Edgar Filing: HOPFED BANCORP INC

FREE WRITING PROSPECTUS

Common Stock Offering

Investor Presentation

John

Peck,

President

Chief

Executive

Officer

Billy

Duvall,

Senior

Vice

President

Chief

Financial

Officer

June 2010

Filed Pursuant to Rule 433

Issuer Free Writing Prospectus dated June 7, 2010

Relating to Preliminary Prospectus dated June 4, 2010

Registration Statement No. 333-167072

We have filed a registration statement (including a prospectus) with the SEC for the offering to which

this communication relates.

Before you invest, you should read the prospectus in that registration

statement and other documents we have filed with the SEC for more complete information about us

and this offering.

You may get these documents for free by visiting EDGAR on the SEC Web site at

www.sec.gov

or by visiting our web site at www.bankwithheritage.com.

Alternatively, we, any

underwriter, or any dealer participating in the offering will arrange to send you the prospectus if you

request it by calling toll-free (800) 800-4693.

Certain statements contained herein are forward-looking statements, within the meaning of Section

27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are

subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, that

involve risks and uncertainties. Actual results may differ materially from the results in these forward-

looking statements. Factors that might cause such a difference include, among other matters, changes

in interest rates, economic conditions, governmental regulation and legislation, credit quality and

competition affecting the Company’s business; the risk of natural disasters and future catastrophic

events including terrorist related incidents; and other factors discussed in the Company’s Annual

Report on Form 10-K for the year ended December 31, 2009 and in subsequent reports

filed on Form

10-Q and Form 8-K.

We can give no assurance that any of the events anticipated by the forward-looking statements will

occur or, if any of them does, what impact they will have on our

results of operations and financial

condition. We disclaim any intent or obligation to publicly update or revise any forward-looking

statements, regardless of whether new information becomes available, future developments occur or

otherwise, except as required by law.

Cautionary and Forward Looking Statements

This presentation also includes non-GAAP financial measures determined by methods other than in

accordance with generally accepted accounting principles (“GAAP”). Such non-GAAP financial

measures include (1) the ratio of tangible common equity to tangible assets, (2) tangible book value

per share, (3) return on average assets excluding goodwill impairment charge, (4) return on average

equity excluding goodwill impairment charge and (5) efficiency ratio excluding goodwill impairment

charge and foreclosed property expenses. The most comparable GAAP measures to these measures

are the ratio of equity to total assets, book value per share, return on average assets, return on average

equity and efficiency ratio, respectively.

We use these non-GAAP financial measures because we believe they are useful for evaluating our

financial condition, operations and performance over periods of time, as well as in managing and

evaluating our business and in discussions about our operations and performance. We also believe

these non-GAAP financial measures provides users of our financial information with a meaningful

measure for assessing our financial condition, financial results

and credit trends, as well as

comparison to financial results for prior periods. These disclosures should not be viewed as a

substitute for results determined in accordance with GAAP, and are not necessarily comparable to

non-GAAP performance measures that other companies may use. For a reconciliation of these non-

GAAP financial measures to the most comparable GAAP measure, please see page 21 of this

presentation

Non-GAAP Measures

Issuer

HopFed

Bancorp, Inc.

NASDAQ Global Market -

HFBC

Type of Security

Common Stock

Transaction Size

$30 million

Over-Allotment Option

15%

Share Price

$11.00 (as of 6/3/10)

Pre-Offering Market Capitalization

$39.6 million

Pre-Offering Shares Outstanding

3,599,417 (as of 05/7/10)

Use of Proceeds

Organic growth, opportunistic

acquisitions, general corporate purposes

and to position us for eventual

redemption of our TARP Preferred Stock

Sole Manager

Howe Barnes Hoefer & Arnett

Offering Summary

Offering Rationale

Further strengthens balance sheet and regulatory capital ratios

Allows us to continue to reposition our balance sheet

Expect to contribute approximately $10.0 million of the net proceeds to the Bank to

bolster regulatory capital ratios

Supports ongoing and future growth

We believe our economically stable markets are ideal for a community bank of our size

and provide tremendous growth opportunities

continuously

for

organic

growth

and

external

expansion

opportunities

within our markets and complementary, contiguous markets

Increases our overall financial flexibility

Positions us for the eventual redemption of our Series A Preferred Stock issued to the

U.S. Treasury under the Capital Purchase Program

Allows us to maintain prudent and required regulatory capital ratios

Experienced Management Team

Our management team has over 150 years of combined industry

experience and strong ties to the Western Kentucky and Middle

Tennessee markets

Years with

Industry

Name

Position

HFBC

Experience

Previous experience

John Peck

President & CEO

President and CEO of United Commonwealth Bank

President of Firstar Bank-Calloway County

Mike Woolfolk

Chief Operating Officer

President of Firstar Bank-Marshall County

Senior Vice President of Operations of Citizens Bank

Billy Duvall

Chief Financial Officer

Auditor with Rayburn, Betts & Bates, P.C.

Examiner with National Credit Union Administration

Michael Stalls

SVP & Chief Credit Officer

Senior Lending Officer at Regions Bank (Southern TN)

Boyd Clark

SVP & Corporate Secretary

Held a variety of positions all at Heritage Bank

Company Profile

(1) As of March 31, 2010

(2) As of June 3, 2010

Headquarters

Hopkinsville, Kentucky

18 branches:

11 in Kentucky; 7 in Tennessee

Average Volume (52 week)

(2)

2,770 shares per day

Total Assets

(1)

$1.1 billion

Insider Ownership

(1)

10%

Common Stockholders’

Equity

(1)

$63.6 million

Institutional Ownership

(1)

16%

Source: SNL Financial LC and Company reports

Market Areas –

Clarksville/Hopkinsville

8 offices in 4 counties

Clarksville, TN was ranked as the

ninth fastest growing city in the

nation by the U.S. Census Bureau in

2007

Entire market area home to Ft.

Campbell Army Base with 22,000

active personnel –

largest

employer in TN and KY

“Green Energy Corridor”

–

future

home of Hemlock Semiconductor

Diverse agricultural production –

corn, wheat, soybeans, cattle and

tobacco

Strong retail and service industries

Home to Austin Peay

State

University with 10,000+ students

Recognized for growth potential,

talented labor pool and affordable

living

Clarksville/Hopkinsville MSA Market Share

(1)

($ in millions)

Market

# of

Deposits in

Market

Rank

Institution (State)

branches

Market

F&M Financial Corporation (TN)

415

13.74%

Planters Financial Group Inc. (TN)

336

11.12%

Regions Financial Corp. (AL)

310

10.24%

HopFed Bancorp Inc. (KY)

309

10.23%

BB&T Corp. (NC)

293

9.70%

U.S. Bancorp (MN)

243

8.05%

Legends Financial Holdings Inc (TN)

225

7.44%

First Advantage Bancorp (TN)

208

6.90%

Bank of America Corp. (NC)

191

6.32%

Green Bankshares Inc (TN)

131

4.33%

Todd Bancshares Inc. (KY)

113

3.73%

Cumberland Bancorp Inc. (TN)

106

3.50%

Cadiz Bancorp Inc. (KY)

2.40%

Jackson Financial Corporation (KY)

2.29%

J. R. Montgomery Bancorp. (OK)

0.02%

Grand Total

3,021

100.00%

(1) Source: SNL Financial LC; Branch deposit data as of June 30, 2009

Market Areas –

Middle Tennessee

3 offices in Cheatham County

and 1 in Houston County

Cheatham County is in

Nashville MSA and currently

serves as a Nashville bedroom

community

Light manufacturing

Management values good

deposit mix, long term growth

prospects and proximity to

Nashville

Management considers this

market a logical entry point

into other communities within

the Nashville MSA

Nashville MSA Market Share

(1)

($ in millions)

Market

# of

Deposits in

Market

Rank

Institution (State)

branches

Market

Regions Financial Corp. (AL)

6,120

18.78%

Bank of America Corp. (NC)

4,924

13.71%

SunTrust Banks Inc. (GA)

4,220

12.91%

Pinnacle Financial Partners (TN)

3,638

9.53%

Fifth Third Bancorp (OH)

1,742

5.08%

First Horizon National Corp. (TN)

1,659

5.20%

Tennessee Commerce Bancorp Inc (TN)

1,205

3.05%

Wilson Bank Holding Company (TN)

1,176

3.59%

U.S. Bancorp (MN)

1,023

2.84%

Green Bankshares

Inc (TN)

717

2.24%

First South Bancorp Inc. (TN)

601

1.53%

Synovus

Financial Corp. (GA)

541

2.25%

BB&T Corp. (NC)

459

1.44%

Wells Fargo & Co. (CA)

428

1.11%

First Farmers Bancshares Inc. (TN)

378

1.20%

Avenue Financial Holdings Inc. (TN)

350

0.61%

Renasant

Corp. (MS)

347

1.16%

Reliant Bank (TN)

323

0.84%

Southeastern Bancorp Inc. (TN)

293

0.97%

Citizens Bncp

Investment Inc. (TN)

272

0.84%

HopFed

Bancorp Inc. (KY)

0.17%

Grand Total

564

34,682

(1) Source: SNL Financial LC; Branch deposit data as of June 30, 2009

Market Areas –

Western Kentucky

6 offices in 3 counties

Significant agricultural base

with prominent wheat, corn

and soybean production

Light manufacturing

Tourism focused on

Kentucky Lake and Land

Between the Lakes

Home to Murray State

University with 10,000+

students

This is an economically

stable region that

management views as a

reliable source of core

deposits and quality loans

Market Share –

Fulton, Marshall and Calloway

Counties

(1)

($ in millions)

Market

# of

Deposits in

Market

Rank

Institution (State)

branches

Market

Community Financial Services (KY)

323

21.90%

HopFed Bancorp Inc. (KY)

320

21.71%

BB&T Corp. (NC)

226

15.34%

Regions Financial Corp. (AL)

208

14.10%

BancKentucky Inc. (KY)

174

11.81%

U.S. Bancorp (MN)

103

6.98%

Citizens Bncp of Hickman Inc. (KY)

4.88%

Reelfoot Bancshares Inc. (TN)

2.11%

Exchange Bancshares Inc. (KY)

0.81%

Jackson Financial Corporation (KY)

0.28%

Woodforest Financial Group (TX)

0.04%

Cadiz Bancorp Inc. (KY)

0.03%

Grand Total

1,474

100.00%

(1) Source: SNL Financial LC; Branch deposit data as of June 30, 2009

Franchise Transformation

Over the last 10 years, we have transformed our franchise from a

traditional mutual savings bank to a vibrant community bank

Source: Company reports

($ in thousands)

12/31/2000

12/31/2005

3/31/2010

Branches

Employees

126

245

Loans

1-4 Family

93,147

71.1%

211,564

52.7%

232,374

35.7%

Multi-family

2,841

2.2%

6,613

1.6%

48,023

7.4%

CRE

21,695

16.5%

102,676

25.6%

194,529

29.9%

C&D

5,729

4.4%

16,592

4.1%

98,762

15.1%

C&I

946

0.7%

36,945

9.2%

55,990

8.6%

Consumer

6,691

5.1%

26,924

6.7%

21,182

3.3%

Total

131,049

100.0%

401,314

100.0%

650,860

100.0%

Deposits

Transaction Accounts

Non-Interest Bearing

3,828

2.3%

36,918

7.6%

66,784

8.2%

Interest Bearing

9,527

5.8%

96,949

20.1%

103,714

12.7%

Total

13,355

8.1%

133,867

27.7%

170,498

20.9%

MMDA & Savings

34,371

20.7%

97,477

20.2%

62,502

7.6%

Time Deposits

Retail < $100K

103,446

62.5%

174,741

36.2%

391,254

47.9%

Retail > $100K

14,432

8.7%

76,643

15.9%

108,913

13.3%

Brokered

0.0%

84,372

10.3%

Total

117,878

71.2%

251,384

52.1%

584,539

71.5%

Total

165,604

100.0%

482,728

100.0%

817,539

100.0%

Business Strategy

Focus on relationship banking

We operate our franchise in a manner that provides local decision making in our retail offices

We have a local market president and a local market advisory board within our larger markets

Focus on our existing market footprint

Our markets are ideal for a community bank as they provide both stability and growth

Ft. Campbell military base, located within our markets, is a major source of stability

Considerable population growth is projected for both the Clarksville and Nashville MSAs

Take advantage of our unique position as a middle market player

Our primary competitors are either large regional banks or smaller community banks

We are small enough to present ourselves to our customers as a locally-based community bank,

yet large enough to attract businesses that require a larger capital base to service their needs

Continue to reposition our balance sheet

In the last ten years we have transformed our Bank from a traditional mutual savings bank into a

diversified financial institution

We believe that the continued diversification of our loan portfolio and improved

deposit mix will result in improved operating results

Asset Quality

Non-performing

Assets

Detail

Much of our past success is

attributable to our

commitment to conservative

lending practices

During the recent economic

downturn, we have remained

profitable, while continuing to

fund our allowance for loan

losses to appropriate levels

Source: SNL Financial LC and Company reports

Non-performing

Assets

Total

Assets

(1)

(1) KY Banks & Thrifts include all banks and thrifts headquartered in Kentucky that are listed on a major stock exchange.

1.29%

1.28%

0.84%

0.12%

0.16%

0.19%

2.37%

0.53%

0.66%

2.22%

0.97%

1.20%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

2005

2006

2007

2008

2009

Q1'10

HopFed Bancorp, Inc.

KY Banks & Thrifts

($ in thousands)

2005

2006

2007

2008

2009

Q1'10

Non-performing loans

996

863

593

7,321

11,209

10,795

OREO

228

342

347

875

1,883

2,728

Non-performing assets

1,224

1,205

940

8,196

13,092

13,523

Total loans

401,314

499,438

581,094

634,210

650,945

650,860

Allowance of loan losses

4,004

4,470

4,842

6,133

8,851

8,639

Total assets

639,589

770,888

808,352

967,560

1,029,876

1,051,850

NPLs

/ total loans

0.25%

0.17%

0.10%

1.16%

1.72%

1.66%

NPAs

/ total assets

0.19%

0.16%

0.12%

0.84%

1.28%

1.29%

ALL / total loans

1.00%

0.90%

0.83%

0.97%

1.36%

1.33%

ALL / NPLs

402.01%

517.96%

816.53%

83.01%

78.96%

80.03%

Loan Portfolio

Total Loan Portfolio

(1)

Over the last 10 years we have transformed

our loan portfolio and continued loan

diversification should lead to improved

operating results

Total Loans:

$650.9 million

Weighted Average Yield:

6.00%

(1)

As of March 31, 2010

(2)

Does not include over-allotment option

Loan Portfolio Concentration

(1)

Source: SNL Financial LC and Company reports

Consumer

3.2%

RE - 1-4 family

35.7%

RE - multi-family

7.4%

RE - CRE

(investor)

5.0%

RE - CRE (owner

occupied)

24.9%

RE - construction

5.2%

Land

development

10.0%

Commercial and

financial

8.6%

% of Pro

($ in thousands)

% of Total

% of Risk

Forma Risk

Loan Category

Amount

Loans

Based Capital

(2)

Consumer

21,182

3.2%

22.9%

17.6%

RE - 1-4 family

232,374

35.7%

251.6%

192.8%

RE - multi-family

48,023

7.4%

52.0%

39.8%

RE - CRE (investor)

32,550

5.0%

35.2%

27.0%

RE - CRE (owner occupied)

161,979

24.9%

175.4%

134.4%

RE - construction

33,967

5.2%

36.8%

28.2%

Land development

64,795

10.0%

70.2%

53.8%

Commercial and financial

55,990

8.6%

60.6%

46.4%

650,860

100.0%

704.7%

540.0%

Total Capitalization

92,343

120,543

$818

$794

$713

$599

$569

$483

$100

$200

$300

$400

$500

$600

$700

$800

$900

2005

2006

2007

2008

2009

Q1'10

Demand -

nonint.

bearing

8.2%

Demand -

int.

bearing

12.7%

Savings

7.6%

Retail CDs

32.7%

Jumbo CDs

38.8%

Deposit Portfolio

Total Deposit Breakout

(1)

Total Deposit Growth ($ in millions)

Qtr. 2010 Deposit Cost Summary

Overall Cost of Deposits:

2.27%

Cost of Interest Bearing Deposits:

2.47%

Growth in core, low cost deposits

continues to be a high priority

Marketing campaign focused on increasing

our market share of checking accounts has

netted 4,000 new noninterest bearing

checking accounts in each of the last two

years

As our deposit mix improves so should

our net interest margin and profitability

Brokered deposits represent 10.3% of

total deposits and we have agreed not to

increase our brokered deposits without

prior OTS approval

Source: SNL Financial LC and Company reports

(1) As of March 31, 2010

Pro Forma Capital Ratios

KY Banks and Thrifts (Median Values)

(3)

HFBC as of 3/31/2010

HFBC as adjusted

(1)

Pro Forma Capital Ratios

(2)

8.34%

13.73%

9.24%

14.12%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

Peers

HFBC

Peers

HFBC

Core Capital to Adj. Assets

Total Capital Ratio

10.74%

17.84%

Source: SNL Financial LC and Company reports

(1) Assumes that 2,727,273 shares of our common stock are sold in this offering at $11.00 per share (based on the closing price of our common stock on the

NASDAQ Global Market on June 3, 2010) and that the net proceeds thereof are approximately $28.2 million after deducting underwriting discounts and

commissions and our estimated expenses. Also assumes that $10.0 million of the net proceeds are contributed to the Bank.

(2) Represents Company capital ratios.

(3) KY Banks & Thrifts include all banks and thrifts headquartered in Kentucky that are listed on a major stock exchange.

Actual

As Adjusted

(1)

($ in thousands, except per share data)

Shares outstanding………………………………

3,598,857

6,326,130

Junior subordinated debt………………………..

10,310

Common stock, par value………………………

Additional paid in capital………………………

26,530

54,703

TARP preferred equity

17,988

Common stock warrant………………………...

556

Retained earnings……………............................

39,415

Treasury stock…………………….....................

(6,495)

Accumulated other comprehensive gain……..

3,998

Total stockholders' equity..................................

82,033

110,233

Total capitalization.............................................

92,343

120,543

Per Share Data:

Book value per share………………………..

17.68

14.52

Tangible book value per share………………

17.38

14.35

Company Capital Ratios:

Core capital to adjusted total assets…………

8.34%

10.74%

Tier 1 capital to risk weighted assets……….

12.73%

16.83%

Total capital to risk weighted assets………..

13.73%

17.84%

Bank Capital Ratios:

Core capital to adjusted total assets………….

8.02%

8.89%

Tier 1 capital to risk weighted assets…………

12.24%

13.71%

Total capital to risk weighted assets………….

13.25%

14.72%

At March 31, 2010

Financial Metrics

Source: Company reports

At or for the three months

ended March 31,

At or for the year ended December 31,

2010

2009

2008

2007

2006

2005

(unaudited)

($ in thousands, except per share data)

Statement of Income:

Net interest income

$ 7,274

$ 6,395

$ 26,829

$ 23,057

$ 20,142

$ 17,380

$ 14,192

Provision for loan losses

611

974

4,199

2,417

976

1,023

1,250

Non-interest income

2,309

2,359

10,225

8,344

7,231

5,765

4,532

Non-interest expense

6,386

5,962

30,483

22,417

20,553

16,514

11,600

Income before income taxes

2,586

1,818

2,372

6,567

5,844

5,608

5,874

Provision for income taxes

726

552

397

1,952

1,728

1,700

1,744

Net income

1,860

1,266

1,975

4,615

4,116

3,908

4,130

Preferred stock dividends

254

1,031

Net income available to common stockholders

$ 1,606

$ 1,012

$ 944

$ 4,559

$ 4,116

$ 3,908

$ 4,130

Balance Sheet:

Assets

$ 1,051,850

$ 991,131

$ 1,029,876

$ 967,560

$ 808,352

$ 770,888

$ 639,589

Loans receivable, net

642,474

620,905

642,355

628,356

576,252

494,968

397,310

Deposits

817,539

738,668

794,144

713,005

598,753

569,433

482,728

Subordinated debentures

10,310

Total stockholders' equity

82,033

80,247

79,949

78,284

55,803

52,270

49,842

Performance Ratios:

Return on average assets

0.62%

0.41%

0.09%

0.55%

0.53%

0.56%

0.69%

Return on average equity

7.80

5.06

1.18

8.08

7.84

7.65

8.33

Net interest margin

3.19

2.89

2.97

3.06

2.89

2.71

2.61

Efficiency ratio

64.80

66.85

80.73

70.41

73.66

70.66

61.95

Capital Ratios:

Tangible common equity to tangible assets

5.95%

5.61%

5.87%

5.52%

6.01%

5.73%

7.06%

Core capital to adjusted total assets (Company)

8.34

8.31

8.4

7.3

9.1

Tier 1 capital to risk weighted assets (Company)

12.73

12.96

12.7

10.1

11.0

14.7

Total capital to risk weighted assets (Company)

13.73

14.02

13.8

13.7

11.0

11.8

15.7

Core capital to adjusted total assets (Bank)

8.02

7.74

8.1

7.8

7.0

8.7

Tier 1 capital to risk weighted assets (Bank)

12.25

12.05

12.2

11.7

9.6

10.4

14.0

Total capital to risk weighted assets (Bank)

13.25

13.12

13.3

12.6

10.5

11.3

15.0

Per Share Data:

Basic earnings per share

$ 0.45

$ 0.28

$ 0.26

$ 1.28

$ 1.15

$ 1.08

$ 1.13

Diluted earnings per share

0.45

0.28

0.26

1.27

1.14

1.07

1.13

Book value per share

17.68

17.25

17.12

16.70

15.54

14.41

13.66

Tangible book value per share

17.38

15.41

16.80

14.81

13.40

12.03

12.27

Dividends per share

0.12

0.48

Weighted

average

outstanding

basic

3,578,073

3,576,791

3,569,969

3,572,127

3,588,163

3,634,138

3,644,178

Weighted

average

outstanding

diluted

3,578,073

3,576,791

3,569,969

3,597,483

3,607,870

3,659,666

3,669,918

Common shares outstanding

3,598,857

3,585,581

3,594,620

3,585,049

3,592,033

3,627,906

3,649,078

7.80%

8.33%

7.65%

7.84%

8.08%

1.18%

0.00%

2.50%

5.00%

7.50%

10.00%

12.50%

15.00%

2005

2006

2007

2008

2009

Q1'10

61.95%

70.66%

73.30%

69.84%

66.88%

63.83%

40.00%

50.00%

60.00%

70.00%

80.00%

2005

2006

2007

2008

2009

Q1'10

0.69%

0.56%

0.53%

0.55%

0.62%

0.09%

0.00%

0.25%

0.50%

0.75%

1.00%

1.25%

1.50%

2005

2006

2007

2008

2009

Q1'10

2.71%

2.61%

2.89%

3.06%

2.97%

3.19%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

2005

2006

2007

2008

2009

Q1'10

Historical Performance

Return on Average Equity

Net Interest Margin

Efficiency Ratio

(1)

Return on Average Assets

HopFed

Bancorp, Inc.

KY Banks & Thrifts

(3)

Source: SNL Financial LC and Company reports

0.42%

(2)

5.30%

(2)

(1) Excludes goodwill impairment and foreclosed property expense.

(2) Excludes goodwill impairment charge of $5.0 million.

(3) KY Banks & Thrifts include all banks and thrifts headquartered in Kentucky that are listed on a major stock exchange.

Why Invest in HopFed

Bancorp, Inc.

History of strong financial performance

We have remained profitable during the recent economic downturn and believe that

we are positioned to take advantage of future growth opportunities

Strong Asset Quality

Our asset quality metrics have remained superior to our peers

Experienced Management Team

We have

experienced

and

energetic

management

team

with

strong

relationships in

our market areas

Disciplined approach to internal and external growth

We are

confident

our

ability

successfully

integrate

future

branch

whole

bank

acquisitions as well as grow through de novo branches

Attractive Entry Point

Opportunity to invest in a high quality franchise with a proven track record at a

significant discount to tangible book value and peer trading multiples

We believe there will be exceptional opportunities for responsible strategic

growth in our market areas

Appendix: Company History

1879:

The Bank was founded under the name Hopkinsville Building and Loan

Association

1940:

The Bank converted to a savings association and began insuring deposits

1983:

The Bank became a federal mutual savings bank

1997:

HopFed

Bancorp, Inc. was incorporated under the laws of Delaware

1998:

The Bank converted from a federal mutual savings bank to a federal stock

savings bank and the Company became listed on the NASDAQ

2000:

John E. Peck named President and Chief Executive Officer

2002:

The Bank changed its name from Hopkinsville Federal Savings Bank

Heritage Bank

2002:

Acquired two branch offices in Fulton, Kentucky from Old National Bancorp

2006:

Acquired four branch offices in Middle Tennessee from AmSouth Bancorp

2006:

Opened first of three branch offices in Clarksville, Tennessee

2008:

Issued $18.4 million of Series A Preferred Stock under Capital

Purchase Program to the Treasury

We are a Kentucky-based unitary savings and loan holding company.

Our wholly-owned savings bank subsidiary is Heritage Bank.

Appendix: Non-GAAP Reconciliation

At or for the three

months ended March 31,

At or for the year ended December 31,

2010

2009

2008

2007

2006

2005

Book value per common share.......................................

17.68

17.25

17.12

16.70

15.54

14.41

13.66

Effect of intangible asset per share.................................

0.30

1.84

0.32

1.89

2.14

2.38

1.39

Tangible book value per common share.......................

17.38

15.41

16.80

14.81

13.40

12.03

12.27

Equity to total assets.........................................................

7.80%

8.10%

7.76%

8.10%

6.90%

6.78%

7.79%

Effect of intangible assets.................................................

0.09

0.62

0.09

0.66

0.89

1.05

0.73

Tangible equity to tangible assets..................................

7.71%

7.48%

7.67%

7.44%

6.01%

5.73%

7.06%

Effect of preferred equity..................................................

1.76

1.87

1.80

1.92

Tangible common equity to tangible assets.................

5.95%

5.61%

5.87%

5.52%

6.01%

5.73%

7.06%

Return on average assets..................................................

0.62%

0.41%

0.09%

0.55%

0.53%

0.56%

0.69%

Effect of goodwill impairment charge...........................

0.33

Adjusted return on average assets..................................

0.62%

0.41%

0.42%

0.54%

0.53%

0.56%

0.69%

Return on average equity..................................................

7.80%

5.06%

1.18%

8.08%

7.84%

7.65%

8.33%

Effect of goodwill impairment charge...........................

4.12

Adjusted return on average equity..................................

7.80%

5.06%

5.30%

8.08%

7.84%

7.65%

8.33%

Efficiency ratio...................................................................

64.80%

66.85%

80.73%

70.41%

73.66%

70.66%

61.95%

Effect of goodwill impairment charge and

foreclosed property expense...........................................

0.97

0.28

13.85

0.57

0.36

0.00

Adjusted efficiency ratio...................................................

63.83%

66.57%

66.88%

69.84%

73.30%

70.66%

61.95%

John E. Peck

Billy C. Duvall

President & Chief Executive Officer

SVP & Chief Financial Officer

(270) 887-8401

(270) 887-8404

john.peck@bankwithheritage.com

billy.duvall@bankwithheritage.com