 

 

   

Total loans

   $ 528,282        $ 524,985     
  

 

 

     

 

 

   

 

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Table of Contents

The Company assigns an industry standard NAICS code to each loan in the Company’s portfolio. By assigning a standard code to each type of loan, management can more readily determine concentrations in risk by industry, location and loan type. This information is most useful when analyzing the Company’s non-residential real estate loan portfolio. At June 30, 2013, and December 31, 2012, the Company’s non-residential real estate loan portfolio was made up of the following loan types:

 

     June 30, 2013      December 31, 2012  
     (Dollars in Thousands)  

Land

   $ 39,145         45,906   

Manufacturing

     4,191         3,856   

Professional, Technical

     2,243         2,025   

Retail Trade

     11,713         12,391   

Other Services

     19,417         18,303   

Finance & Insurance

     1,855         386   

Agricultural, Forestry, Fishing & Hunting

     46,862         42,420   

Real Estate and Rental and Leasing

     54,354         48,249   

Wholesale Trade

     19,718         8,891   

Arts, Entertainment & Recreation

     3,153         3,461   

Accommodations / Food Service

     20,323         17,152   

Healthcare and Social Assistance

     7,696         7,932   

Transportation & Warehousing

     1,238         1,295   

Information

     2,548         2,488   

Non-industry

     2,105         46   

Admin Support / Waste Mgmt

     375         541   
  

 

 

    

 

 

 

Total

   $ 236,936         215,342   
  

 

 

    

 

 

 

The allowance for loan losses totaled $9.4 million at June 30, 2013, and $10.6 million at December 31, 2012, and June 30, 2012, respectively. The ratio of the allowance for loan losses to total loans was 1.75% at June 30, 2013, 1.99% at December 31, 2012, and 1.92% at June 30, 2012.

The following table indicates the type and level of non-accrual loans at the dates indicated below:

 

     June 30, 2013      December 31, 2012      June 30, 2012  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 1,131         2,243         2,577   

Home equity line of credit

     22         66         91   

Junior lien

     37         4         107   

Multi-family

     —           38         190   

Construction

     —           —           —     

Land

     2,255         2,768         4,290   

Non-residential real estate

     7,055         1,134         4,000   

Farmland

     781         648         727   

Consumer loans

     11         145         16   

Commercial loans

     520         617         121   
  

 

 

    

 

 

    

 

 

 

Total non-accrual loans

   $ 11,812         7,663         12,119   
  

 

 

    

 

 

    

 

 

 

 

18


Table of Contents

The following table provides a detail of the Company’s activity in the allowance for loan loss account by loan type for the three month period ended June 30, 2013:

 

     Balance
12/31/2012
     Charge off
2013
    Recovery
2013
     General
Provision
2013
    Specific
Provision
2013
    Ending
Balance
6/30/2013
 
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 2,490         (368     8         149        115        2,394   

Home equity line of credit

     374         (6     2         30        (11     389   

Junior liens

     230         (84     24         (132     25        63   

Multi-family

     524         (38     163         (257     (159     233   

Construction

     256         —          —           (61     (128     67   

Land

     2,184         (393     5         (231     235        1,800   

Non-residential real estate

     2,914         (1,039     14         580        469        2,938   

Farmland

     719         —          —           (271     14        462   

Consumer loans

     338         (386     119         307        102        480   

Commercial loans

     619         (56     4         42        (36     573   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 10,648         (2,370     339         156        626        9,399   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

The following table provides a detail of the Company’s activity in the allowance for loan loss account by loan type for the year ended December 31, 2012:

 

     Balance
12/31/2011
     Charge off
2012
    Recovery
2012
     General
Provision
2012
    Specific
Provision
2012
    Balance
12/31/2012
 
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 2,640         (379     81         324        (176     2,490   

Home equity line of credit

     408         (67     6         6        21        374   

Junior liens

     277         (1     4         —          (50     230   

Multi-family

     1,201         (417     —           429        (689     524   

Construction

     139         —          —           117        —          256   

Land

     1,332         (1,033     405         635        845        2,184   

Non-residential real estate

     3,671         (1,120     137         718        (492     2,914   

Farmland

     —           —          —           315        404        719   

Consumer loans

     262         (510     150         404        32        338   

Commercial loans

     1,332         (157     12         (171     (397     619   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 11,262         (3,684     795         2,777        (502     10,648   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

19


Table of Contents

The table below presents currently performing, past due, and non-accrual balances at June 30, 2013, by loan classification allocated between performing and non-performing:

 

     Currently
Performing
     30 - 89
Days
Past Due
     Non-accrual
Loans
     Special
Mention
     Impaired Loans         

June 30, 2013

               Currently Performing         
                 Substandard      Doubtful      Total  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 149,160         2,172         1,131         1,169         4,248         —           157,880   

Home equity line of credit

     34,728         289         22         —           943         —           35,982   

Junior liens

     3,355         14         37         45         461         —           3,912   

Multi-family

     27,870         —           —           —           2,095         —           29,965   

Construction

     8,818         —           —           176         —           —           8,994   

Land

     21,951         235         2,255         7,441         7,263         —           39,145   

Non-residential real estate

     132,667         206         7,055         890         6,673         —           147,491   

Farmland

Consumer loans

    

 

45,086

12,345

  

  

    

 

—  

49

  

  

    

 

781

11

  

  

    

 

352

—  

  

  

    

 

4,081

427

  

  

     —          

 

50,300

12,832

  

  

Commercial loans

     47,366         424         520         435         2,410         —           51,155   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 483,346         3,389         11,812         10,508         28,601         —           537,656   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The table below presents currently performing, past due, and non-accrual balances at December 31, 2012, by loan classification allocated between performing and non-performing:

 

     Currently
Performing
     30 - 89
Days
Past Due
     Non-accrual
Loans
     Special
Mention
     Impaired Loans      Total  
                 Currently Performing     

December 31, 2012

               Substandard      Doubtful     
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 155,936         1,339         2,243         779         2,038         —           162,335   

Home equity line of credit

     34,732         5         66         1,109         1,171         —           37,083   

Junior liens

     3,584         237         4         47         464         —           4,336   

Multi-family

     27,463         —           38         1,478         4,077         —           33,056   

Construction

     13,876         176         —           —           4,848         —           18,900   

Land

     14,237         137         2,768         7,683         21,081         —           45,906   

Non-residential real estate

     101,894         293         1,134         669         18,647         —           122,637   

Farmland

     44,256         —           648         1,230         665         —           46,799   

Consumer loans

     13,266         74         145         —           401         —           13,886   

Commercial loans

     43,961         230         617         516         5,225         —           50,549   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 453,205         2,491         7,663         13,511         58,617         —           535,487   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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All loans listed as 30-89 days past due and non-accrual are not performing as agreed. Loans listed as special mention, substandard and doubtful are paying as agreed. However, the customer’s financial statements may indicate weaknesses in their current cash flow, the customer’s industry may be in decline due to current economic conditions, collateral values used to secure the loan may be declining, or the Company may be concerned about the customer’s future business prospects.

The Company does not originate loans it considers sub-prime and is not aware of any exposure to the additional credit concerns associated with sub-prime lending in either the Company’s loan or investment portfolios. The Company does have a significant amount of construction and land development loans. Management reports to the Company’s Board of Directors on the status of the Company’s specific construction and development loans as well as the market trends in those markets in which the Company actively participates.

The Company’s annualized net charge off ratios for six month periods ended June 30, 2013, June 30, 2012, and the year ended December 31, 2012, was 0.77%, 0.71% and 0.52%, respectively. The ratios of allowance for loan losses to non-accrual loans at June 30, 2013, June 30, 2012, and December 31, 2012, were 79.6%, 87.23%, and 138.99% respectively.

 

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The table on the below sets forth an analysis of the Bank’s allowance for loan losses for the periods presented:

 

     Six month period ended
June 30, 2013
    Year ended
December 31, 2012
    Six month period ended
June 30, 2012
 
     (Dollars in Thousands, Except Percentages)  

Beginning balance, allowance for loan loss

   $ 10,648        11,262        11,262   

Charge offs

      

One-to-four family mortgages

     (368     (379     (264

Home equity line of credit

     (6     (67     (53

Junior liens

     (84     (1     (1

Multi-family

     (38     (417     (416

Land

     (393     (1,033     (779

Non-residential real estate

     (1,039     (1,120     (579

Consumer loans

     (386     (510     (130

Commercial loans

     (56     (157     (206   
  

 

 

   

 

 

   

 

 

 

Total charge offs

     (2,370     (3,684     (2,428
  

 

 

   

 

 

   

 

 

 

Recoveries

      

One-to-four family mortgages

     8        81        43   

Home equity line of credit

     2        6        3   

Junior liens

     24        4        2   

Multi-family

     163        —          —     

Land

     5        405        234   

Non-residential real estate

     14        137        100   

Consumer loans

     119        150        79   

Commercial loans

     4        12        4   
  

 

 

   

 

 

   

 

 

 

Total recoveries

     339        795        465   
  

 

 

   

 

 

   

 

 

 

Net Charge offs

     (2,031     (2,889     (1,963
  

 

 

   

 

 

   

 

 

 

Provision for loan losses

     782        2,275        1,269   
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 9,399        10,648        10,568   
  

 

 

   

 

 

   

 

 

 

Average loan balance, gross

   $ 525,448        533,081        550,871   
  

 

 

   

 

 

   

 

 

 

Ratio of net charge offs to average outstanding loans during the period

     0.77     0.52     0.71
  

 

 

   

 

 

   

 

 

 

The determination of the allowance for loan losses is based on management’s analysis, completed 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.

 

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The Company conducts annual reviews on all loan relationships above $1 million to ascertain the borrowers continued ability to service their debt as agreed. In addition to the credit relationships mentioned above, management may revise a risk grade on any credit relationship once it becomes aware of adverse credit trends for that customer. Typically, the annual review consists of updated financial statements for borrowers and any guarantors, a review of the borrower’s credit history with the Company and other creditors, and current income tax information.

As a result of this review, management will classify loans based on their credit risk. Additionally, the Company provides a risk grade for all loans past due more than sixty days. The Company uses the following risk definitions for risk grades:

Satisfactory loans of average strength having some deficiency or vulnerability to changing economic or industry conditions. These customers should have reasonable amount of capital and operating ratios. Secured loans may lack in margin or liquidity. Loans to individuals, perhaps supported in dollars of net worth, but with supporting assets may be difficult to liquidate.

Watch loans are acceptable credits: (1) that need continual monitoring, such as out-of territory or asset-based loans (since the Bank does not have an asset-based lending department), or (2) with a marginal risk level to business concerns and individuals that; (a) have exhibited favorable performance in the past, though currently experiencing negative trends; (b) are in an industry that is experiencing volatility or is declining, and their performance is less than industry norms; and (c) are experiencing unfavorable trends in their financial position, such as one-time net losses or declines in asset values. These marginal borrowers may have early warning signs of problems such as occasional overdrafts and minor delinquency. If considered marginal, a loan would be a “watch” until financial data demonstrated improved performance or further deterioration to a “substandard” grade usually within a 12-month period. In the table on page 25, Watch loans are included with satisfactory loans and classified as Pass.

Other Loans Especially Mentioned are currently protected but are potentially weak. These loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific loan. These credit weaknesses, if not checked or corrected, will weaken the loan or inadequately protect the Bank’s credit position at some future date.

 

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Table of Contents

A Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the credit. Examples of substandard loans include those to borrowers with insufficient or negative cash flow, negative net worth coupled with inadequate guarantor support, inadequate working capital, and/or significantly past-due loans and overdrafts.

A loan classified Doubtful has all the weaknesses inherent in a substandard credit except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. The possibility of loss is extremely high, but because of certain pending factors charge-off is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans. The doubtful classification is applied to that portion of the credit in which the full collection of principal and interest is questionable.

A loan is considered to be impaired when management determines that it is probable that the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. The value of individually impaired loans is measured based on the present value of expected payments using the fair value of the collateral if the loan is collateral dependent. Currently, it is management’s practice to classify all substandard or doubtful loans as impaired. At June 30, 2013, December 31, 2012, and June 30, 2012, the Company’s impaired loans totaled $40.4 million, $66.6 million and $90.4 million, respectively. At June 30, 2013, December 31, 2012, and June 30, 2012, the Company’s specific reserve for impaired loans totaled $3.5 million, $3.8 million and $3.7 million, respectively.

 

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Table of Contents

A summary of the Company’s impaired loans, including their respective regulatory classification and their respective specific reserve at June 30, 2013, were as follows:

 

                                        Specific      Allowance  
                                        Allowance      for  
            Special      Impaired Loans             for      Performing  
     Pass      Mention      Substandard      Doubtful      Total      Impairment      Loans  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 151,332         1,169         5,348         31         157,880         794         1,600   

Home equity line of credit

     35,017         —           965         —           35,982         146         243   

Junior liens

     3,361         45         506         —           3,912         —           63   

Multi-family

     27,870         —           2,095         —           29,965         —           233   

Construction

     8,818         176         —           —           8,994         —           67   

Land

     22,185         7,441         9,519         —           39,145         1,385         415   

Non-residential real estate

     132,851         890         13,750         —           147,491         1,046         1,892   

Farmland

     45,086         352         4,862         —           50,300         —           462   

Consumer loans

     12,394         —           438         —           12,832         87         393   

Commercial loans

     47,790         435         2,930         —           51,155         91         482   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 486,704         10,508         40,413         31         537,656         3,549         5,850   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

A summary of the Company’s impaired loans and their respective reserve at December 31, 2012, were as follows:

 

                                        Specific      Allowance  
                                        Allowance      for  
            Special      Impaired Loans             for      Performing  
     Pass      Mention      Substandard      Doubtful      Total      Impairment      Loans  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 156,961         779         4,595         —           162,335         754         1,736   

Home equity line of credit

     34,737         1,109         1,237         —           37,083         68         306   

Junior liens

     3,821         47         468         —           4,336         196         34   

Multi-family

     27,463         1,478         4,115         —           33,056         38         486   

Construction

     14,052         —           4,848         —           18,900         —           256   

Land

     14,374         7,683         23,849         —           45,906         932         1,252   

Non-residential real estate

     107,947         669         14,021         —           122,637         1,240         1,681   

Farmland

     38,496         1,230         7,073         —           46,799         184         528   

Consumer loans

     13,330         —           556         —           13,886         121         217   

Commercial loans

     44,191         516         5,842         —           50,549         308         311   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 455,372         13,511         66,604         —           535,487         3,841         6,807   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Impaired loans by classification type and the related valuation allowance amounts at June 30, 2013, were as follows:

 

                                                                          
     At June 30, 2013      For the six month period ended
June 30, 2013
 
            Unpaid             Average      Interest  
     Recorded      Principal      Related      Recorded      Income  
     Investment      Balance      Allowance      Investment      Recognized  
     (Dollars in thousands)  

Impaired loans with no recorded reserve:

  

One-to-four family mortgages

   $ 2,680         2,680         —           1,975         4   

Home equity line of credit

     468         468         —           507         2   

Junior liens

     506         506         —           438         1   

Multi-family

     2,095         2,095         —           1,981         16   

Construction

     —           —           —           2,056         —     

Land

     3,979         3,979         —           9,367         11   

Farmland

     4,862         4,862         —           4,591         108   

Non-residential real estate

     8,587         8,587         —           6,340         51   

Consumer loans

     24         24         —           34         3   

Commercial loans

     2,411         2,411         —           2,439         109   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 25,612         25,612         —           29,728         305   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans with recorded reserve:

  

One-to-four family mortgages

   $ 2,699         2,739         794         2,504         10   

Home equity line of credit

     497         497         146         420         4   

Junior liens

     —           —           —           43         —     

Multi-family

     —           —           —           —           —     

Construction

     —           —           —           —           —     

Land

     5,540         5,934         1,385         4,753         50   

Farmland

     —           —           —           226         —     

Non-residential real estate

     5,163         6,460         1,046         3,321         97   

Consumer loans

     414         419         87         321         —     

Commercial loans

     519         570         91         743         3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 14,832         16,619         3,549         12,331         164   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 40,444         42,231         3,549         42,059         469   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Impaired loans by classification type and the related valuation allowance amounts at December 31, 2012, were as follows:

 

                                                                
     At December 31, 2012                
            Unpaid             Average      Interest  
     Recorded      Principal      Related      Recorded      Income  
     Investment      Balance      Allowance      Investment      Recognized  

Impaired loans with no recorded reserve:

              

One-to-four family mortgages

   $ 1,759         1,759         —           5,279         107   

Home equity line of credit

     1,169         1,169         —           869         50   

Junior liens

     —           —           —           281         3   

Multi-family

     4,077         4,077         —           3,626         219   

Construction

     4,848         4,848         —           3,133         174   

Land

     20,279         20,279         —           19,857         504   

Farmland

     5,701         5,701            5,701         202   

Non-residential real estate

     9,662         9,662         —           14,235         653   

Consumer loans

     81         81         —           66         5   

Commercial loans

     1,617         1,617         —           2,701         165   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 49,193         49,193         —           55,748         2,082   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans with recorded reserve:

              

One-to-four family mortgages

   $ 2,836         2,836         754         3,135         145   

Home equity line of credit

     68         68         76         162         3   

Junior liens

     468         468         188         365         38   

Multi-family

     38         38         38         2,640         4   

Construction

     —           —           —           1,095         —     

Land

     3,570         3,570         932         4,848         213   

Farmland