10-Q 1 d10q.txt QUARTERLY REPORT FOR PERIOD ENDED 6/30/01 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------------- FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 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.) 2700 Fort Campbell Boulevard, Hopkinsville, Kentucky 42240 ---------------------------------------------------- ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (270) 885-1171 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. Yes x No ------ --- As of June 30, 2001, 3,772,305 shares of Common Stock were issued and outstanding. CONTENTS PAGE PART I. FINANCIAL INFORMATION --------------------- Item 1. Financial Statements
Consolidated Statements of Financial Condition as of June 30, 2001 and December 31, 2000................................................................... 2 Consolidated Statements of Income for the Three-Month and Six-Month Periods Ended June 30, 2001 and 2000.................................................... 3 Consolidated Statements of Comprehensive Income for the Three-Month and Six-Month Periods Ended June 30, 2001 and 2000...................................... 4 Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 2001 and 2000.................................................... 5 Notes to Unaudited Condensed Financial Statements................................................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................................. 6 Item 3. Quantitative and Qualitative Disclosures About Market Risk..................................................................................... 11 PART II. OTHER INFORMATION ----------------- Item 4. Submission of Matters to a Vote of Security Holders.............................................. 11 Item 6. Exhibits and Reports on Form 8-K................................................................ 12 SIGNATURES............................................................................................... 13
1 PART I. FINANCIAL INFORMATION Item 1. Financial Statements HOPFED BANCORP, INC. AND SUBSIDIARY Consolidated Statements of Financial Condition
June 30, December 31, ASSETS 2001 2000 ------------------- ------------------ (Unaudited) (In thousands) Cash and due from banks................................. $ 3,665 $ 2,227 Interest-earning deposits in Federal Home Loan Bank ("FHLB")................................... 249 50 Federal funds sold...................................... 11,330 1,530 Securities available for sale........................... 76,082 84,269 Securities held to maturity, market value of $6,195 and $7,930 at June 30, 2001 and December 31, 2000, respectively...................... 5,946 7,796 Loans receivable, net of allowance for loan losses of $805 at June 30, 2001, and $708 at December 31, 2000................................. 145,556 129,154 Accrued interest receivable............................. 3,873 2,285 Premises and equipment, net............................. 2,671 2,442 Other assets............................................ 290 205 ------------- ------------ Total assets................................... $ 249,662 $ 229,958 =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities: Deposits............................................. $ 184,813 $ 165,604 Advances from borrowers for taxes and insurance...... 277 158 Advances from FHLB................................... 18,000 17,040 Dividends payable ................................... 415 441 Accrued expenses and other liabilities............... 976 1,353 ------------- ------------ Total liabilities.............................. 204,481 184,596 ------------- ------------ Stockholders' Equity: Common stock......................................... 40 40 Additional paid in capital........................... 25,714 25,228 Retained earnings, substantially restricted.......... 22,405 21,896 Treasury stock (at cost, 267,000 shares at June 30, 2001 and 149,354 shares at December 31, 2000)................................ (3,080) (1,643) Accumulated other comprehensive income (loss) net of taxes............................... 102 (159) ------------- ------------- Total stockholders' equity..................... 45,181 45,362 ------------- ------------ Total liabilities and stockholders' equity..... $ 249,662 $ 229,958 =========== ==========
The balance sheet at December 31, 2000 has been derived from the audited financial statements of that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying Notes to Unaudited Condensed Financial Statements. 2 HOPFED BANCORP, INC. AND SUBSIDIARY Consolidated Statements of Income (Unaudited)
For the Three Months For the Six Months Ended June 30, Ended June 30, -------------------------------------- ------------------------------- 2001 2000 2001 2000 ----------------- ----------------- ----------- ----------- (Dollars in thousands, except per share data) Interest income: Interest on loans...................... $ 2,810 $ 2,125 $ 5,470 $ 4,305 Interest and dividends on investments.. 1,400 1,849 2,899 3,556 Time deposit interest income........... 170 7 313 21 ---------- ---------- ---------- ---------- Total interest income........... 4,380 3,981 8,682 7,882 ---------- ---------- ---------- ---------- Interest expense: Interest on deposits................... 2,267 1,930 4,413 3,823 Interest on advances................... 206 292 420 477 ---------- ---------- ---------- ---------- Total interest expense............ 2,473 2,222 4,833 4,300 ---------- ---------- ---------- ---------- Net interest income......................... 1,907 1,759 3,849 3,582 Provision for loan losses................... 42 10 102 20 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses........................ 1,865 1,749 3,747 3,562 ---------- ---------- ---------- ---------- Noninterest income: Loan and other service fees............ 176 120 256 235 Other, net............................. 4 19 22 31 ---------- ---------- ---------- --------- Total noninterest income........... 180 139 278 266 ---------- ---------- ---------- ---------- Noninterest expenses: Salaries and benefits.................. 490 595 1,050 1,161 Federal insurance premium.............. 15 8 23 18 Occupancy expense, net................. 24 49 82 96 Data processing........................ 47 40 92 82 Other operating expenses............... 441 202 704 375 ---------- ---------- ---------- ---------- Total noninterest expenses......... 1,017 894 1,951 1,732 ---------- ---------- ---------- ---------- Income before income taxes.................. 1,028 994 2,074 2,096 Income tax expense.......................... 367 355 744 730 ---------- ---------- ---------- ---------- Net income ................................. 661 639 1,330 1,366 ========== ========== ========== ========== Basic net income per share.................. $ 0.17 $ .16 $ 0.35 $ .34 Diluted net income per share............... $ 0.17 $ .16 $ 0.35 $ .34 Dividends per share......................... $ 0.11 $ .11 $ 0.22 $ .185 ========== ========== ========== ========== Weighted average shares outstanding......... 3,806,893 3,999,807 3,831,921 3,996,682 ========== ========== ========== ==========
See accompanying Notes to Unaudited Condensed Financial Statements. 3 HOPFED BANCORP, INC. AND SUBSIDIARY Consolidated Statements of Comprehensive Income (Unaudited)
For the Three Months For the Six Months Ended June 30 Ended June 30 ---------------------------- ------------------------------ 2001 2000 2001 2000 ------------- ---------- -------------- ----------- (In thousands) Net income $ 661 $ 639 $ 1,330 $1,366 Other comprehensive income, net of tax Unrealized holding gains (losses) arising during period net of tax effect of ($11) and ($55) for the three months ended June 30, 2001 and 2000, respectively, and ($134) and ($343) for the six months ended June 30, 2001 and 2000, respectively 20 (106) 261 (665) -------- ----- -------- ------- Comprehensive income $ 681 $ 533 $ 1,591 $ 701 ======= ==== ======= =======
See accompanying Notes to Unaudited Condensed Financial Statements 4 HOPFED BANCORP, INC. Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, -------------------------------------- 2001 2000 -------------------- ------------- (In thousands) Cash flows from operating activities: Net income........................................... $ 1,330 $ 1,366 Adjustments to reconcile net income to net cash Provided by operating activities: Loss on impairment of ORE 18 - Provision for loan losses............................ 102 21 Provision for depreciation........................... 56 55 FHLB stock dividend.................................. (78) (72) Accretion of investment security discounts........... (4) (9) Amortization of investment security premiums......... 25 20 MRP Shares........................................... - 974 (Increase) decrease in Accrued interest receivable.......................... (1,588) (913) Other assets......................................... (85) (406) Increase (decrease) in: Accrued expenses and other liabilities............... (25) (789) --------- --------- Net cash used in operating activities................ (249) 247 ---------- --------- Cash flows from investing activities: Proceeds from maturities of held-to-maturity securities 1,854 1,152 Proceeds from sale of available-for-sale securities.. 54,840 3,606 Purchases of available-for-sale securities........... (46,205) (25,048) Net increase in loans................................ (16,522) (5,301) Real estate acquired in settlement of loans.......... - (258) Purchases of premises/equipment...................... (285) (51) --------- ---------- Net cash used in investing activities................ (6,318) (25,900) ---------- ---------- Cash flows from financing activities: Net increase in demand deposits...................... 1,471 756 Net increase (decrease) in time deposits............. 17,738 942 Advances from FHLB................................... 960 18,385 Increase in advance payments by Borrowers for taxes and insurance................ 119 111 Net dividends paid................................... (847) (747) Purchase of treasury stock........................... (1,437) -- ---------- --------- Net cash used in financing activities................ 18,004 19,447 --------- --------- Decrease in cash and cash equivalents..................... 11,437 (6,206) Cash and cash equivalents, beginning of period............ 3,807 8,716 --------- --------- Cash and cash equivalents, end of period.................. 15,244 2,510 ========= ========= Supplemental disclosures of cash flow information......... Cash paid for income taxes........................... $ 315 $ 381 ========= ========= Cash paid for interest............................... $ 4,405 $ 4,316 ========= =========
See accompanying Notes to Unaudited Condensed Financial Statements. 5 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION HopFed Bancorp, Inc. (the "Company") was formed at the direction of Hopkinsville Federal 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 asset is the outstanding capital stock of the converted Bank, and its sole business is that of the converted Bank. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") 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 GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary for fair presentation have been included. The results of operations and other data for the six month period ended June 30, 2001 are not necessarily indicative of results that may be expected for the entire fiscal year ending December 31, 2001. 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, 2000. The accounting policies followed by the Company are set forth in the Summary of Significant Accounting Policies in the Company's December 31, 2000 Consolidated Financial Statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Comparison of Financial Condition at June 30, 2001 and December 31, 2000 Total assets increased by $19.7 million, from $230.0 million at December 31, 2000 to $249.7 million at June 30, 2001. Securities available for sale decreased from $84.3 million at December 31, 2000 to $76.1 million at June 30, 2001. Federal funds sold increased from $1.5 million at December 31, 2000, to $11.3 million at June 30, 2001. At June 30, 2001, investments classified as "held to maturity" were carried at an amortized cost of $5.9 million and had an estimated fair market value of $6.2 million, and securities classified as "available for sale" had an estimated fair market value of $76.1million. The loan portfolio increased $16.4 million during the six months ended June 30, 2001. Net loans totaled $145.6 million and $129.2 million at June 30, 2001 and December 31, 2000, respectively. For the six months ended June 30, 2001, the average yield on loans was 7.90%, compared to 7.73% for the year ended December 31, 2000. 6 The allowance for loan losses totaled $ 805,000 at June 30, 2001, an increase of $ 97,000 from the allowance of $708,000 December 31, 2000. The ratio of the allowance for loan losses to loans was 0.55% at each of June 30, 2001 and December 31, 2000. Also at June 30, 2001, non-performing loans were $ 1,860,000, or 1.27% of total loans, compared to $434,000, or .34% of total loans, at December 31, 2000, and the ratio of allowance for loan losses to non-performing loans at June 30, 2001 and December 31, 2000 was 43.3% and 163.1%, respectively. The determination of the allowance for loan losses is based on management's analysis, performed on a quarterly basis. The increase in non-performing loans is largely the result of three significant problem loans. Two loans, totaling $1.075 million, are non-performing but fully guaranteed by an agency of the federal government and present no significant risk of loss. The third large non-performing loan had an outstanding balance of $144,000 at June 30, 2001 and is 80% guaranteed by the Small Business Administration. Various factors are considered in determining the necessary allowance for loan losses, 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 the allowance for loan losses is adequate, there can be no assurance that additional provisions for loan losses will not be required or that losses on loans will not be incurred. Minimal losses on loans have been incurred in prior years. Real estate owned of $143,000 at June 30, 2001 represents one parcel of residential property on which the Bank holds a first mortgage and which was acquired by the Bank in a sale initiated by the second mortgagee. At June 30, 2001, deposits increased to $ 184.8 million from $165.6 million at December 31, 2000, a net increase of $19.2 million. The average cost of deposits during the three and six month periods ended June 30, 2001 and the year ended December 31, 2000 was 5.07%, 5.08% and 4.98%, respectively. Management continually evaluates the investment alternatives available to customers and adjusts the pricing on its deposit products to more actively manage its funding cost while remaining competitive in its market area. Comparison of Operating Results for the Six Months Ended June 30, 2001 and 2000 Net Income. Net income for the six months ended June 30, 2001 was $1.3 million, compared to net income of $1.4 million for the six months ended June 30, 2000. The decline in net earnings for the six months resulted primarily from lower investment yields due to a significant number of agency securities being called during the first six months of 2001. Net Interest Income. Net interest income for the six months ended June 30, 2001 was $3.8 million, compared to $3.6 million for the six months ended June 30, 2000. The increase in net interest income for the six months ended June 30, 2001 was primarily due to additional loans outstanding. For the six months ended June 30, 2001, the Bank's average yield on average interest-earning assets was 7.49%, compared to 7.30% for the six months ended June 30, 2000, and its average cost of interest-bearing liabilities was 5.04% for the six months ended June 30, 2001, compared to 4.93% for the six months ended June 30, 2000. As a 7 result, the Bank's interest rate spread for the six months ended June 30, 2001 was 2.45%, compared to 2.37% for the six months ended June 30, 2000, and its net yield on interest-earning assets was 3.34% for the six months ended June 30, 2001, compared to 3.32% for the six months ended June 30, 2000. Interest Income. Interest income increased by $800,000, from $7.9 million to $8.7 million, or by 10.1%, during the six months ended June 30, 2001 compared to the same period in 2000. This increase primarily resulted from increased loan volume. The average balance of securities available for sale declined $10.1 million, from $90.3 million at June 30, 2000, to $80.2 million at June 30, 2001, while the average balance of securities held to maturity declined $2.6 million, from $9.5 million at June 30, 2000 to $6.9 million at June 30, 2001. In addition, average time deposits and other interest-earning cash deposits declined $640,000 million, from $790,000 at June 30, 2000 to $150,000 at June 30, 2001. Overall, average total interest-earning assets increased $16.7 million, or 7.75%, from June 30, 2000 to June 30, 2001. The ratio of average interest-earning assets to average interest-bearing liabilities declined from 123.88% for the six months ended June 30, 2000 to 120.8% for the six months ended June 30, 2001. Interest Expense. Interest expense increased $533,000, or 12.4%, to $4.8 million for the six months ended June 30, 2001, compared to $4.3 million for the same period in 2000. The increase was attributable to the growth of deposits. The average cost of average interest-bearing deposits increased from 4.93% for the six months ended June 30, 2000 to 5.08% for the six months ended June 30, 2001. Over the same periods, the average balance of deposits increased $14.7 million, from $159.1 million for the six months ended June 30, 2000 to $173.8 million for the six months ended June 30, 2001, or 9.24%. Provision for Loan Losses. The allowance for loan losses is established through a provision for loan losses based on management's evaluation of the risk inherent in the loan portfolio and the general economy. Such evaluation considers numerous factors, including general economic conditions, loan portfolio composition, prior loss experience, the estimated fair value of the underlying collateral and other factors that warrant recognition in providing for an adequate loan loss allowance. The Bank determined that an additional $102,000 provision for loan losses was required for the six months ended June 30, 2001. Non-Interest Expenses. There was a $219,000 increase in total non-interest expenses in the six months ended June 30, 2001 compared to the same period in 2000, primarily due to opening a new branch office in Benton, Kentucky. Income Taxes. The effective tax rate for the six months ended June 30, 2001 was 35.9%, compared to 34.8% for the same period in 2000. Comparison of Operating Results for the Three Months Ended June 30, 2001 and 2000 Net Income. Net income for the three months ended June 30, 2001 was $661,000, compared to net income of $639,000 for the three months ended June 30, 8 2000. The increase in net income for the three months ended June 30, 2001 resulted primarily from an increase in loans outstanding. Net Interest Income. Net interest income for the three months ended June 30, 2001 and June 30, 2000 was $1.9 and $1.8 million, respectively. For the three months ended June 30, 2001, the average yield on total interest-earning assets was 7.43%, compared to 7.26% for the three months ended June 30, 2000, and the average cost of interest-bearing liabilities was 5.03% for the three months ended June 30, 2001, compared to 5.02% for the three months ended June 30, 2000. As a result, the interest rate spread for the three months ended June 30, 2001 was 2.40%, compared to 2.24% for the three months ended June 30, 2000, and the net yield on interest-earning assets was 3.23% for the three months ended June 30, 2001, compared to 3.21% for the three months ended June 30, 2000. Interest Income. Interest income increased by $400,000, from $4.0 million to $4.4 million, or by 10.00%, during the three months ended June 30, 2001 compared to the same period in 2000. The average balance of securities available for sale declined $14.1million, from $92.3 million at June 30, 2000 to $78.2 million at June 30, 2001, while the average balance of securities held to maturity declined $2.8 million, from $9.2 million at June 30, 2000 to $6.4 million at June 30, 2001. In addition, average time deposits and other interest-earning cash deposits declined $381,000, from $507,000 at June 30, 2000 to $126,000 at June 30, 2001. The average balance of loans receivable at June 30, 2001 was $143.1 million, an increase of $13.9 million from the average balance at June 30, 2000. Overall, average total interest-earning assets increased $16.6 million, or 7.7%, from June 30, 2000 to June 30, 2001. The ratio of average interest-earning assets to average interest-bearing liabilities declined from 123.87% for the three months ended June 30, 2000 to 119.9% for the three months ended June 30, 2001. Interest Expense. Interest expense increased $251,000, or 11.3%, to $2.5 million for the three months ended June 30, 2001, compared to $2.2 million for the same period in 2000. The increase was attributable to increased deposit balances. The average cost of average interest-bearing deposits increased from 5.02% at June 30, 2000 to 5.07% at June 30, 2001. Over the same period, the average balance of deposits increased $19.7 million, from $159.1 million at June 30, 2000 to $178.8 million at June 30, 2001, or 12.38%. The average balance of advances from the FHLB was $18.0 million at June 30, 2001, compared to $17.9 million at June 30, 2000. Provision for Loan Losses. The Bank determined that an additional $42,000 provision for loan losses was required for the three months ended June 30, 2001, compared to an additional $10,200 provision for the three months ended June 30, 2000. Non-Interest Expenses. There was an approximate $100,000 increase in total non-interest expenses in the three months ended June 30, 2001 compared to the same period in 2000, primarily due to opening a new branch office in Benton, Kentucky. Income Taxes. The effective tax rate for each of the three months ended June 30, 2001 and June 30, 2000 was 35.7%. 9 Liquidity and Capital Resources The Company has no business other than that of the Bank. Management believes that dividends that may be paid by the Bank to the Company will provide sufficient funds for its initial operations and liquidity needs. However, no assurance can be given that the Company will not have a need for additional funds in the future. The Bank is subject to certain regulatory limitations with respect to the payment of dividends to the Company. The Bank's principal sources of funds for operations are deposits from its primary market areas, principal and interest payments on loans, proceeds from maturing investment securities and the net conversion proceeds received by it. The principal uses of funds by the Bank include the origination of mortgage and consumer loans and the purchase of investment securities. The Bank is required by current federal regulations to maintain specified liquid assets of at least 5% of its net withdrawable accounts plus short-term borrowings. Short-term liquid assets (those maturing in one year or less) may not be less than 1% of the Bank's liquidity base. At June 30, 2001, the Bank met all regulatory liquidity requirements, and management believes that the liquidity levels maintained are adequate to meet potential deposit outflows, loan demand and normal operations. The Bank must satisfy three capital standards: a ratio of core capital to adjusted total assets of 4.0%, a tangible capital standard expressed as 1.5% of total adjusted assets, and a combination of core and "supplementary" capital equal to 8.0% of risk-weighted assets. At June 30, 2001, the Bank exceeded all regulatory capital requirements. The table below presents certain information relating to the Bank's capital compliance at June 30, 2001. Amount Percent ------ ------- (Dollars in thousands) Tangible Capital . . . . . . . . . . $ 42,457 17.2% Core Capital . . . . . . . . . . . . $ 42,457 17.2% Risk-Based Capital . . . . . . . . . $ 43,262 36.4% At June 30, 2001, the Bank had outstanding commitments to originate loans totaling $3.4 million. Management believes that the Bank's sources of funds are sufficient to fund all of its outstanding commitments. Certificates of deposits which are scheduled to mature in one year or less from June 30, 2001 totaled $106.9 million. Management believes that a significant percentage of such deposits will remain with the Bank. 10 Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements. Additional written or oral forward-looking statements may be made by the Company from time to time in filings with the Securities and Exchange Commission or otherwise. The words "believe," "expect," "seek," and "intend" and similar expressions identify forward-looking statements, which speak only as of the date the statement is made. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may include, but are not limited to, projections of income or loss, expenditures, acquisitions, plans for future operations, financing needs or plans relating to services of the Company, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of revisions which may be made to forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company monitors whether material changes in market risk have occurred since year-end. The Company is unable to predict future changes in market rates and their impact on the Company's profitability. The Company does not believe that material changes in market risk exposures have occurred since December 31, 2000. Item 3. Quantitative and Qualitative Disclosures About Market Risk During the six month period ending June 30, 2001, the Federal Reserve Bank significantly reduced its fed funds target rate. As a result of the declining in market interest rates that followed the Federal Reserve Bank's action, the Bank had a large portion of its bond portfolio called. These funds were re-invested at a shorter maturity, in fed funds or used to fund the growth of the loan portfolio. The result was a 140 basis point reduction in investment yields for the month ending June 30, 2001 as compared to the month ending December 31, 2000. During the next six months, the Bank's exposure to additional bonds being called is limited to $2 million dollars. Therefore, the Bank does not anticipate a significant decline in investment yields from current levels. The Company monitors interest rate risk using an OTS model to measure the estimated change in the Bank's net portfolio value (NPV) of its assets assuming instantaneous parallel shifts in the Treasury yield curve of 100 to 300 basis points in 100 basis points increments. The NPV is defined as the present value of expected cash flows from existing assets less the present value of expected cash flows from existing liabilities plus the present value of expected cash flows from existing liabilities plus the present value of net expected cash inflows from existing off-balance sheet contracts. The Bank has developed an Interest Rate Risk Policy that defines acceptable levels of interest rate risk and requires the quarterly reporting of interest rate risk to the Bank's Board of Directors. The information used in the NPV model is obtained by OTS from the Bank on schedule CMR of the quarterly Thrift Financial Report. The OTS NPV model is a commonly used measure of interest rate risk in OTS regulated institutions. The most recent measurement of the Bank's NPV ratio was March 31, 2001. This measurement revealed that the Bank's NPV would be reduced by 156 basis points, to 20.07% given a instantaneous decline of 200 basis points in the Treasury yield curve. The thrift median at March 31, 2001 for a 200 basis point decline is 181 basis points to 11.29%. At December 31, 2000, this same measure indicated that the Bank's NPV would decline 298 basis points under the same scenario with the thrift median being 168 basis points. The NPV ratio's decline in a instantaneous 200 basis point shift in the Treasury curve was reduced during the three month period ending March 31, 2001 as a result of the Bank's re-investment of called bonds into shorter term investments. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders On May 15, 2001, the Company held its Annual Meeting of Stockholders at which the following matters were considered and voted on: Proposal I - Election of Directors: Nominees For Withheld -------- --- -------- WD Kelley 2,561,081 62,439 Clifton H. Cochran 2,575,681 47,839 Walton G. Ezell 2,560,522 62,998 11 There were no abstentions or broker non-votes. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 10.1 - Employment Agreement by and between HopFed Bancorp, Inc. and Billy C. Duvall Exhibit 10.2 - Employment Agreement by and between Hopkinsville Federal Bank and Billy C. Duvall (b) None. 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HOPFED BANCORP, INC. Date: August 14, 2001 /s/ John E. Peck -------------------------------------- John E. Peck President and Chief Executive Officer Date: August 14, 2001 /s/ Billy C. Duvall -------------------------------------- Billy C. Duvall Vice President, Chief Financial Officer and Treasurer 13