10-Q

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, 2004

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-23667

HOPFED BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	61-1322555
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2700 Fort Campbell Boulevard, Hopkinsville, Kentucky	42240
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (270) 885-1171

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days.    Yes  x    No  ¨

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

As of August 9, 2004, the Registrant had issued and outstanding 3,637,183 shares of the Registrant’s Common Stock.

CONTENTS

		PAGE
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Financial Condition as of June 30, 2004 and December 31, 2003	2
	Consolidated Statements of Income for the Three-Month and Six-Month Periods Ended June 30, 2004 and June 30, 2003	3
	Consolidated Statements of Comprehensive (Loss) Income for the Three-Month and Six-Month Periods Ended June 30, 2004 and June 30, 2003	4
	Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 2004 and June 30, 2003	5
	Notes to Unaudited Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	15
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	16
Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	16
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Submission of Matters to a Vote of Security Holders	17
Item 5.	Other Information	18
Item 6.	Exhibits and Reports on Form 8-K	18
SIGNATURES		19

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HOPFED BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

	June 30, 2004			December 31, 2003
	(Unaudited)
	(In thousands)
ASSETS
Cash and due from banks	$	11,654		$	12,958
Interest-earning deposits in Federal Home Loan Bank (“FHLB”)		142			35
Federal funds sold		1,000			2,185
Total cash and cash equivalents		12,796			15,178
Securities available for sale		163,677			143,514
Securities held to maturity, market value of $29,630 and $15,104 at June 30, 2004 and December 31, 2003, respectively		29,969			15,108
Loans receivable, net of allowance for loan losses of $2,999 at June 30, 2004, and $2,576 at December 31, 2003, respectively		351,369			334,740
Goodwill		3,689			3,689
Intangible assets		1,946			2,133
Bank owned life insurance		6,768			6,628
Accrued interest receivable		3,074			2,849
Premises and equipment, net		6,351			6,006
Deferred tax asset		1,675			652
Other assets		964			968
Total assets	$	582,278		$	531,465
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Non-interest bearing deposits	$	26,896		$	27,348
Interest bearing accounts:
Now accounts		66,698			61,246
Money market accounts		57,701			58,593
Savings		9,973			9,817
Other time deposits		255,197			260,484
Total deposits		416,465			417,488
Subordinated debentures		10,310			10,310
Advances from borrowers for taxes and insurance		433			199
Advances from FHLB		106,485			54,353
Dividends payable		436			435
Accrued expenses and other liabilities		1,769			1,442
Total liabilities		535,898			484,227
Stockholders’ equity:
Preferred stock, par value $0.01 per share; authorized 500,000 shares; none issued or outstanding at June 30, 2004 and December 31, 2003		—			—
Common stock, par value $0.01 per share: authorized 7,500,000 shares; 4,046,092 issued and 3,637,183 outstanding at June 30, 2004 and 4,039,305 issued and 3,630,396 outstanding at December 31, 2003, respectively		40			40
Additional paid in capital		25,828			25,714
Retained earnings, substantially restricted		28,011			26,897
Unearned compensation		(114	)		—
Treasury stock at cost, 408,909 shares at June 30, 2004 and December 31, 2003		(4,857	)		(4,857	)
Accumulated other comprehensive loss, net of taxes		(2,528	)		(556	)
Total stockholders’ equity		46,380			47,238
Total liabilities and stockholders’ equity	$	582,278		$	531,465

The balance sheet at December 31, 2003 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 SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2004		2003		2004		2003
	(Dollars in thousands, except per share data)
Interest and dividend income:
Interest on loans	$	4,814	$	4,843	$	9,534	$	9,574
Interest on investments, tax exempt		258		125		500		240
Interest and dividends on investments, taxable		1,517		1,214		2,843		2,235
Time deposit interest income		3		10		9		48
Total interest and dividend income		6,592		6,192		12,886		12,097
Interest expense:
Interest on deposits		2,358		2,786		4,787		5,552
Interest on subordinated debentures		111		—		221		—
Interest on advances from FHLB.		585		310		1,011		577
Total interest expense.		3,054		3,096		6,019		6,129
Net interest income		3,538		3,096		6,867		5,968
Provision for loan losses		300		450		600		850
Net interest income after provision for loan losses		3,238		2,646		6,267		5,118
Non-interest income:
Service charges		450		403		835		814
Gain on sale of loans		25		260		57		378
Gain on sale of securities		3		54		174		372
Other, net		227		188		431		356
Total non-interest income		705		905		1,497		1,920
Non-interest expenses:
Salaries and benefits		1,271		1,947		2,527		2,970
Federal insurance premium		44		8		88		31
Occupancy expense, net		175		166		344		376
State tax on deposits		104		96		220		192
Data processing		219		127		417		313
Loss on sale of equipment		—		—		7		—
Other operating expenses		582		468		1,188		953
Total non-interest expenses		2,395		2,812		4,791		4,835
Income before income taxes		1,548		739		2,973		2,203
Income tax expense		507		234		985		702
Net income	$	1,041	$	505	$	1,988	$	1,501
Basic net income per share	$	0.29	$	0.14	$	0.55	$	0.41
Diluted net income per share	$	0.28	$	0.14	$	0.54	$	0.41
Dividends per share	$	0.12	$	0.12	$	0.24	$	0.23
Weighted average shares outstanding		3,631,515		3,630,396		3,630,955		3,630,396
Weighted average shares outstanding, diluted		3,659,691		3,654,347		3,660,581		3,650,581

See accompanying Notes to Unaudited Condensed Financial Statements.

3

HOPFED BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2004			2003			2004			2003
				(In thousands)
Net income	$	1,041		$	505		$	1,988		$	1,501
Other comprehensive income, net of tax
Unrealized holding (loss) gains arising during period net of tax effect of $1,534 and ($139) for the three months ended June 30, 2004 and 2003, respectively, and $ 957 and ($65) for the six months ended June 30, 2004 and 2003, respectively		(2,977	)		270			(1,857	)		127
Reclassification adjustment for gains included in net income		(1	)		(36	)		(115	)		(246	)
Comprehensive (loss) income	$	(1,937	)	$	739		$	16		$	1,382

See accompanying Notes to Unaudited Condensed Financial Statements

4

HOPFED BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

	For the Six Months Ended June 30,
	2004			2003
	(In thousands)
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	2,698		$	(178	)
Cash flows from investing activities:
Purchases from held-to-maturity securities		(14,704	)		(5,357	)
Proceeds from sale of available-for-sale securities		22,136			78,437
Purchases of available-for-sale securities		(44,946	)		(106,547	)
Purchase of FHLB stock		(388	)		—
Net increase in loans		(17,138	)		(27,806	)
Purchases of premises and equipment		(510	)		(898	)
Net cash used in investing activities		(55,550	)		(62,171	)
Cash flows from financing activities:
Net increase in demand deposits		4,264			28,522
Net increase (decrease) in time deposits		(5,287	)		23,115
Advances from FHLB,		54,434			15,162
Payment made to FHLB		(2,302	)		(3,096	)
Increase in advance payments by borrowers for taxes and insurance		234			114
Net dividends paid		(873	)		(798	)
Net cash provided by financing activities		50,470			63,019
Increase (decrease) in cash and cash equivalents		(2,382	)		670
Cash and cash equivalents, beginning of period		15,178			14,033
Cash and cash equivalents, end of period	$	12,796		$	14,703
Supplemental disclosures of cash flow information
Cash paid for income taxes	$	975		$	860
Cash paid for interest	$	6,086		$	6,108

See accompanying Notes to Unaudited Condensed Financial Statements.

5

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note (1) BASIS OF PRESENTATION

HopFed Bancorp, Inc. (the “Company”) was formed at the direction of Heritage Bank, formerly known as 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, 2004 are not necessarily indicative of results that may be expected for the entire fiscal year ending December 31, 2004.

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, 2003. The accounting policies followed by the Company are set forth in the Summary of Significant Accounting Policies in the Company’s December 31, 2003 Consolidated Financial Statements.

Note (2) EARNINGS PER SHARE

The following schedule reconciles the numerators and denominators of the basic and diluted earnings per share (“EPS”) computations for the three and six-months ending June 30, 2004. Diluted common shares arise from the potentially dilutive effect of the Company’s stock options outstanding.

	Quarters Ended June 30,
	2004		2003
Basic EPS:
Net income	$	1,041,000	$	505,000
Average common shares outstanding		3,631,515		3,630,396
Earnings per share	$	0.29	$	0.14
Diluted EPS:
Net income	$	1,041,000	$	505,000
Average common shares outstanding		3,631,515		3,630,396
Dilutive effect of stock options		28,176		23,951
Average diluted shares outstanding		3,659,691		3,654,347
Diluted earnings per share	$	0.28	$	0.14

6

	Six Months Ended June 30,
	2004		2003
Basic EPS:
Net income	$	1,988,000	$	1,501,000
Average common shares outstanding		3,630,955		3,630,396
Earnings per share	$	0.55	$	0.41
Diluted EPS:
Net income	$	1,988,000	$	1,501,000
Average common shares outstanding		3,630,955		3,630,396
Dilutive effect of stock options		29,626		20,185
Average diluted shares outstanding		3,660,581		3,650,581
Diluted earnings per share	$	0.54	$	0.41

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Note (3) STOCK OPTIONS

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

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

	For the Quarters Ended June 30,
	2004			2003
	(In thousands)
Net income as reported	$	1,041		$	505
Deduct: Total stock-based compensation expense determined under fair value based method for all awards granted, net of related tax effects		(31	)		(15	)
Pro forma net income	$	1,010		$	490

8

	For the Quarter Ended June 30,
	2004		2003
Earnings per share:
Basic – as reported	$	0.29	$	0.14
Basic – pro forma	$	0.28	$	0.13
Diluted – as reported	$	0.28	$	0.14
Diluted – pro forma	$	0.28	$	0.13

	For the Six Months Ended June 30,
	2004			2003
	(In thousands)
Net income as reported	$	1,988		$	1,501
Deduct: Total stock-based compensation expense determined under fair value based method for all awards granted, net of related tax effects		(52	)		(31	)
Pro forma net income	$	1,936		$	1,470

	For the Six Months Ended June 30,
	2004		2003
Earnings per share:
Basic – as reported	$	0.55	$	0.41
Basic – pro forma	$	0.53	$	0.40
Diluted – as reported	$	0.54	$	0.41
Diluted – pro forma	$	0.53	$	0.40

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Note (4) LONG-TERM INCENTIVE PLAN

On June 14, 2004, 6,787 shares of restricted stock were awarded to participants in the HopFed Bancorp, Inc. Long-Term Incentive Plan which was approved at the Company’s Annual Meeting on May 21, 2004. The stock awards vest over a four-year period. The stock was awarded from authorized but unissued shares on the date of the grant. The Company recorded the stock awards at the market value of the date of the grant ($16.83 per share) as unearned compensation in stockholders’ equity and will amortize it over the vesting period.

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

Critical Accounting Policies

The Company’s critical accounting policies are set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s Annual Report on Form 10-K, which is incorporated herein by reference.

Comparison of Financial Condition at June 30, 2004 and December 31, 2003

Total assets increased by $50.8 million, from $531.5 million at December 31, 2003 to $582.3 million at June 30, 2004. Securities available for sale increased from $143.5 million at December 31, 2003 to $163.7 million at June 30, 2004. Federal funds sold decreased from $2.2 million at December 31, 2003, to $1.0 million at June 30, 2004.

At June 30, 2004, investments classified as “held to maturity” were carried at an amortized cost of $30.0 million and had an estimated fair market value of $29.6 million, and securities classified as “available for sale” had an estimated fair market value of $163.7 million.

The loan portfolio increased $16.7 million during the six months ended June 30, 2004. Net loans totaled $351.4 million and $334.7 million at June 30, 2004 and December 31, 2003, respectively. For the six months ended June 30, 2004, the average yield on loans was 5.57%, compared to 6.14% for the year ended December 31, 2003.

The allowance for loan losses totaled $3.0 million at June 30, 2004, an increase of $423,000 from the allowance of $2.6 million at December 31, 2003. The ratio of the allowance for loan losses to loans was 0.85% at June 30, 2004 and 0.76% at December 31, 2003. Also at June 30, 2004, non-performing loans were $ 730,000, or 0.21% of total loans, compared to $1.1 million, or 0.34% of total loans, at December 31, 2003, and the ratio of allowance for loan losses to non-performing loans at June 30, 2004 and December 31, 2003 was 410.8% and 225.2%, respectively. The determination of the allowance for loan losses is based on management’s analysis, performed on a quarterly basis.

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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. The Company had $77,000 in real estate owned and $135,000 of other assets owned at June 30, 2004. The Company’s non-performing assets at June 30, 2004 totaled $942,000, or 0.16% of total assets.

At June 30, 2004, deposits decreased to $416.5 million from $417.5 million at December 31, 2003, a decline of $ 1.0 million. The average cost of deposits during the three and six-month periods ended June 30, 2004 and the year ended December 31, 2003 was 2.22%, 2.27% and 2.88%, 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, 2004 and 2003

Net Income. Net income for the six months ended June 30, 2004 was $ 2.0 million, compared to net income of $1.5 million for the six months ended June 30, 2003. The increase in net earnings for the six months resulted from lower compensation expense in 2004 as compared to 2003, when the Company incurred a $990,000 settlement expense to complete the liquidation of the Company’s defined benefit pension plan.

Net Interest Income. Net interest income for the six months ended June 30, 2004 was $6.9 million, compared to $6.0 million for the six months ended June 30, 2003. The increase in net interest income for the six months ended June 30, 2004 was due to the growth of both the loan and investment portfolios. For the six months ended June 30, 2004, the Bank’s average yield on average interest-earning assets was 5.10%, compared to 5.65% for the six months ended June 30, 2003, and its average cost of interest-bearing liabilities was 2.54% for the six months ended June 30, 2004, compared to 3.16% for the six months ended June 30, 2003. As a result, the Bank’s interest rate spread for the six months ended June 30, 2004 was 2.55%, compared to 2.49% for the six months ended June 30, 2003, and its net yield on interest-earning assets was 2.76% for the six months ended June 30, 2004, compared to 2.81% for the six months ended June 30, 2003.

Interest Income. Interest income increased by $800,000 from $12.1 million to $12.9 million, or by 6.6%, during the six months ended June 30, 2004 compared to the same period in 2003. This increase primarily resulted from increases in both the loan and investment portfolios. The average balance of taxable securities available for sale increased $32.6 million, from $89.0 million at June 30, 2003, to $121.6 million at June 30, 2004, while the average balance of securities held to maturity increased $14.0 million, from $5.6 million at June 30, 2003 to $19.6 million at June 30, 2004. The average balance of tax-free securities available for sale declined from $28.4 million at June 30, 2003 to $28.0 million at June 30, 2004. In addition,

11

average time deposits and other interest-earning cash deposits declined $1.3 million, from $3.7 million at June 30, 2003 to $2.4 million at June 30, 2004. Overall, average total interest-earning assets for the six-month period ended June 30, 2004 were $514.2 million. The ratio of average interest-earning assets to average interest-bearing liabilities declined from 111.3% for the six months ended June 30, 2003 to 108.7% for the six months ended June 30, 2004.

Interest Expense. Interest expense declined by $110,000, or 1.8%, to $6.0 million for the six months ended June 30, 2004, compared to $6.1 million for the same period in 2003. The decline was attributable to a decline in interest expense on deposits, which offset growth in both deposits and borrowed funds. The average cost of average interest-bearing deposits decreased from 3.10% for the six months ended June 30, 2003 to 2.42% for the six months ended June 30, 2004. Over the same periods, the average balance of interest-bearing deposits increased $37.0 million, from $358.1 million for the six months ended June 30, 2003 to $395.1 million for the six months ended June 30, 2004, or 10.3%.

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 $600,000 provision for loan losses was required for the six months ended June 30, 2004, compared to $850,000 at June 30, 2003.

Non-Interest Income. There was a $423,000 decline in non-interest income for the six- month period ending June 30, 2004 as compared to the same period in 2003. This decline was the result of lower gains on the sale of loans, which declined from $378,000 at June 30, 2003 to $57,000 at June 30, 2004. Also, gains on the sales of securities declined from $372,000 at June 30, 2003 to $174,000 at June 30, 2004. Both declines are attributable to rising interest rates, sharply reducing the amount of mortgage refinancing activity and limiting the Company’s ability to recognize investment gains.

Non-Interest Expenses. There was a $44,000 decrease in total non-interest expenses in the six months ended June 30, 2004 compared to the same period in 2003. In 2003, the Company incurred expenses related to the closing of its defined benefit pension plan. In 2004, these cost savings were largely offset by the addition of one retail branch as well as increased staffing levels.

Income Taxes. The effective tax rate for the six months ended June 30, 2004 was 33.1%, compared to 31.9% for the same period in 2003.

Comparison of Operating Results for the Three-Months Ended June 30, 2004 and 2003

Net Income. Net income for the three months ended June 30, 2004 was $1,041,000 compared to net income of $505,000 for the three months ended June 30, 2003. The increase in net income for the three months ended June 30, 2004 was the result of the $990,000 settlement expense for the defined benefit pension plan incurred in May of 2003.

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Net Interest Income. Net interest income for the three months ended June 30, 2004 and June 30, 2003 was $3.5 million and $3.1 million, respectively. For the three months ended June 30, 2004, the average yield on total interest-earning assets was 5.06%, compared to 5.46% for the three months ended June 30, 2003, and the average cost of interest-bearing liabilities was 2.50% for the three months ended June 30, 2004, compared to 3.05% for the three months ended June 30, 2003. As a result, the interest rate spread for the three months ended June 30, 2004 was 2.56%, compared to 2.40% for the three months ended June 30, 2003, and the net yield on interest-earning assets was 2.78% for the three months ended June 30, 2004, compared to 2.74% for the three months ended June 30, 2003.

Interest Income. Interest income increased by $400,000 from $6.2 million to $6.6 million, or by 6.5%, during the three months ended June 30, 2004 compared to the same period in 2003. The average balance of taxable securities available for sale increased $17.6 million, from $109.9 million at June 30, 2003 to $127.5 million at June 30, 2004, while the average balance of tax-free securities available for sale increased $14.2 million, from $14.6 million at June 30, 2003 to $28.8 million at June 30, 2004. Securities held to maturity increased $12.5 million, from $11.1 million at June 30, 2003 to $23.6 million at June 30, 2004. In addition, average time deposits and other interest-earning cash deposits declined $6.3 million, from $8.0 million at June 30, 2003 to $1.7 million at June 30, 2004. The average balance of loans receivable at June 30, 2004 was $348.1 million, an increase of $34.4 million from the average balance at June 30, 2003. Average total interest-earning assets for the quarter ended June 30, 2004 were $529.7 million. The ratio of average interest-earning assets to average interest-bearing liabilities was 112.5% for the three- month period ended June 30, 2003 and 108.42% for the three-month period ending June 30, 2004.

Interest Expense. Interest expense declined $42,000, or 1.4%, to $3.1 million for the three months ended June 30, 2004 as compared to the same period in 2003. The decline was attributable to a lower cost of funding interest-bearing deposits with offset higher balances of deposits, subordinated debentures and FHLB advances. The average cost of average interest-bearing deposits decreased from 2.96% at June 30, 2003 to 2.38% at June 30, 2004. Over the same period, the average balance of deposits increased $25.3 million, from $398.8 million at June 30, 2003 to $424.1 million at June 30, 2004, or 6.3%. The average balance of advances from the FHLB was $82.4 million at June 30, 2004, compared to $29.7 million at June 30, 2003.

Provision for Loan Losses. The Bank determined that an additional $300,000 provision for loan losses was required for the three months ended June 30, 2004, compared to a $450,000 provision for the three months ended June 30, 2003.

Non-Interest Income. There was a $200,000 decline in non-interest income for the three month period ending June 30, 2004 as compared to the same period in 2003. This decline was the result of lower gains on the sale of securities and mortgage loans, both negatively affected by the increase in interest rates during the second quarter of 2004.

Non-Interest Expenses. There was an approximate $417,000 decrease in total non-interest expenses in the three months ended June 30, 2004 compared to the same period in 2003, primarily due to the May 2003 settlement expense of $990,000 for the defined benefit pension plan.

13

Income Taxes. The effective tax rate for the three months ended June 30, 2004 was 32.8%. The effective tax rate for the three-month period ending June 30, 2003 was 31.7%.

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 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, 2004, the Bank exceeded all regulatory capital requirements. The table below presents certain information relating to the Bank’s capital compliance at June 30, 2004.

	At June 30, 2004
	Company				Bank
	Amount		Percent		Amount		Percent
			(Dollars in thousands)
Tangible capital	$	53,583	9.25	%	$	52,469	9.08	%
Core capital	$	53,583	9.25	%	$	52,469	9.08	%
Risk-based capital	$	56,582	14.28	%	$	55,468	13.86	%

At June 30, 2004, the Bank had outstanding commitments to originate loans totaling $2.1 million. Management believes that the Bank’s sources of funds are sufficient to fund all of its outstanding commitments. Time deposits which are scheduled to mature in one year or less from June 30, 2004 totaled $113.2 million. Management believes that a significant percentage of such deposits will remain with the Bank.

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

14

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. During the second quarter of 2004, market interest rates increased significantly. As a result, the Company’s investment portfolio experienced a substantial reduction in market value.

The Company’s liquidity has declined for several reasons, prepayment speeds on mortgage backed related investments have slowed, agency securities are not being called at the same rate as in recent periods, and the competitive marketplace has driven up the cost of time deposits. The Company’s goal is to maintain adequate liquidity levels while working to increase our net interest margin. This emphasis will require the Company to place a lesser degree of dependence on time deposits and to aggressively market demand deposit accounts.

Overall, management believes the sudden increase in interest rates is a positive for the Company. In the next twelve months, management’s analysis of the loan portfolio indicates that more than $100 million in variable rate loans will re-price. Until recently, these loans were scheduled to average a rate reduction of approximately 0.82%, resulting in a $900,000 decline in interest income on loans. The average rate change is now close to zero and many loans are re-pricing upwards. In addition, management borrowed $27.0 million from the Federal Home Loan Bank of Cincinnati in April 2004 at rates management felt were favorable. These funds will act to stabilized the Company’s cost of funds in a rising rate environment.

Item 4 Controls and Procedures

Evaluation of disclosure controls and procedures.

In accordance with Rule 13a-15(b) of the Securities and Exchange Act of 1934 (the “Exchange Act”), an evaluation was carried out with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and

15

procedures (as defined in Rule 13a-14(c) and 15 d-14(c) under the Exchange Act) as of the end of the quarter ended June 30, 2004. Based upon their evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the three months ended June 30, 2004 to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this quarterly report on Form 10-Q was being prepared.

Changes in internal controls over financial reporting.

There was not any change in the Company’s internal control over financial reporting that occurred during the three months ended June 30, 2004 that has materially affected, or is reasonable likely to affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None

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

(a) None

(b) None

(c) None

(d) None

(e) The following table provides information about purchases by the Company during the quarter ended June 30, 2004, of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.

16

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total number of shares purchased	Average Price paid per share	Total number of shares purchased as part of announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
April 1, 2004 through April 30, 2004	—	—	—	91,091
May 1, 2004 through May 31, 2004	—	—	—	91,091
June 1, 2004 through June 30, 2004	—	—	—	91,091
Total	—	—	—

On March 26, 2001, the Company announced that its Board of Directors had approved the repurchase of 300,000 shares of Common Stock. The purchases are being made from time to time on the Nasdaq Stock Market at prices prevailing on that market or in privately negotiated transactions at management’s discretion, depending on market conditions, prices of the Company’s Common Stock, corporate cash requirements and other factors. As of June 30, 2004, a total of 208,909 shares of Common Stock had been repurchased under the current program. No shares were repurchased during the quarter ended June 30, 2004. The current stock repurchase program remains open until the Company completes the purchase of all fully authorized shares.

Item 3. Defaults Upon Senior Securities

None

Item 4 Submission of Matters to a Vote of Security Holders

On May 21, 2004, 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 Kelly	2,706,730	188,544
Thomas I. Miller	2,717,078	178,196
Walton G. Ezell	2,710,524	184,750

There were no abstentions or broker non-votes.

17

Proposal II – HopFed Bancorp, Inc. 2004 Long - Term Incentive Plan

For	Against	Abstain
999,340	491,757	46,234

There were 1,357,943 broker non-votes.

Item 5. Other Information

On July 26, 2004, the Company announced its results of operations for the quarter and six months ended June 30, 2004. A copy of the related press release is attached as Exhibit 99.1 to this Form 10-Q and is incorporated by reference herein.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

4.1 HopFed Bancorp, Inc. 2004 Long-Term Incentive Plan. Incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 (File No. 333-117956)

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

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

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

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

99.1 Press release dated July 26, 2004.

(b) Reports on Form 8-K

The Company furnished a report on Form 8-K dated April 28, 2004, reporting under Item 12 the announcement of the Company’s earnings for the first quarter of 2004.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HOPFED BANCORP, INC.
Date: August 16, 2004	/s/ John E. Peck
	John E. Peck
	President and Chief Executive Officer
Date: August 16, 2004	/s/ Billy C. Duvall
	Billy C. Duvall
	Vice President, Chief Financial Officer and Treasurer

19

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, John E. Peck, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of HopFed Bancorp, Inc.;

(2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrants internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2004	/s/ John. E. Peck
	John E. Peck, Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Billy C. Duvall, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of HopFed Bancorp, Inc.;

(2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrants internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information ; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2004	/s/ Billy C. Duvall
	Billy C. Duvall, Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of HopFed Bancorp, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John E. Peck, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and the result of operations of the Company.

Date: August 16, 2004

/s/ John E. Peck

John E. Peck, Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to HopFed Bancorp, Inc. and will be retained by HopFed Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The information furnished herein shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of HopFed Bancorp, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Billy C. Duvall, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and the result of operations of the Company.

Date: August 16, 2004

/s/ Billy C. Duvall

Billy C. Duvall, Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to HopFed Bancorp, Inc. and will be retained by HopFed Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The information furnished herein shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE CONTACT:    JohnE. Peck President and CEO (270) 885-1171

HOPFED BANCORP REPORTS SECOND QUARTER RESULTS

HOPKINSVILLE, Ky. (July 26, 2004) – HopFed Bancorp, Inc. (NASDAQ: HFBC) (the “Company”) today reported results for the second quarter and the six-month period ended June 30, 2004. Net income for the second quarter ended June 30, 2004, was $1,041,000, or $0.29 per share, compared with net income of $505,000, or $0.14 per share, for the second quarter in 2003. Net income for the six months ended June 30, 2004, was $1,988,000, or $0.55 per share, compared with net income of $1,501,000, or $0.41 per share.

Commenting on the second quarter results, John E. Peck, president and chief executive officer, said, “The Company continues to experience growth in the number of demand deposit accounts. By focusing on core deposits, the Company is working to reduce its cost of funds and improving its net interest margin. As interest rates increase, this focus further enhances our operating results. The Company’s improved net interest income offset declines in non-operating income over the same six-month period in 2003. The decline in non-interest income is the result of higher interest rates, weakening the demand for fixed rate mortgages and limiting the Company’s opportunities to realize gains on the sale of investment securities. Despite these challenges, net income increased almost $100,000 over the previous quarter.”

“In addition, at June 30, 2004, total assets increased to $582.2 million compared with $531.5 million at December 31, 2003; deposits declined to $416.5 million compared with $417.5 million at December 31, 2003; while net loans increased to $351.4 million compared with $334.7 million at December 31, 2003.”

HopFed Bancorp, Inc. is a holding company for Heritage Bank headquartered in Hopkinsville, Kentucky. The Bank has nine offices in western Kentucky as well as Fall & Fall Insurance of Fulton, Kentucky and Heritage Solutions of Murray, Kentucky. The Bank offers a broad line of banking and financial products and services with the personalized focus of a community banking organization. More information about HopFed Bancorp and Heritage Bank may be found on its website www.bankwithheritage.com.

Information contained in this press release, other than historical information, may be considered forward-looking in nature and is subject to various risk, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. Among the key factors that may have a direct bearing on the Company’s operating results, performance or financial condition are competition and the demand for the Company’s products and services, and other factors as set forth in filings with the Securities and Exchange Commission.

	Three Months Ended June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
Earnings Summary
Interest income on loans	$	4,814	$	4,843	$	9,534	$	9,574
Interest income on taxable investments		1,517		1,214		2,843		2,235
Interest income on non taxable investments		258		125		500		240
Interest income on time deposits		3		10		9		48
Total interest income		6,592		6,192		12,886		12,097
Interest expense on deposits		2,358		2,786		4,787		5,552
Interest on subordinated debentures		111		—		221		—
Interest expense on borrowed funds		585		310		1,011		577
Total interest expense		3,054		3,096		6,019		6,129
Net interest income		3,538		3,096		6,867		5,968
Provision for loan losses		300		450		600		850
Net interest income after provision
For loan losses		3,238		2,646		6,267		5,118
Non-interest income:
Gain on sale of investments		3		54		174		372
Gain on sale of loans		25		260		57		378
Service charges		450		586		835		1,161
Other		227		5		431		9
Total non-interest income		705		905		1,497		1,920
Non-interest expense:
Salaries and benefits		1,271		1,947		2,527		2,970
Occupancy expense		175		166		344		376
Data processing		219		127		417		313
State deposit taxes		104		96		220		192
Loss on sale of fixed assets		—		—		7		—
Other operating expenses		626		476		1,276		984
Total non-interest expense		2,395		2,812		4,791		4,835
Net income before income taxes		1,548		739		2,973		2,203
Federal income tax expense		507		234		985		702
Net income	$	1,041	$	505	$	1,988	$	1,501
Earnings per share – basic	$	0.29	$	0.14	$	0.55	$	0.41
Earnings per share – diluted	$	0.28	$	0.14	$	0.54	$	0.41
Dividend per share	$	0.12	$	0.12	$	0.24	$	0.23
Weighted average shares outstanding – Basic		3,630,396		3,630,396		3,630,396		3,630,396
Weighted average shares outstanding – Diluted		3,658,572		3,654,347		3,660,022		3,650,581

	As of
	June 30, 2004		December 31, 2003
Total assets	$	582,278	$	531,465
Loans receivable, gross		354,368		337,316
Securities available for sale		160,710		143,514
Securities held to maturity		29,969		15,108
Allowance for loan losses		2,999		2,576
Total deposits		416,465		417,488
Total borrowings		116,795		64,663
Stockholders’ equity		46,380		47,238
Book value	$	12.78	$	13.01