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HopFed Bancorp 10-Q 2016

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 September 30, 2016

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   (I.R.S. Employer
incorporation or organization)   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 Rule 12b-2 of the Exchange Act: (Check one)

 

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

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 November 6, 2016, the Registrant had outstanding 6,717,719 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 September 30, 2016 (unaudited) and December 31, 2015

     2   

Consolidated Condensed Statements of Income for the Three and Nine Month Periods Ended September 30, 2016, and September 30, 2015 (unaudited)

     4   

Consolidated Condensed Statements of Comprehensive Income for the Three and Nine Month Periods Ended September 30, 2016, and September 30, 2015 (unaudited)

     6   

Consolidated Condensed Statements of Stockholders’ Equity for the Nine Month Period Ended September 30, 2015 (unaudited)

     7   

Consolidated Condensed Statements of Stockholders’ Equity for the Nine Month Period Ended September 30, 2016 (unaudited)

     8   

Consolidated Condensed Statements of Cash Flows for the Nine Month Periods Ended September 30, 2016, and September 30, 2015 (unaudited)

     9   

Notes to Unaudited Consolidated Condensed Financial Statements

     10   

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

     45   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     54   

Item 4. Controls and Procedures

     55   

PART II OTHER INFORMATION

  

Item 1. Legal Proceedings

     56   

Item 1A. Risk Factors

     56   

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

     56   

Item 3. Defaults Upon Senior Securities

     56   

Item 4. Mine Safety Disclosures

     56   

Item 5. Other Information

     57   

Item 6. Exhibits

     57   

SIGNATURES

     57   

 

1


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HOPFED BANCORP, INC.

Consolidated Condensed Statements of Financial Condition

(Dollars in Thousands)

 

     September 30, 2016      December 31, 2015  
     (Unaudited)         
Assets      

Cash and due from banks

   $ 24,741         46,926   

Interest-earning deposits

     4,695         7,772   
  

 

 

    

 

 

 

Cash and cash equivalents

     29,436         54,698   

Federal Home Loan Bank stock, at cost

     4,428         4,428   

Securities available for sale

     213,289         237,177   

Loans held for sale

     1,547         2,792   

Loans receivable, net of allowance for loan losses of $6,812 at September 30, 2016, and $5,700 at December 31, 2015

     579,063         556,349   

Accrued interest receivable

     3,603         4,139   

Real estate and other assets owned

     741         1,736   

Bank owned life insurance

     10,581         10,319   

Premises and equipment, net

     23,579         24,034   

Deferred tax assets

     2,144         2,642   

Other assets

     3,495         4,840   
  

 

 

    

 

 

 

Total assets

   $ 871,906         903,154   
  

 

 

    

 

 

 
Liabilities and Stockholders’ Equity      

Liabilities:

     

Deposits:

     

Non-interest-bearing accounts

   $ 130,327         125,070   

Interest-bearing accounts:

     

Interest bearing checking accounts

     182,360         203,779   

Savings and money market accounts

     98,929         95,893   

Other time deposits

     300,701         314,664   
  

 

 

    

 

 

 

Total deposits

     712,317         739,406   

Advances from Federal Home Loan Bank

     11,000         15,000   

Repurchase agreements

     44,465         45,770   

Subordinated debentures

     10,310         10,310   

Advances from borrowers for taxes and insurance

     1,111         614   

Dividends payable

     287         287   

Accrued expenses and other liabilities

     3,554         4,137   
  

 

 

    

 

 

 

Total liabilities

     783,044         815,524   
  

 

 

    

 

 

 

 

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)

 

     September 30, 2016     December 31, 2015  
     (Unaudited)        

Stockholders’ equity:

    

Preferred stock, par value $0.01 per share; authorized - 500,000 shares; no shares issued and outstanding at September 30, 2016, and December 31, 2015

     —          —     

Common stock, par value $.01 per share; authorized 15,000,000 shares; 7,963,378 issued and 6,723,243 outstanding at September 30, 2016, and 7,951,699 issued and 6,865,811 outstanding at December 31, 2015

     80        79   

Additional paid-in-capital

     58,658        58,604   

Retained earnings

     48,176        47,124   

Treasury stock- common (at cost, 1,240,135 shares at September 30, 2016, and 1,085,888 shares at December 31, 2015)

     (15,279     (13,471

Unallocated ESOP shares (at cost, 514,187 shares at September 30, 2016, and 546,413 shares at December 31, 2015)

     (6,756     (7,180

Accumulated other comprehensive income, net of taxes

     3,983        2,474   
  

 

 

   

 

 

 

Total stockholders’ equity

     88,862        87,630   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 871,906        903,154   
  

 

 

   

 

 

 

The consolidated condensed statement of financial condition at December 31, 2015, has been derived from the audited 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 Nine Month Periods  
     Ended September 30,      Ended September 30,  
     2016      2015      2016      2015  

Interest income:

           

Loans receivable

   $ 6,569         6,374         19,175         18,895   

Securities available for sale - taxable

     1,099         1,237         3,544         4,953   

Securities available for sale - nontaxable

     326         398         1,019         1,267   

Interest-earning deposits

     10         3         38         11   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest income

     8,004         8,012         23,776         25,126   
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest expense:

           

Deposits

     1,044         1,246         3,146         3,751   

Advances from Federal Home Loan Bank

     33         71         134         206   

Repurchase agreements

     139         130         421         368   

Subordinated debentures

     99         186         287         553   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest expense

     1,315         1,633         3,988         4,878   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     6,689         6,379         19,788         20,248   

Provision for loan losses

     255         275         1,178         760   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income after provision for loan losses

     6,434         6,104         18,610         19,488   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-interest income:

           

Service charges

     719         750         2,094         2,184   

Merchant card income

     308         286         913         842   

Mortgage origination revenue

     415         345         1,218         865   

Gain on sale of securities

     79         103         422         552   

Income from bank owned life insurance

     104         108         265         252   

Financial services commission

     131         186         455         539   

Other operating income

     189         158         568         483   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-interest income

     1,945         1,936         5,935         5,717   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

See accompanying Notes to Unaudited Consolidated Condensed Financial Statements.

 

4


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HOPFED BANCORP, INC.

Consolidated Condensed Statements of Income, Continued

(Dollars in Thousands, Except Per Share Amounts)

(Unaudited)

 

     For the Three Month Periods     For the Nine Month Periods  
     Ended September 30,     Ended September 30,  
     2016     2015     2016     2015  

Non-interest expenses:

        

Salaries and benefits

   $ 3,757        3,960        11,646        12,148   

Occupancy

     810        788        2,398        2,278   

Data processing

     744        724        2,175        2,117   

State deposit tax

     248        260        743        759   

Intangible amortization

     —          —          —          32   

Professional services

     368        380        1,008        1,177   

Deposit insurance and examination

     164        135        496        403   

Advertising

     376        337        1,067        983   

Postage and communications

     157        162        484        428   

Supplies

     148        107        456        364   

Loss (gain) on real estate owned

     22        (18     30        716   

Real estate owned

     182        202        443        406   

Gain on sale of premises and equipment

     (72     —          (72     —     

Other operating

     449        516        1,771        1,446   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest expense

     7,353        7,553        22,645        23,257   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax

     1,026        487        1,900        1,948   

Income tax expense (benefit)

     41        (23     102        200   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 985        510        1,798        1,748   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share:

        

Basic

   $ 0.16      $ 0.08      $ 0.29      $ 0.27   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.16      $ 0.08      $ 0.29      $ 0.27   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividend per share

   $ 0.04      $ 0.04      $ 0.12      $ 0.12   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding - basic

     6,212,231        6,359,556        6,247,536        6,493,449   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding - diluted

     6,212,231        6,359,556        6,247,536        6,493,449   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

(Dollars in Thousands)

(Unaudited)

 

     For the three month     For the nine month  
     Periods Ended September 30,     Periods Ended September 30,  
     2016     2015     2016     2015  

Net income

   $ 985        510        1,798        1,748   

Other comprehensive income, net of tax:

        

Unrealized gain (loss) on non-other than temporary impaired investment securities, net of taxes of $384 and ($468) for the three-month periods ended September 30, 2016, and September 30, 2015, respectively; and net of taxes of ($883) and ($89) for the nine month periods ended September 30, 2016, and September 30, 2015, respectively.

     (744     920        1,715        184   

Unrealized gain (loss) on OTTI securities, net of taxes of ($37) for the nine month period ended September 30, 2016; and $6 and ($98) for the three and nine month periods ended September 30, 2015, respectively.

     —          (11     72        191   

Unrealized gain on derivatives, net of taxes of ($33) and ($98) for the three and nine month periods ended September 30, 2015, respectively.

     —          64        —          191   

Reclassification adjustment for gains and accretion included in net income, net of taxes of $27 and $35 for three month periods ended September 30, 2016, and September 30, 2015, respectively; and $144 and $188 for the nine month periods ended September 30, 2016, and September 30, 2015, respectively.

     (52     (68     (278     (364
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     (796     905        1,509        202   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 189        1,415        3,307        1,950   
  

 

 

   

 

 

   

 

 

   

 

 

 

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 Nine Month Period Ended September 30, 2015

(Dollars in Thousands, Except Share Amounts)

(Unaudited)

 

                                          Accumulated         
     Shares            Additional           Treasury     Unearned     Other      Total  
     Common     Common     

Paid In

    Retained     Stock     ESOP     Comprehensive      Stockholders  
     Stock     Stock      Capital     Earnings     Common     Shares     Income      Equity  

Balance at December 31, 2014

     7,171,282      $ 79         58,466        45,729        (9,429     —          3,557         98,402   

Consolidated net income

     —          —           —          1,748        —          —          —           1,748   

Issue of restricted stock

     2,034        —           —          —          —          —          —           —     

Repurchase of treasury stock

     (860,303     —           —          —          (11,370     —          —           (11,370

Treasury stock reissued

     600,000        —           —          —          7,884        (7,884     —           —     

Change in price of ESOP shares

     —          —           (32     —          —          —          —           (32

ESOP shares committed to release

     —          —           —          —          —          487        —           487   

Compensation expense, restricted stock awards

     —          —           144        —          —          —          —           144   

Net change in unrealized gain on derivatives, net of income taxes

     —          —           —          —          —          —          191         191   

Net change in unrealized gain on securities available for sale, net of income taxes

     —          —           —          —          —          —          11         11   

Cash dividend to common stockholders

     —          —           —          (758     —          —          —           (758
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance September 30, 2015

     6,913,013      $ 79         58,578        46,719        (12,915     (7,397     3,759         88,823   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

See accompanying Notes to Unaudited Consolidated Condensed Financial Statements

 

7


Table of Contents

HOPFED BANCORP, INC.

Consolidated Condensed Statement of Stockholders’ Equity

For the Nine Month Period Ended September 30, 2016

(Dollars in Thousands, Except Share Amounts)

(Unaudited)

 

                                          Accumulated         
     Shares            Additional           Treasury     Unearned     Other      Total  
     Common     Common      Paid In     Retained     Stock     ESOP     Comprehensive      Stockholders  
     Stock     Stock      Capital     Earnings     Common     Shares     Income      Equity  

Balance at December 31, 2015

     6,865,811      $ 79         58,604        47,124        (13,471     (7,180     2,474         87,630   

Consolidated net income

     —          —           —          1,798        —          —          —           1,798   

Issue of restricted stock

     12,342        1         —          —          —          —          —           1   

Forfieted restricted shares

     (663        —          —          —          —          —           —     

Repurchase of treasury stock

     (154,247     —           —          —          (1,808     —          —           (1,808

ESOP shares earned

     —          —           —          —          —          424        —           424   

Change in price os ESOP shares

     —          —           (51     —          —          —          —           (51

Compensation expense, restricted stock awards

     —          —           105        —          —          —          —           105   

Net change in unrealized gain on securities available for sale, net of income taxes

     —          —           —          —          —          —          1,509         1,509   

Cash dividend to common stockholders

     —          —           —          (746     —          —          —           (746
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance September 30, 2016

     6,723,243        80         58,658        48,176        (15,279     (6,756     3,983         88,862   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

See accompanying Notes to Unaudited Consolidated Condensed Financial Statements

 

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Table of Contents

HOPFED BANCORP, INC.

Consolidated Condensed Statements of Cash Flows

(Dollars in Thousands)

(Unaudited)

 

     For the Nine Month Periods  
     Ended September 30,  
     2016     2015  

Cash flows from operating activities:

    

Net cash provided by operating activities

   $ 7,098      $ 5,977   

Cash flows from investing activities:

    

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

     54,274        91,119   

Purchase of securities available for sale

     (28,805     (28,162

Net increase in loans

     (24,246     (26,827

Proceeds from sale of foreclosed assets

     1,319        318   

Proceeds from sale of premises and equipment

     100        —     

Purchase of premises and equipment

     (551     (2,363
  

 

 

   

 

 

 

Net cash provided by investing activities

     2,091        34,085   
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net decrease in demand deposits

     (13,126     (1,582

Net decrease in time and other deposits

     (13,963     (23,528

Increase in advances from borrowers for taxes and insurance

     497        564   

Advances from Federal Home Loan Bank

     23,000        36,000   

Repayment of advances from Federal Home Loan Bank

     (27,000     (45,000

Net decrease in repurchase agreements

     (1,305     (11,058

Cash used to repurchase treasury stock

     (1,808     (11,370

Dividends paid on common stock

     (746     (770
  

 

 

   

 

 

 

Net cash used in financing activities

     (34,451     (56,744
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (25,262     (16,682

Cash and cash equivalents, beginning of period

     54,698        40,439   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 29,436      $ 23,757   
  

 

 

   

 

 

 

Supplemental disclosures of cash flow information:

    

Interest paid

   $ 4,060      $ 4,912   
  

 

 

   

 

 

 

Income taxes paid (refund)

   $ (700   $ 100   
  

 

 

   

 

 

 

Supplemental disclosures of non-cash investing and financing activities:

    

Loans charged off

   $ 674      $ 1,744   
  

 

 

   

 

 

 

Foreclosures and in substance foreclosures of loans during period

   $ 354      $ 843   
  

 

 

   

 

 

 

Net unrealized gains on investment securities classified as available for sale

   $ 2,286      $ 16   
  

 

 

   

 

 

 

Decrease in deferred tax asset related to unrealized gains on investments

   $ (777   $ (5
  

 

 

   

 

 

 

Dividends declared and payable

   $ 289      $ 289   
  

 

 

   

 

 

 

Issue of common stock to ESOP

   $ —        $ 7,884   
  

 

 

   

 

 

 

Issue of restricted common stock

   $ 145      $ 25   
  

 

 

   

 

 

 

See accompanying Notes to Unaudited Consolidated Condensed Financial Statements

 

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NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

HopFed Bancorp, Inc. (the “Company”) was formed at the direction of Heritage Bank USA Inc., 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.

On June 5, 2013, the Bank’s legal name became Heritage Bank USA Inc. and the Bank was granted a commercial bank charter by the Kentucky Department of Financial Institutions (“KDFI”). On June 5, 2013, the Bank became subject to regulation by the KDFI and the Federal Deposit Insurance Corporation (“FDIC”). On the same day, HopFed Bancorp was granted a bank holding company charter by the Federal Reserve Bank of Saint Louis (“FED”) and as such regulated by the FED.

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 Solutions, with offices in Murray, Kentucky, Kingston Springs, Tennessee, and Pleasant View, Tennessee. Heritage Solutions agents travel throughout western Kentucky and middle Tennessee offering fixed and variable annuities, mutual funds and brokerage services. In October of 2014, the Bank opened a loan production office in Nashville, Tennessee. In October 2016, the Bank opened a loan production office in Brentwood, Tennessee, that will be used our commercial loan officers and Heritage Mortgage 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 three month period ended September 30, 2016, are not necessarily indicative of results that may be expected for the entire fiscal year ending December 31, 2016.

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, 2015. The accounting policies followed by the Company are set forth in the Summary of Significant Accounting Policies in the Company’s December 31, 2015, Consolidated Financial Statements.

 

 

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(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 nine month periods ended September 30, 2016, and September 30, 2015. For the three and nine month periods ended September 30, 2016, and September 30, 2015, the Company’s financial statements reflect a liability adequate to release 32,226 and 37,063 shares, respectively, from the HopFed Bancorp, Inc. 2015 Employee Stock Ownership Plan (the “ESOP”). Therefore, the Company has included 32,226 and 37,063 shares held by the ESOP in the IPS calculation for the three and nine month periods ended September 30, 2016, and September 30, 2015, respectively. For the three and nine month periods ended September 30, 2016, and September 30, 2015, the Company has excluded all unearned shares held by the ESOP.

 

     For the three month periods ended
September 30.
 
     2016      2015  

Basic IPS:

     

Net income

   $ 985,000       $ 510,000   

Average common shares outstanding

     6,212,231         6,359,556   
  

 

 

    

 

 

 

Net income per share

   $ 0.16       $ 0.08   
  

 

 

    

 

 

 

Diluted IPS:

     

Net income

   $ 985,000       $ 510,000   

Average common shares outstanding

     6,212,231         6,359,556   

Dilutive effect of stock options

     —           —     
  

 

 

    

 

 

 

Average diluted shares outstanding

     6,212,231         6,359,556   
  

 

 

    

 

 

 

Net income per share, diluted

   $ 0.16       $ 0.08   
  

 

 

    

 

 

 
     For the nine month periods ended
September 30
 
     2016      2015  

Basic IPS:

     

Net income

   $ 1,798,000       $ 1,748,000   

Average common shares outstanding

     6,247,536         6,493,449   
  

 

 

    

 

 

 

Net income per share

   $ 0.29       $ 0.27   
  

 

 

    

 

 

 

Diluted IPS:

     

Net income

   $ 1,798,000       $ 1,748,000   

Average common shares outstanding

     6,247,536         6,493,449   

Dilutive effect of stock options

     —           —     
  

 

 

    

 

 

 

Average diluted shares outstanding

     6,247,536         6,493,449   
  

 

 

    

 

 

 

Net income per share, diluted

   $ 0.29       $ 0.27   
  

 

 

    

 

 

 

 

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(3) STOCK COMPENSATION

The Company incurred compensation cost related to the HopFed Bancorp, Inc. 2004 Long Term Incentive Plan of $27,000 and $105,000 for the three and nine month periods ended September 30, 2016, and $46,000 and $144,000 for the three and nine month periods ended September 30, 2015, respectively. The Company issued 856 and 12,342 shares of restricted stock during the three and nine month periods ended September 30, 2016. The Company issued 1,263 and 2,034 shares of restricted stock during the three and nine month periods ended September 30, 2015, respectively. The table below provides a detail of the Company’s future compensation expense related to restricted stock vesting at September 30, 2016:

 

Year Ending

December 31,

   Future
Expense
 

2016

   $ 30,974   

2017

     88,200   

2018

     54,067   

2019

     9,354   

2020

     1,977   
  

 

 

 

Total

   $ 184,572   
  

 

 

 

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.

 

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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 September 30, 2016, the Company has 24 securities with unrealized losses. The carrying amount of securities and their estimated fair values at September 30, 2016, were as follows:

 

     September 30, 2016  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair
Value
 
     (Dollars in Thousands)  

Restricted:

           

FHLB stock

   $ 4,428         —           —           4,428   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available for sale:

           

U.S. Treasury securities

   $ 2,000         4         —           2,004   

U.S. Agency securities

     78,524         2,611         (55      81,080   

Taxable municipal bonds

     2,730         53         (3      2,780   

Tax free municipal bonds

     36,473         1,968         (11      38,430   

Trust preferred securities

     1,630         353         —           1,983   

Mortgage-backed securities:

           

GNMA

     21,462         288         (44      21,706   

FNMA

     37,174         813         (48      37,939   

FHLMC

     7,392         111         —           7,503   

NON-AGENCY CMO

     3,774         —           (288      3,486   

AGENCY CMO

     16,096         283         (1      16,378   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 207,255         6,484         (450      213,289   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

The carrying amount of securities and their estimated fair values at December 31, 2015, was as follows:

 

     December 31, 2015  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair
Value
 
     (Dollars in Thousands)  

Restricted:

           

FHLB stock

   $ 4,428         —           —           4,428   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available for sale:

           

U.S. Treasury securities

   $ 2,001         —           (1      2,000   

U.S. Agency securities

     91,694         1,727         (488      92,933   

Tax free municipal bonds

     42,237         2,481         (59      44,659   

Taxable municipal bonds

     6,190         52         (65      6,177   

Trust preferred securities

     1,617         248         —           1,865   

Mortgage-backed securities:

           

GNMA

     29,990         239         (239      29,990   

FNMA

     28,189         266         (152      28,303   

FHLMC

     8,113         24         (51      8,086   

Non-Agency CMO

     3,828         —           (174      3,654   

AGENCY CMO

     19,570         71         (131      19,510   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 233,429         5,108         (1,360      237,177   
  

 

 

    

 

 

    

 

 

    

 

 

 

The scheduled maturities of debt securities available for sale at September 30, 2016, were as follows (Dollars in Thousands):

 

     Amortized
Cost
     Estimated
Fair
Value
 

Due within one year

   $ 4,579         4,590   

Due in one to five years

     13,932         14,287   

Due in five to ten years

     32,998         34,297   

Due after ten years

     14,052         15,211   
  

 

 

    

 

 

 
     65,561         68,385   

Amortizing agency bonds

     55,796         57,892   

Mortgage-backed securities

     85,898         87,012   
  

 

 

    

 

 

 

Total securities available for sale

   $ 207,255         213,289   
  

 

 

    

 

 

 

 

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Table of Contents

The scheduled maturities of debt securities available for sale at December 31, 2015, were as follows (Dollars in Thousands):

 

     Amortized
Cost
     Estimated
Fair
Value
 

Due within one year

   $ —           —     

Due in one to five years

     17,939         18,304   

Due in five to ten years

     42,151         42,793   

Due after ten years

     22,702         24,088   
  

 

 

    

 

 

 
     82,792         85,185   

Amortizing agency bonds

     60,947         62,449   

Mortgage-backed securities

     89,690         89,543   
  

 

 

    

 

 

 

Total securities available for sale

   $ 233,429         237,177   
  

 

 

    

 

 

 

The estimated fair value and unrealized loss amounts of temporarily impaired investments as of September 30, 2016, 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. Agency securities

   $ 5,314         (13     3,707         (42     9,021         (55

Taxable municipals

     554         (3     —           —          554         (3

Tax free municipals

     1,717         (11     —           —          1,717         (11

Mortgage-backed securities:

               

GNMA

     3,458         (7     4,938         (37     8,396         (44

FNMA

     7,301         (36     1,887         (12     9,188         (48

Agency CMO

     1,057         (1     —           —          1,057         (1

NON-AGENCY CMOs

     —           —          3,485         (288     3,485         (288
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total available for sale

   $ 19,401         (71     14,017         (379     33,418         (450
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

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Table of Contents

The estimated fair value and unrealized loss amounts of temporarily impaired investments as of December 31, 2015, 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. Treasury securities

U.S. Agency securities

Taxable municipals

   $

 

 

2,000

26,499

2,159

  

  

  

    

 

 

(1

(203

(32


   

 

 

—  

16,224

1,887

  

  

  

    

 

 

—  

(285

(33

  

   

 

 

2,000

42,723

4,046

  

  

  

    

 

 

(1

(488

(65


Tax free municipals

     —           —          3,878         (59     3,878         (59

Mortgage-backed securities:

               

GNMA

     10,840         (105     11,508         (134     22,348         (239

FNMA

     11,484         (87     3,036         (65     14,520         (152

FHLMC

     7,336         (51     —           —          7,336         (51

Non-Agency CMOs

     —           —          3,654         (174     3,654         (174

AGENCY CMOs

     9,781         (90     1,991         (41     11,772         (131
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Available for Sale

   $ 70,099         (569     42,178         (791     112,277         (1,360
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

At September 30, 2016, securities with a book value of approximately $118.0 million and a market value of approximately $123.7 million were pledged to various municipalities for deposits in excess of FDIC limits as required by law.

At September 30, 2016, securities with a book and market value of $44.5 million were sold under agreements to repurchase from various customers.

 

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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 September 30, 2016, and December 31, 2015. At September 30, 2016, and December 31, 2015, there were no concentrations of loans exceeding 10% of total loans other than as disclosed below:

 

     September 30, 2016
Amount
     September 30, 2016
Percent
    December 31, 2015
Amount
     December 31, 2015
Percent
 
     (Dollars in thousands, except percentages)  

Real estate loans:

  

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

   $ 146,744         25.0     145,999         26.0

Home equity lines of credit

     34,563         5.9     33,644         6.0

Junior liens

     1,601         0.3     1,771         0.3

Multi-family

     32,418         5.5     24,725         4.4

Construction

     37,775         6.5     34,878         6.2

Land

     22,999         3.9     22,453         4.0

Farmland

     46,877         8.0     42,246         7.5

Non-residential real estate

     170,759         29.1     149,711         26.6
  

 

 

    

 

 

   

 

 

    

 

 

 

Total mortgage loans

     493,736         84.2     455,427         81.0

Consumer loans

     8,908         1.5     20,324         3.6

Commercial loans

     83,684         14.3     86,743         15.4
  

 

 

    

 

 

   

 

 

    

 

 

 

Total other loans

     92,592         15.8     107,067         19.0
  

 

 

    

 

 

   

 

 

    

 

 

 

Total loans, gross

     586,328         100.0     562,494         100.0
     

 

 

      

 

 

 

Deferred loan cost, net of income

     (453        (445   

Less allowance for loan losses

     (6,812        (5,700   
  

 

 

      

 

 

    

Total loans

   $ 579,063           556,349      
  

 

 

      

 

 

    

The Federal Home Loan Bank of Cincinnati has issued letters of credit in the Bank’s name totaling $45.6 million secured by the Bank’s loan portfolio to secure additional municipal deposits.

 

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Table of Contents

The allowance for loan losses totaled $6.8 million at September 30, 2016, $5.7 million at December 31, 2015, and $5.5 million at September 30, 2015, respectively. The ratio of the allowance for loan losses to total loans was 1.16% at September 30, 2016, 1.01% at December 31, 2015, and 0.97% at September 30, 2015. At December 31, 2015 and September 30, 2016, the Company had no loans past due more than 90 days still accruing interest. The following table indicates the type and level of non-accrual loans at the periods indicated below:

 

     September 30, 2016      December 31, 2015      September 30, 2015  
    

(Dollars in Thousands)

 

One-to-four family mortgages

   $ 700         2,234         1,427   

Home equity line of credit

     124         48         48   

Multi-family

     1,772         1,968         1,968   

Land

     7,842         1,553         1,680   

Non-residential real estate

     248         247         672   

Farmland

     —           166         168   

Consumer loans

     31         8         —     

Commercial loans

     947         1,198         1,195   
  

 

 

    

 

 

    

 

 

 

Total non-accrual loans

   $ 11,664         7,422         7,158   
  

 

 

    

 

 

    

 

 

 

 

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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 nine month period ended September 30, 2016 (Dollars in Thousands):

 

                         General     Specific     Ending  
     Balance      Charge off     Recovery      Provision     Provision     Balance  
     12/31/2015      2016     2016      2016     2016     9/30/2016  

One-to-four family mortgages

   $ 1,030         —          164         162        (224     1,132   

Home equity line of credit

     201         (30     12         134        18        335   

Junior liens

     8         —          14         3        (14     11   

Multi-family

     227         —          —           68        213        508   

Construction

     377         —          —           429        —          806   

Land

     1,379         —          —           (266     (69     1,044   

Non-residential real estate

     1,139         —          6         138        (39     1,244   

Farmland

     358         —          —           657        —          1,015   

Consumer loans

     358         (322     122         (166     221        213   

Commercial loans

     623         (322     290         (22     (65     504   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
   $ 5,700         (674     608         1,137        41        6,812   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

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, 2015 (Dollars in Thousands):

 

                         General     Specific     Ending  
     Balance      Charge off     Recovery      Provision     Provision     Balance  
     12/31/2014      2015     2015      2015     2015     12/31/2015  

One-to-four family mortgages

   $ 1,198         (143     39         (176     112        1,030   

Home equity line of credit

     181         (92     10         20        82        201   

Junior liens

     14         —          4         (6     (4     8   

Multi-family

     85         —          —           4        138        227   

Construction

     146         —          —           231        —          377   

Land

     1,123         (911     —           850        317        1,379   

Non-residential real estate

     2,083         (222     2         (944     220        1,139   

Farmland

     461         —          —           500        (603     358   

Consumer loans

     494         (298     118         (123     167        358   

Commercial loans

     504         (201     54         (61     327        623   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
   $ 6,289         (1,867     227         295        756        5,700   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

 

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Table of Contents

The table below presents past due and non-accrual balances at September 30, 2016, by loan classification allocated between performing and non-performing:

 

            30 - 89                    Impaired Loans         
     Currently      Days      Non-accrual      Special      Currently Performing         
     Performing      Past Due      Loans      Mention      Substandard      Doubtful      Total  
     (Dollars in Thousands)  

One-to-four family mortgages

     144,121         466         700         753         704         —           146,744   

Home equity line of credit

     33,970         53         124         25         391         —           34,563   

Junior liens

     1,552         5         —           32         12         —           1,601   

Multi-family

     27,623         —           1,772         —           3,023         —           32,418   

Construction

     37,775         —           —           —           —           —           37,775   

Land

     14,562         —           7,842         37         558         —           22,999   

Farmland

     44,040         26         —           505         2,306         —           46,877   

Non-residential real estate

     160,096         —           248         5         10,410         —           170,759   

Consumer loans

     8,603         2         31         —           272         —           8,908   

Commercial loans

     79,450         34         947         666         2,587         —           83,684   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     551,792         586         11,664         2,023         20,263         —           586,328   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The table below presents past due and non-accrual balances at December 31, 2015, by loan classification allocated between performing and non-performing (Dollars in Thousands):

 

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

One-to-four family mortgages

   $ 142,058         671         2,234         41         995         —         $ 145,999   

Home equity line of credit

     33,396         79         48         —           121         —           33,644   

Junior liens

     1,720         —           —           35         16         —           1,771   

Multi-family

     21,638         6         1,968         —           1,113         —           24,725   

Construction

     34,878         —           —           —           —           —           34,878   

Land

     11,047         747         1,553         41         9,065         —           22,453   

Non-residential real estate

     138,637         228         247         2,489         8,110         —           149,711   

Farmland

     41,853         64         166         —           163         —           42,246   

Consumer loans

     20,108         15         8         —           193         —           20,324   

Commercial loans

     84,272         45         1,198         352         876         —           86,743   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 529,607         1,855         7,422         2,958         20,652         —           562,494   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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The following table presents the balance in the allowance for loan losses and the recorded investment in loans as of September 30, 2016, and December 31, 2015, by portfolio segment and based on the impairment method as of September 30, 2016, and December 31, 2015.

 

            Land                              
            Development /      Commercial      Residential                
     Commercial      Construction      Real Estate      Real Estate      Consumer      Total  

September 30, 2016:

                 

Allowance for loan losses:

                 

Ending allowance balance attributable to loans:

                 

Individually evaluated for impairment

   $ 83         —           452         —           70       $ 605   

Collectively evaluated for impairment

     421         1,850         2,315         1,478         143         6,207   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending allowance balance

   $ 504         1,850         2,767         1,478         213       $ 6,812   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans:

                 

Loans individually evaluated for impairment

   $ 3,534         8,400         17,759         1,931         303       $ 31,927   

Loans collectively evaluated for impairment

     80,150         52,374         232,295         180,977         8,605         554,401   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending loans balance

   $ 83,684         60,774         250,054         182,908         8,908         586,328   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
            Land                              
            Development /      Commercial      Residential                
     Commercial      Construction      Real Estate      Real Estate      Consumer      Total  
     (Dollars in Thousands)  

December 31, 2015:

                 

Allowance for loan losses:

                 

Ending allowance balance attributable to loans:

                 

Individually evaluated for impairment

   $ 180         69         272         60         49       $ 630   

Collectively evaluated for impairment

     443         1,687         1,452         1,179         309         5,070   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending allowance balance

   $ 623         1,756         1,724         1,239         358       $ 5,700   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans:

                 

Loans individually evaluated for impairment

   $ 2,074         10,618         11,767         3,414         201       $ 28,074   

Loans collectively evaluated for impairment

     84,669         46,713         204,915         178,000         20,123         534,420   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending loans balance

   $ 86,743         57,331         216,682         181,414         20,324       $ 562,494   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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 mentioned, 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 nine month periods ended September 30, 2016, September 30, 2015, and the year ended December 31, 2015, was 0.02%, 0.37% and 0.29%, respectively. The ratios of allowance for loan losses to non-accrual loans at September 30, 2016, September 30, 2015, and December 31, 2015, were 58.40%, 76.70%, and 76.80%, 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.

The Company conducts annual reviews on all loan relationships above one million to ascertain the borrowers continued ability to service their debt as agreed. In addition to the credit relationships mentioned above, management may classify 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 ninety days. The Company uses the following risk definitions for commercial loan risk grades:

Excellent - Loans in this category are to persons or entities of unquestioned financial strength, a highly liquid financial position, with collateral that is liquid and well margined. These borrowers have performed without question on past obligations, and the bank expects their performance to continue. Internally generated cash flow covers current maturities of long-term debt by a substantial margin. Loans secured by bank certificates of deposit and savings accounts, with appropriate holds placed on the accounts, are to be rated in this category.

 

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Table of Contents

Very Good - These are loans to persons or entities with strong financial condition and above- average liquidity who have previously satisfactorily handled their obligations with the bank. Collateral securing the bank’s debt is margined in accordance with policy guidelines. Internally generated cash flow covers current maturities of long-term debt more than adequately. Unsecured loans to individuals supported by strong financial statements and on which repayment is satisfactory may be included in this classification.

Satisfactory - Assets of this grade conform to substantially all the Bank’s underwriting criteria and evidence an average level of credit risk; however, such assets display more susceptibility to economic, technological or political changes since they lack the above average financial strength of credits rated Very Good. Borrower’s repayment capacity is considered to be adequate. Credit is appropriately structured and serviced; payment history is satisfactory.

Acceptable - Assets of this grade conform to most of the Bank’s underwriting criteria and evidence an acceptable, though higher than average, level of credit risk; however, these loans have certain risk characteristics which could adversely affect the borrower’s ability to repay given material adverse trends. Loans in this category require an above average level of servicing and show more reliance on collateral and guaranties to preclude a loss to the Bank should material adverse trends develop. If the borrower is a company, its earnings, liquidity and capitalization are slightly below average when compared to its peers.

Watch - These loans are characterized by borrowers who have marginal cash flow, marginal profitability, or have experienced an unprofitable year and a declining financial condition. The borrower has in the past satisfactorily handled debts with the bank, but in recent months has either been late, delinquent in making payments, or made sporadic payments. While the bank continues to be adequately secured, margins have decreased or are decreasing, despite the borrower’s continued satisfactory condition. Other characteristics of borrowers in this class include inadequate credit information, weakness of financial statement and repayment capacity, but with collateral that appears to limit exposure. This classification includes loans to established borrowers that are reasonably margined by collateral, but where potential for improvement in financial capacity appears limited.

Special Mention - Loans in this category have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deteriorating prospects for the asset or in the institution’s credit position at some future date. Borrowers may be experiencing adverse operating trends or market conditions. Non- financial reasons for rating a credit exposure Special Mention include, but are not limited to: management problems, pending litigations, ineffective loan agreement and/or inadequate loan documentation, structural weaknesses and/or lack of control over collateral.

 

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Table of Contents

Substandard - A substandard asset is inadequately protected by the current sound worth or paying capacity of the debtor or the collateral pledged. There exists one or more well defined weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility the Bank will experience some loss if the deficiencies are not corrected. Generally, the asset is considered collectible as to both principal and interest primarily because of collateral coverage or enterprise value. Generally, the asset is current and marginally secured.

Doubtful - A loan classified as doubtful has all the weaknesses inherent in a loan classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collectability in full in a reasonable period of time; in fact, there is permanent impairment in the collateral securing the bank’s loan. These loans are in a work-out status and have a defined work-out strategy.

Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. The bank takes losses in the period in which they become uncollectible.

The following credit risk standards are assigned to consumer loans.

Satisfactory - All consumer open-end and closed-end retail loans shall have an initial risk grade assigned of 3 - Satisfactory.

Substandard Assets - All consumer open-end and closed-end retail loans past due 90 cumulative days from the contractual date will be classified as 7 - Substandard. If a consumer/retail loan customer files bankruptcy, the loan will be classified as 7 - Substandard regardless of payment history.

Loss Assets - All closed-end retail loans that become past due 120 cumulative days and open-end retail loans that become past due 180 cumulative days from the contractual due date will be charged off as loss assets. The charge off will be taken by the end of the month in which the 120-day or 180-day time period elapses. All losses in retail credit will be recognized when the affiliate becomes aware of the loss, but in no case should the charge off exceed the time frames stated within this policy.

A loan is considered to be impaired when management determines that it is possible 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 or using the fair value of the collateral less cost to sell if the loan is collateral dependent. Currently, it is management’s practice to classify all substandard or doubtful loans as impaired.

 

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Table of Contents

At September 30, 2016, December 31, 2015, and September 30, 2015, the Company’s impaired loans totaled $31.9 million, $28.1 million and $23.5 million, respectively. At September 30, 2016, December 31, 2015 and September 30, 2015, the Company’s specific reserve for impaired loans totaled $605,000, $630,000 and $545,000 respectively. A summary of the Company’s impaired loans, including their respective regulatory classification and their respective specific reserve at September 30, 2016, and December 31, 2015, were as follows:

 

            Special      Impaired Loans             Specific
Allowance
for
    

Allowance

for

Loans not

 

September 30, 2016

   Pass      Mention      Substandard      Doubtful      Total      Impairment      Impaired  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 144,587         753         1,404         —           146,744         —           1,132   

Home equity line of credit

     34,023         25         515         —           34,563         —           335   

Junior liens

     1,557         32         12         —           1,601         —           11   

Multi-family

     27,623         —           4,795         —           32,418         351         157   

Construction

     37,775         —           —           —           37,775         —           806   

Land

     14,562         37         8,400         —           22,999         —           1,044   

Non-residential real estate

     160,096         5         10,658         —           170,759         101         1,143   

Farmland

     44,066         505         2,306         —           46,877         —           1,015   

Consumer loans

     8,605         —           303         —           8,908         70         143   

Commercial loans

     79,484         666         3,534         —           83,684         83         421   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 552,378         2,023         31,927         —           586,328         605         6,207   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
            Special      Impaired Loans             Specific
Allowance
for
    

Allowance

for

Loans not

 

December 31, 2015

   Pass      Mention      Substandard      Doubtful      Total      Impairment      Impaired  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 142,729         41         3,229         —           145,999         60         970   

Home equity line of credit

     33,475         —           169         —           33,644         —           201   

Junior lien

     1,720         35         16         —           1,771         —           8   

Multi-family

     21,644         —           3,081         —           24,725         138         89   

Construction

     34,878         —           —           —           34,878         —           377   

Land

     11,794         41         10,618         —           22,453         69         1,310   

Non-residential real estate

     138,865         2,489         8,357         —           149,711         134         1,005   

Farmland

     41,917         —           329         —           42,246         —           358   

Consumer loans

     20,123         —           201         —           20,324         49         309   

Commercial loans

     84,317         352         2,074         —           86,743         180         443   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 531,462         2,958         28,074         —           562,494         630         5,070   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Impaired loans by classification type and the related valuation allowance amounts at September 30, 2016, were as follows:

 

     At September 30, 2016      For the nine month period ended
September 30, 2016
 
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 
     (Dollars in Thousands)  

Impaired loans with no specific allowance:

              

One-to-four family mortgages

   $ 1,404         1,404         —           1,627         53   

Home equity line of credit

     515         515         —           257         14   

Junior liens

     12         12         —           13         1   

Multi-family

     2,085         2,085         —           3,920         47   

Construction

     —           —           —           —           —     

Land

     8,400         9,357         —           11,012         512   

Farmland

     2,306         2,306         —           913         84   

Non-residential real estate

     9,951         9,951         —           8,850         336   

Consumer loans

     24         24         —           37         2   

Commercial loans

     2,599         2,599         —           4,444         119   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     27,296         28,253         —           31,073         1,168   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans with a specific allowance:

              

One-to-four family mortgages

     —           —           —           786         —     

Home equity line of credit

     —           —           —           —           —     

Junior liens

     —           —           —           —           —     

Multi-family

     2,710         2,781         351         310         105   

Construction

     —           —           —           —           —     

Land

     —           —           —           191         —     

Farmland

     —           —           —           —           —     

Non-residential real estate

     707         707         101         712         22   

Consumer loans

     279         279         70         227         —     

Commercial loans

     935         935         83         950         49   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,631         4,702         605         3,176         176   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 31,927         32,955         605         34,249         1,344   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

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Table of Contents

Impaired loans by classification type and the related valuation allowance amounts at December 31, 2015, were as follows:

 

     At December 31, 2015      For the year ended
December 31, 2015
 
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 
     (Dollars in Thousands)  

Impaired loans with no specific allowance

              

One-to-four family mortgages

   $ 2,526         2,526         —           2,389         80   

Home equity line of credit

     169         169         —           457         7   

Junior liens

     16         16         —           17         1   

Multi-family

     2,128         2,128         —           2,797         126   

Construction

     —           —           —           —           —     

Land

     10,038         10,998         —           8,520         671   

Non-residential real estate

     7,640         7,640         —           283         404   

Farmland

     329         329         —           7,774         19   

Consumer loans

     5         5         —           3         —     

Commercial loans

     1,274         1,274         —           1,599         73   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     24,125         25,085         —           23,839         1,381   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans with a specific allowance

              

One-to-four family mortgages

   $ 703         703         60         709         40   

Home equity line of credit

     —           —           —           —           —     

Junior liens

     —           —           —           —           —     

Multi-family

     953         953         138         318         17   

Construction

     —           —           —           —           —     

Land

     580         580         69         1,707         46   

Non-residential real estate

     717         717         134         836         28   

Farmland

     —           —           —           —           —     

Consumer loans

     196         196         49         194         —     

Commercial loans

     800         800         180         514         15   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     3,949         3,949         630         4,278         146   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 28,074         29,034         630         28,117         1,527   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

On a periodic basis, the Bank may modify the terms of certain loans. In evaluating whether a restructuring constitutes a troubled debt restructuring (TDR), Financial Accounting Standards Board has issued Accounting Standards Update 310 (ASU 310), A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring. In evaluating whether a restructuring constitutes a TDR, the Bank must separately conclude that both of the following exist:

 

    The restructuring constitutes a concession

 

    The debtor is experiencing financial difficulties

ASU 310 provides the following guidance for the Bank’s evaluation of whether it has granted a concession as follows:

 

    If a debtor does not otherwise have access to funds at a market interest rate for debt with similar risk characteristics as the restructured debt, the restructured debt would be considered a below market rate, which may indicate that the Bank may have granted a concession. In that circumstance, the Bank should consider all aspects of the restructuring in determining whether it has granted a concession, the creditor must make a separate assessment about whether the debtor is experiencing financial difficulties to determine whether the restructuring constitutes a TDR.

 

    A temporary or permanent increase in the interest rate on a loan as a result of a restructuring does not eliminate the possibility of the restructuring from being considered a concession if the new interest rate on the loan is below the market interest rate for loans of similar risk characteristics.

 

    A restructuring that results in a delay in payment that is insignificant is not a concession. However, the Bank must consider a variety of factors in assessing whether a restructuring resulting in a delay in payment is insignificant.

At December 31, 2015, the Company had eight loans, representing two lending relationships, classified as performing TDR’s. During the nine month period ended September 30, 2016, the Company added four loans to TDR status, representing one additional lending relationship, as a performing TDR. The loans added to TDR classification are paying interest only for one year while the customer attempts to sell the collateral. A summary of the activity in loans classified as TDRs for the nine month period ended September 30, 2016, is as follows:

 

     Balance
at
     New      Loss or      Loan    

Removed
from

(Taken to)

     Balance at  
     12/31/15      TDR      Foreclosure      Amortization     Non-accrual      09/30/16  
     (Dollars in Thousands)  

Multi-family real estate

   $ —           816         —           —          —           816   

Non-residential real estate

     5,536         228         —           (77     —           5,687   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total performing TDR

   $ 5,536         1,044         —           (77     —           6,503   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

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Table of Contents

A summary of the activity in loans classified as TDRs for the year ended December 31, 2015, is as follows:

 

     Balance at      New      Loss or      Loan    

Removed
from

(Taken to)

     Balance at  
     12/31/14      TDR      Foreclosure      Amortization     Non-accrual      12/31/15  
     (Dollars in Thousands)  

Non-residential real estate

   $ 3,284         2,265         —           (13     —           5,536   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total performing TDR

   $ 3,284         2,265         —           (13     —           5,536   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

(6) NON-PERFORMING ASSETS

The Company’s real estate and other assets owned represent properties and personal collateral acquired through customer loan defaults. The property is recorded at the lower of cost or fair value less estimated cost to sell and carrying cost at the date acquired. Any difference between the book value and estimated market value is recognized as a charge off through the allowance for loan loss account. Additional real estate owned and other asset losses may be determined on individual properties at specific intervals or at the time of disposal. In general, the Company will obtain a new appraisal on all real estate owned with a book balance in excess of $250,000 on an annual basis. Additional losses are recognized as a non-interest expense.

At September 30, 2016, December 31, 2015, and September 30, 2015, the Company had balances in other real estate and assets owned and non-accrual loans consisting of the following:

 

     September 30, 2016     December 31, 2015     September 30, 2015  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ —          55        55   

Home equity line of credit

     68        —          —     

Multi-family mortgages

     141        —          —     

Land

     73        943        943   

Non-residential real estate

     459        738        738   
  

 

 

   

 

 

   

 

 

 

Total other assets owned

   $ 741        1,736        1,736   

Total non-accrual loans

   $ 11,664        7,422        7,158   

Past due 90 days still accruing

         1,486   
      

 

 

 

Total non-performing assets

   $ 12,405        9,158        10,380   
  

 

 

   

 

 

   

 

 

 

Non-performing assets /Average assets

     1.42     1.02     1.18
  

 

 

   

 

 

   

 

 

 

 

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The following is a summary of the activity in the Company’s real estate and other assets owned for the nine month period ending September 30, 2016:

 

     Balance      Activity During 2016     Reduction      Gain (Loss)     Balance  
     12/31/2015      Foreclosures      Proceeds     in Values      on Sale     9/30/2016  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 55         —           (43     —           (12   $ —     

Home equity line of credit

     —           68         —          —           —          68   

Multi-family real estate

     —           141         —          —           —          141   

Land

     943         130         (987     —           (13     73   

Non-residential real estate

     738         —           (270     —           (9     459   

Consumer

     —           15         (19     —           4        —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ 1,736         354         (1,319     —           (30   $ 741   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

The following is a summary of the activity in the Company’s real estate and other assets owned for the year ended December 31, 2015:

 

     Activity During 2015  
     Balance                   Reduction      Loss     Balance  
     12/31/2014      Foreclosures      Proceeds     in Values      on Sale     12/31/2015  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 159         105         (194     —           (15   $ 55   

Land

     1,768         —           (124     —           (701     943   

Non-residential real estate

     —           738         —          —           —          738   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ 1,927         843         (318     —           (716   $ 1,736   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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(7) INVESTMENTS 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 Statements of Financial Condition

 

     At      At  
     September 30, 2016      December 31, 2015  
     (Dollars in Thousands)  

Assets - 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 stockholders’ equity

   $ 10,310         10,310   
  

 

 

    

 

 

 

Summary Statement of Income

 

     Three Month Periods      Nine Month Periods  
     Ended September 30,      Ended September 30,  
     2016      2015      2016      2015  
     (Dollars in Thousands)  

Income – interest income from subordinated debentures issued by HopFed Bancorp, Inc.

   $ 102         87       $ 296         264   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 102         87       $ 296         264   
  

 

 

    

 

 

    

 

 

    

 

 

 

Summary Statement of Stockholders’ Equity

(For the nine month period ended September 30, 2016)

(Dollars in Thousands)

 

     Trust
Preferred
Securities
     Common
Stock
     Retained
Earnings
     Total
Stockholders’
Equity
 

Beginning balances, December 31, 2015

   $ 10,000         310         —           10,310   

Net income

     —           —           296         296   

Dividends:

           

Trust preferred securities

     —           —           (287      (287

Common paid to HopFed Bancorp, Inc.

     —           —           (9      (9
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balances, September 30, 2016

   $ 10,000         310         —           10,310   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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(8) FAIR VALUE OF ASSETS AND LIABILITIES

In September 2006, the FASB issued ASC 820-10, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value. The statement establishes a fair value hierarchy which requires an entity to maximize the use of observable input and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.

 

    Level 1 is for assets and liabilities that management has obtained quoted prices (unadjusted for transaction cost) or identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

 

    Level 2 is for assets and liabilities in which significant unobservable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

    Level 3 is for assets and liabilities in which significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available for sale are determined by a matrix pricing, which is a mathematical technique that is widely used in the industry to value debt securities without exclusively using quoted prices for the individual securities in the Company’s portfolio but rather by relying on the securities relationship to other benchmark quoted securities. Impaired loans are valued at the net present value of expected payments using the fair value of any assigned collateral. The values for bank owned life insurance are obtained from stated values from the respective insurance companies. The liability associated with the Company’s derivative is obtained from a quoted value supplied by our correspondent banker. The value of real estate owned is obtained from appraisals completed on properties at the time of acquisition and annually thereafter.

 

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Assets and Liabilities Measured on a Recurring Basis

The assets and liabilities measured at fair value on a recurring basis at September 30, 2016, are summarized below:

 

Description

   Total carrying
value in the
consolidated
balance sheet at
September 30, 2016
     Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 
     (Dollars in Thousands)  

Assets

           

Available for sale securities

   $ 213,289         2,004         209,302         1,983   

The assets and liabilities measured at fair value on a recurring basis at December 31, 2015, are summarized below

 

Description

   Total carrying
value in the
consolidated
balance sheet at
December 31, 2015
     Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 
     (Dollars in Thousands)  

Assets

           

Available for sale securities

   $ 237,177         2,000         233,312         1,865   

 

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The assets and liabilities measured at fair value on a non-recurring basis are summarized below for September 30, 2016:

 

Description

   Total carrying
value in the
consolidated
balance sheet at
September 30, 2016
     Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 
     (Dollars in Thousands)  

Assets

  

Other real estate and other assets owned

   $ 741         —           —         $ 741   

Impaired loans, net of allowance of $605

   $ 4,026         —           —         $ 4,026   

The assets and liabilities measured at fair value on a non-recurring basis are summarized below for December 31, 2015:

 

Description

   Total carrying
value in the
consolidated
balance sheet at
December 31, 2015
     Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 
     (Dollars in Thousands)  

Assets

           

Other real estate and other assets owned

   $ 1,736         —           —         $ 1,736   

Impaired loans, net of allowance of $630

   $ 3,319         —           —         $ 3,319   

 

 

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The table below includes a roll-forward of the consolidated condensed statement of financial condition items for the nine month periods ended September 30, 2016, and September 30, 2015, (including the change in fair value) for assets and liabilities classified by HopFed Bancorp, Inc. within level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis. When a determination is made to classify an asset or liability within level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, since level 3 assets and liabilities typically include, in addition to the unobservable or level 3 components, observable components (that is components that are actively quoted and can be validated to external sources), the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.

 

     2016      2015  

Nine month period ended September 30,

   Other Assets      Other Liabilities      Other Assets      Other Liabilities  
     (Dollars in Thousands)  

Fair value, January 1,

   $ 1,865         —           1,489         —     

Change in unrealized gain included in other comprehensive income for assets and liabilities still held at September 30,

     105         —           289         —     

Accretion of previous discounted amounts

     13            12      

Purchases, issuances and settlements, net

     —           —           —           —     

Transfers in and/or out of Level 3

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair value, September 30,

   $ 1,983         —           1,790         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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The estimated fair values of financial instruments were as follows at September 30, 2016:

 

     Carrying
Amount
     Estimated
Fair
Value
     Quoted Prices
In Active Markets
for Identical
Assets
Level 1
     Using
Significant
Other
Observable
Inputs
Level 2
     Significant
Unobservable
Inputs
Level 3
 
     (Dollars in Thousands)  

Financial Assets:

              

Cash and due from banks

   $ 24,741         24,741         24,741         —           —     

Interest-earning deposits

     4,695         4,695         4,695         —           —     

Securities available for sale

     213,289         213,289         2,004         209,302         1,983   

Federal Home Loan Bank stock

     4,428         4,428         —           4,428         —     

Loans held for sale

     1,547         1,547         —           1,547         —     

Loans receivable

     579,063         573,655         —           —           573,655   

Accrued interest receivable

     3,603         3,603         —           3,603         —     

Financial liabilities:

              

Deposits

     712,317         712,426         130,327         582,099         —     

Advances from borrowers for taxes and insurance

     1,111         1,111         —           1,111         —     

Advances from Federal Home Loan Bank

     11,000         11,022         —           11,022         —     

Repurchase agreements

     44,465         44,465         —           44,465         —     

Subordinated debentures

     10,310         10,099         —           —           10,099   

 

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The estimated fair values of financial instruments were as follows at December 31, 2015:

 

     Carrying
Amount
     Estimated
Fair
Value
     Quoted Prices
In Active Markets
for Identical
Assets
Level 1
     Using
Significant
Other
Observable
Inputs
Level 2
     Significant
Unobservable
Inputs
Level 3
 
     (Dollars in Thousands)  

Financial Assets:

              

Cash and due from banks

   $ 46,926         46,926         46,926         —           —     

Interest-earning deposits

     7,772         7,772         7,772         —           —     

Securities available for sale

     237,177         237,177         2,000         233,312         1,865   

Federal Home Loan Bank stock

     4,428         4,428         —           4,428         —     

Loans held for sale

     2,792         2,792         —           2,792         —     

Loans receivable

     556,349         552,981         —           —           552,981   

Accrued interest receivable

     4,139         4,139         —           4,139         —     

Financial liabilities:

              

Deposits

     739,406         724,877         —           724,877         —     

Advances from borrowers for taxes and insurance

     614         614         —           614         —     

Advances from Federal Home Loan Bank

     15,000         14,985         —           14,985         —     

Repurchase agreements

     45,770         45,931         —           45,931         —     

Subordinated debentures

     10,310         10,099         —           —           10,099   

(9) EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

ASU 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20) – Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” ASU 2015-01 eliminates from U.S. GAAP the concept of extraordinary items, which, among other things, required an entity to segregate extraordinary items considered to be unusual and infrequent from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. ASU 2015-01 was effective for the Company beginning January 1, 2016, though early adoption was permitted. The implementation of ASU 2015-01 did not have a significant impact on the Company’s Consolidated Financial Statements.

ASU No. 2015-02, “Amendments to the Consolidation Analysis.” This ASU affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities; (2) Eliminate the presumption that a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU No. 2015-02 was effective for interim and annual reporting periods beginning after December 15, 2015. The provisions of ASU No. 2015-02 did not have a material impact on the Company’s Consolidated Financial Statements.

 

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ASU 2015-05, “Intangibles – Goodwill and Other - Internal-Use Software (Subtopic 350-40) – Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” ASU 2015-05 addresses accounting for fees paid by a customer in cloud computing arrangements such as (i) software as a service, (ii) platform as a service, (iii) infrastructure as a service and (iv) other similar hosting arrangements. ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 was effective on January 1, 2016, and did not have a material impact on the Company’s Consolidated Financial Statements.

ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30) – Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting.” ASU 2015-15 adds SEC paragraphs pursuant to an SEC Staff Announcement that given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 did not have a significant impact on the Company’s Consolidated Financial Statements.

In September 2015, the FASB issued Accounting Standards Update No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. The guidance in this update eliminates the requirement to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The new guidance is intended to reduce complexity in financial reporting. The elimination of the restatement requirement should simplify financial reporting for many entities. However, recognizing the entire impact of a measurement period adjustment in a single reporting period may introduce earnings volatility and reduce comparability between periods when the adjustments are material. The accounting changes in this update are effective for public companies for annual periods, and the interim periods within those annual periods, beginning after December 15, 2015. Early application was permitted for financial statements that have not been issued. The implementation of ASU 2015-16 did not have a material impact on the Company’s Consolidated Financial Statements.

ASU 2016-1, “No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-1, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments,

 

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(vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. ASU 2016-1 will be effective on January 1, 2018, and is not expected to have a significant impact on the Company’s financial statements.

On June 16, 2016, the FASB released its finalized ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendments to U.S. GAAP require businesses and other organization to measure the expected credit losses on financial assets, such as loans, securities, bond insurance, and many receivables, the FASB said. The accounting changes apply to instruments recorded on balance sheets at their historical cost, although there are some limited changes to the accounting for debt instruments classified as available-for-sale. The accounting board added that the write-downs will be based on historical information, current business conditions, and forecasts, and it expects the forecasts to improve the loss estimates on financial assets that are losing value. The board also said the techniques that are employed today to write down loans and other instruments can still be used, although it expects the variables for calculating the losses to change. ASU 2016-13 will become effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Companies are permitted to adopt ASU 2016-13 in fiscal years beginning after December 15, 2018. The Company has not made a determination as to how the implementation of ASU 2016-13 will affect the Company’s consolidated financial statements.

ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 will, among other things, require lessees to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model and ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2016-02 will be effective for us on January 1, 2019 and will require transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the potential impact of ASU 2016-02 on our financial statements.

ASU 2016-05 Derivatives and Hedging (Topic 815) Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.” ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under ASC Topic 815 does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. ASU 2016-05 will be effective for us on January 1, 2017, and is not expected to have a significant impact on our financial statements.

 

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ASU 2016-07, “Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.” The amendments affect all entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence. ASU 2016-07 simplifies the transition to the equity method of accounting by eliminating retroactive adjustment of the investment when an investment qualifies for use of the equity method, among other things. ASU 2016-07 will be effective for us on January 1, 2017 and is not expected to have a significant impact on our financial statements.

ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Under ASU 2016-09 all excess tax benefits and tax deficiencies related to share-based payment awards should be recognized as income tax expense or benefit in the income statement during the period in which they occur. Previously, such amounts were recorded in the pool of excess tax benefits included in additional paid-in capital, if such pool was available. Because excess tax benefits are no longer recognized in additional paid-in capital, the assumed proceeds from applying the treasury stock method when computing earnings per share should exclude the amount of excess tax benefits that would have previously been recognized in additional paid-in capital. Additionally, excess tax benefits should be classified along with other income tax cash flows as an operating activity rather than a financing activity, as was previously the case. ASU 2016-09 also provides that an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. ASU 2016-09 changes the threshold to qualify for equity classification (rather than as a liability) to permit withholding up to the maximum statutory tax rates (rather than the minimum as was previously the case) in the applicable jurisdictions. ASU 2016-09 will be effective on January 1, 2017 and is not expected to have a significant impact on our financial statements.

ASU 2016-15 “Statement of Cash Flows (Topic 230)” (“ASU 2016-15”) is intended to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows. ASU 2016-15 is effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted with retrospective application. We are evaluating the impact adoption of ASU 2016-15 will have on our consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

 

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(10) INCOME TAXES

The Company and its subsidiaries file consolidated federal income tax returns and Tennessee excise tax returns. The Company and its non-bank subsidiaries filed consolidated Kentucky income tax returns. The Bank is exempt from Kentucky corporate income tax. The Company has no unrecognized tax benefits and has accrued any interest or penalties for uncertain tax positions. The effective tax rate differs from the statutory federal rate of 34% and Tennessee excise rate of 6.50% due to investments in qualified municipal securities; bank owned life insurance, income apportioned to Kentucky and certain non-deductible expenses.

(11) OTHER ASSETS

The Company has invested in two flow-through limited liability entities that manage and invest in affordable housing projects that qualify for historic, low-income and elderly housing tax credits. At September 30, 2016, the Company’s total investment in each entity was $39,250 and $923,000, respectively. The Company has no future capital commitments to either entity. The amounts recognized in net income for these investments for the three and nine month periods below include:

 

     For the three months ended      For the nine months ended  
     September 30,      September 30,  
     2016      2015      2016      2015  
     (Dollars in Thousands)  

Investment loss included in pre-tax net income

   $ 55         55       $ 165         165   

Tax credits recognized in provision for income taxes

     —           24         —           72   

 

 

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(12) ESOP

All Company employees participate in the 2015 HopFed Bancorp, Inc. Employee Stock Ownership Plan (“ESOP”). The ESOP purchased 600,000 shares of the Company’s common stock from the Company on March 2, 2015, at $13.14 per share. The ESOP borrowed $7.9 million from an open-end line of credit from the Company for the purchase of the stock, using the 600,000 shares of common stock as collateral. The Company makes discretionary contributions to the ESOP. The ESOP utilizes these contributions along with the dividends on the 600,000 held by the ESOP to repay the loan from the Company. When loan payments are made, ESOP shares are released based on reduction in the principal balance of the loan. The shares are allocated to participants based on relative compensation. Employees who are not employed at the December 31st of each year are not eligible for participation in the ESOP. The Company anticipates that loan payments will be made at the end of each year. Participants receive shares at the end of employment. The Company has the option to repurchase the shares or provide the shares directly to the employee.

The Company made its first ESOP loan payment in December 2015. In January 2016, the ESOP and Company revised the loan to the ESOP converting the loan to a closed end note with total payments of approximately $780,000 per year for a term of eleven years. At September 30, 2016, the Company’s accrued liability for the loan payment is $528,000. At September 30, 2016, shares held by the ESOP were as follows:

 

     September 30, 2016  
     (Dollars in Thousands,
Except Shares)
 

Accrued to allocation to participants

     32,226   

Earned ESOP shares

     53,587   

Unearned ESOP shares

     514,187   
  

 

 

 

Total ESOP shares

     600,000   
  

 

 

 

Fair value of unearned shares

   $ 5,758,894   
  

 

 

 

(13) COMMITMENTS AND CONTINGENCIES

At September 30, 2016, certificates of deposits scheduled to mature in one year or less from September 30, 2016, totaled $135.8 million. At September 30, 2016, the Company has $32.4 million in time deposits greater than $100,000 but less than $250,000 that are schedule to mature in one year and $41.5 million in time deposits greater than $250,000 that are scheduled to mature in one year or less. Management believes that a significant percentage of such deposits will remain with the Bank. At September 30, 2016, the Company has deposit balances of $29.5 million that exceed FDIC insurance limits without additional collateral pledged.

 

 

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At September 30, 2016, the Company had the following off-balance sheet commitments (in thousands):

 

Standby letters of credit

   $ 250   

Unused home equity lines of credit

   $ 31,597   

Unused commercial lines of credit

   $ 61,787   

Unused unsecured personal lines of credit

   $ 16,256   

Unfunded commitments to originate commercial loans

   $ 33,863   

The Bank’s FHLB borrowings are secured by a blanket security agreement pledging the Bank’s 1-4 family first mortgage loans and non-residential real estate loans. At September 30, 2016, the Bank has pledged all eligible 1-4 family first mortgages. At September 30, 2016, the Bank has outstanding borrowings of $11.0 million from the FHLB. At September 30, 2016, the Bank had $49.2 million in additional borrowing capacity with the FHLB which includes an overnight line of credit of $30.0 million. The Bank has an $8 million unsecured overnight borrowing capacity from a correspondent bank. A schedule of FHLB borrowings at September 30, 2016, is provided below:

 

Outstanding
Balance
     Rate     Maturity  
(Dollars in thousands)  
$ 5,000         0.88     10/06/2017   
  6,000         1.18     07/06/2018   

 

 

      
$ 11,000         1.04  

 

 

      

(14) REGULATORY MATTERS

In July 2013, the Federal Reserve Board and the FDIC approved final rules that substantially amend the regulatory capital rules applicable to Heritage Bank USA, Inc. and HopFed Bancorp, Inc. The final rules implement the regulatory capital reforms of the Basel Committee on Banking Supervision reflected in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” (Basel III) and changes required by the Dodd-Frank Act.

Under these rules, the leverage and risk-based capital ratios of bank holding companies may not be lower than the leverage and risk-based capital ratios for insured depository institutions. The final rules implementing the Basel III regulatory capital reforms became effective for the Company and Bank on January 1, 2015, and include new minimum risk-based capital and leverage ratios. Moreover, these rules refine the definition of what constitutes “capital” for purposes of calculating those ratios, including the definitions of Tier 1 capital and Tier 2 capital.

The new minimum capital level requirements applicable to bank holding companies and banks subject to the rules are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a total risk-based capital ratio of 8% (unchanged from current rules); (iv) a Tier 1 leverage ratio of 4% for all institutions.

 

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The rules also establish a “capital conservation buffer” of 2.5% (to be phased in over three years) above the new regulatory minimum risk-based capital ratios, and result in the following minimum ratios once the capital conservation buffer is fully phased in: (i) a common equity Tier 1 risk-based capital ratio of 7%, (ii) a Tier 1 risk-based capital ratio of 8.5%, and (iii) a total risk-based capital ratio of 10.5%.

The capital conservation buffer requirement is being phased in beginning in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019. An institution is subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if capital levels fall below minimum plus the buffer amounts. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

Under these new rules, Tier 1 capital generally consist of common stock (plus related surplus) and retained earnings, limited amounts of minority interest in the form of additional Tier 1 capital instruments, and non-cumulative preferred stock and related surplus, subject to certain eligibility standards, less goodwill and other specified intangible assets and other regulatory deductions. Cumulative preferred stock and trust preferred securities issued after May 19, 2010, will no longer qualify as Tier 1 capital, but such securities issued prior to May 19, 2010, including in the case of bank holding companies with less than $15.0 billion in total assets, trust preferred securities issued prior to that date, will continue to count as Tier 1 capital subject to certain limitations. The definition of Tier 2 capital is generally unchanged for most banking organizations, subject to certain new eligibility criteria.

Common equity Tier 1 capital generally consist of common stock (plus related surplus) and retained earnings plus limited amounts of minority interest in the form of common stock, less goodwill and other specified intangible assets and other regulatory deductions. The final rules allow banks and their holding companies with less than $250 billion in assets a one-time opportunity to opt-out of a requirement to include unrealized gains and losses in accumulated other comprehensive income in their capital calculation. The Company has made the decision to opt-out of this requirement.

The Federal Reserve has adopted regulations applicable to bank holding companies with assets over $10 billion that require such holding companies and banks to conduct annual stress tests and report the results to the applicable regulators and publicly disclose a summary of certain capital information and results including pro forma changes in regulatory capital ratios. The Board of Directors and senior management are required to consider the results of the stress test in the normal course of business, including but not limited to capital planning and an assessment of capital adequacy in accordance with management’s policies. The FDIC has adopted all guidelines applicable to state nonmember banks in each case. At September 30, 2016, the Bank exceeded all regulatory capital requirements. The table below presents certain information relating to the Company’s and Bank’s capital compliance at September 30, 2016:

 

     Company     Bank  
     Amount      Percent     Amount      Percent  
     (Dollars in Thousands, Except Percentages)  

Common equity tier 1 capital ratio

Tier 1 leverage ratio

   $

$

93,478

93,478

  

  

    

 

15.77

10.87


  $

$

92,041

92,041

  

  

    

 

15.60

10.75


Tier 1 risk-based capital ratio

   $ 93,478         15.77   $ 92,041         15.60

Total risk based capital ratio

   $ 100,290         16.92   $ 98,853         16.76

 

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

Critical Accounting Policies

The consolidated condensed financial statements as of September 30, 2016, and December 31, 2015, and for the three and nine month periods ended September 30, 2016, and September 30, 2015, included herein have been prepared by the Company, without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in interim financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the financial statements and notes thereon included in the Company’s 2015 Annual Report to Stockholders on Form 10-K.

Certain of the Company’s accounting policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances, which could affect these material judgments, include, but without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for loan losses, determining the fair value of securities and other financial instruments, and assessing other than temporary impairments of securities.

Comparison of Financial Condition at September 30, 2016, and December 31, 2015

At September 30, 2016, total assets declined $31.3 million, to $871.9 million as compared to $903.2 million at December 31, 2015, largely due to lower levels of time deposits, investments available for sale, and cash on hand offset by an increase in loans. At September 30, 2016, total cash and cash equivalents was $29.4 million, representing a decline of $25.3 million decline as compared to December 31, 2015. Securities available for sale declined from $237.2 million at December 31, 2015, to $213.3 million at September 30, 2016. At September 30, 2016, and December 31, 2015, securities classified as “available for sale” had an amortized cost of $207.3 million and $233.4 million, respectively.

The Company’s holdings of Federal Home Loan Bank of Cincinnati (“FHLB”) stock, at cost were $4.4 million at December 31, 2015, and September 30, 2016. Total FHLB borrowings were $11.0 million at September 30, 2016, as compared to $15.0 million at December 31, 2015. Total repurchase balances declined from $45.8 million at December 31, 2015, to $44.5 million at September 30, 2016. Net loans totaled $579.1 million and $556.3 million at September 30, 2016, and December 31, 2015, respectively.

At September 30, 2016, deposits declined $27.1 million, from $739.4 million at December 31, 2015, to $712.3 million at September 30, 2016. At September 30, 2016, non-interest checking account balances are $130.3 million, or 18.3% of total deposits as compared to $125.1 million, or 16.9% of total deposits at December 31, 2015. At September 30, 2016, time deposits were $300.7 million, representing a $14.0 million decline as compared to December 31, 2015.

 

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Comparison of Operating Results for the Nine Month Periods Ended September 30, 2016, and September 30, 2015.

Net Income. The Company’s net income was $1.8 million for the nine month period ended September 30, 2016, as compared to $1.7 million for the nine month period ended September 30, 2015. For the nine month period ended September 30, 2015, net income and net interest income were influenced by a $830,000 recovery on a previously non-accrual investment in First Financial Services Corporation (“FFKY”) upon its sale in January 2015 to Your Community Bank of Indiana (“YCB”).

Net Interest Income. Net interest income for the nine month period ended September 30, 2016, was $19.8 million, compared to $20.2 million for the nine month period ended September 30, 2015. The decrease in net interest income for the nine months ended September 30, 2016, as compared to September 30, 2015, was largely due to the collection of past due investment income in 2015.

For the nine month periods ended September 30, 2016, the average yield on loans was 4.55%, as compared to 4.58% for the nine month period ended September 30, 2015. For the nine month periods ended September 30, 2016, and September 30, 2015, income on taxable securities was $3.5 million and $5.0 million, respectively. For the nine month period ending September 30, 2016, the tax equivalent yield on taxable and tax free securities were 2.43% and 5.05%, respectively, as compared to 3.16% and 4.68% for the nine month period ended September 30, 2015, respectively. For the nine month period ended September 30, 2015, the receipt of non-accrual interest added 0.53% to the Company’s yield on taxable securities.

For the nine month periods ended September 30, 2016, and September 30, 2015, the Company’s cost of interest bearing liabilities was 0.80% and 0.95%, respectively. The average cost of retail time deposits declined from 1.16% for the nine month period ended September 30, 2015, to 0.95% for the nine month period ended September 30, 2016. At September 30, 2016, and September 30, 2015, the Company’s net interest margin was 3.36% and 3.40%, respectively. For the nine month period ended September 30, 2015, the receipt of past due investment interest added 0.13% to the Company’s net interest margin.

Average Balances, Yields and Interest Expenses. The table on the next page summarizes the overall effect of changes in both interest rates and the average balances of interest earning assets and liabilities for the nine-month periods ended September 30, 2016, and September 30, 2015. Yields on assets and cost of liabilities are derived by dividing income or expense by the average daily balances of interest earning assets and liabilities for the appropriate nine-month periods.

 

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Average balances for loans include loans classified as non-accrual, net of the allowance for loan losses. The table adjusts tax-free investment income by $506,000 for September 30, 2016, and $625,000 for September 30, 2015, for a tax equivalent rate using a cost of funds rate of 0.80% for September 30, 2016, and 0.95% for September 30, 2015. The table adjusts tax-free loan income by $20,000 for September 30, 2016, and $5,000 for September 30, 2015, respectively, for a tax equivalent rate using the same cost of funds rate (Table Amounts in Thousands, Except Percentages):

 

     Average      Income &     Average     Average      Income &     Average  
     Balance      Expense     Rates     Balance      Expense     Rates  
     09/30/2016      09/30/2016     09/30/2016     09/30/2015      09/30/2015     09/30/2015  

Loans

   $ 562,870       $ 19,195        4.55   $ 550,047       $ 18,900        4.58

Investments AFS taxable

     194,657         3,544        2.43     208,721         4,953        3.16

Investments AFS tax free

     40,283         1,525        5.05     53,859         1,892        4.68

Interest earning deposits

     8,168         38        0.62     5,096         11        0.29
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total interest earning assets

     805,978         24,302        4.02     817,723         25,756        4.20
     

 

 

   

 

 

      

 

 

   

 

 

 

Other assets

     74,212             74,136        
  

 

 

        

 

 

      

Total assets

   $ 880,190           $ 891,859        
  

 

 

        

 

 

      

Retail time deposits

   $ 257,790         1,835        0.95   $ 289,157         2,516        1.16

Brokered deposits

     35,853         294        1.09     32,706         279        1.14

Interest bearing checking accounts

     203,736         888        0.58     195,929         810        0.55

MMDA and savings accounts

     98,510         129        0.17     95,016         146        0.20

FHLB borrowings

     12,876         134        1.39     17,315         206        1.59

Repurchase agreements

     44,186         421        1.27     43,726         368        1.12

Subordinated debentures

     10,310         287        3.71     10,310         553        7.15
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total interest bearing liabilities

     663,261         3,988        0.80     684,159         4,878        0.95
     

 

 

   

 

 

      

 

 

   

 

 

 

Non-interest bearing deposits

     124,788             112,198        

Other non-interest bearing liabilities

     3,501             4,363        

Stockholders’ equity

     88,640             91,139