SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 6, 2002
HOPFED BANCORP, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 0-23667 61-1322555
-------------------------------- ---------------- -----------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) 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
ITEM 2. Acquisition or Disposition of Assets.
On March 5, 2002, the Registrant announced that Hopkinsville Federal
Bank, the Registrant's wholly owned subsidiary (the "Bank"), had entered into a
definitive agreement to acquire two offices of Old National Bank located in
Fulton, Kentucky (the "Agreement"). Subsequent thereto, the Bank changed its
name to "Heritage Bank." On September 5 and 6, 2002, the Bank completed the
acquisition. Pursuant to the terms of the Agreement, the Bank has acquired the
facilities, fixed assets, loans and deposits of the two offices. The combined
deposits of such offices total approximately $96.5 million. The Bank also
acquired approximately 2,400 loans, with an aggregate balance of approximately
$42.0 million, and Fall & Fall Insurance, a full service insurance agency. The
Bank paid a premium of 6.456%, or approximately $6.25 million, for the acquired
deposits and other assets.
The assets acquired and liabilities assumed are approximately as
follows:
Assets acquired:
Cash and cash equivalents $ 854,000
Securities 45,003,000
Loans 41,613,000
Premises and equipment 1,085,000
Accrued interest receivable 395,000
Cash surrender value of life insurance 1,534,000
-------------
Total assets acquired 90,484,000
-------------
Liabilities assumed:
Deposits 96,532,000
Accrued interest payable 518,000
Deferred compensation 449,000
Other liabilities 83,000
-------------
Total liabilities assumed 97,582,000
-------------
Excess of liabilities assumed over assets acquired $ 7,098,000
=============
The excess of liabilities assumed over assets acquired has been
estimated to be allocated to the following intangible assets:
Core deposit intangible $ 2,509,000
Insurance contracts intangible 380,000
Goodwill 4,209,000
-------------
Total $ 7,098,000
=============
The Registrant issued a press release on September 6, 2002, with
respect to the transaction, which is attached as an exhibit to this Current
Report on Form 8-K and is incorporated herein by reference.
1
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
FULTON DIVISION
Consolidated Financial Statements
As of September 5, 2002
and
For the Six Months Ended June 30, 2002 (unaudited) and 2001 (unaudited)
and the Year Ended December 31, 2001
Table of Contents
-----------------
Page
Number
------
Independent Auditors' Report 3
Consolidated Statement of Assets and Liabilities Assumed 4
Consolidated Statements of Revenues and Direct Expenses 5
Notes to Consolidated Financial Statements 6
2
Independent Auditors' Report
The Board of Directors
HopFed Bancorp, Inc. as Acquirers of
the Fulton Division
Hopkinsville, Kentucky
We have audited the accompanying the consolidated statement of assets
acquired and liabilities assumed of the Fulton Division (the Division) as of
September 5, 2002 (date of acquisition), and the related consolidated statements
of revenues and direct expenses for the year ended December 31, 2001. These
consolidated financial statements are the responsibility of the Division's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Division as of September 5, 2002, and the consolidated results of its direct
operations for the year ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.
/s/Rayburn, Betts & Bates, P.C.
Nashville, Tennessee
November 14, 2002
3
FULTON DIVISON
Consolidated Statement of Assets Acquired and Liabilities Assumed
September 5, 2002
Assets Acquired
Cash and cash equivalents (note 2) $ 854,000
Security available for sale (note 3) 45,003,000
Loans (note 4) 41,613,000
Premises and equipment (note 5) 1,085,000
Accrued interest receivable 395,000
Intangible assets (note 6) 7,098,000
Cash surrender value of life insurance 1,534,000
----------------
$ 97,582,000
================
Liabilities Assumed
Deposits (note 7) $ 96,532,000
Accrued interest payable 518,000
Deferred compensation (note 8) 449,000
Other liabilities 83,000
----------------
$ 97,582,000
================
See notes to consolidated financial statements.
4
FULTON DIVISON
Consolidated Statements of Revenues and Direct Expenses
For the Year Ended December 31, 2001 and the Six Months
Ended June 30, 2002 (unaudited) and 2001 (unaudited)
Year Ended Six Months Ended Six Months Ended
December 31, 2001 June 30, 2002 June 30, 2001
----------------- ------------- -------------
(Unaudited) (Unaudited)
Interest income from loans $ 4,751,000 1,806,000 2,549,000
Interest expense on deposits 3,871,000 1,684,000 1,997,000
----------- ----------- ----------
Net interest income 880,000 122,000 552,000
Provision for possible loan losses - - -
----------- ----------- ----------
Net interest income after provision
for loan losses 880,000 122,000 552,000
----------- ----------- ----------
Non-interest income:
Service charges on deposits 754,000 340,000 387,000
Loan fees 155,000 64,000 58,000
Other income 112,000 53,000 64,000
----------- ----------- ----------
Total non-interest income 1,021,000 457,000 509,000
----------- ----------- ----------
Non-interest direct expenses:
Salaries and benefits 932,000 458,000 460,000
Occupancy expenses, net 78,000 42,000 46,000
Equipment expenses 99,000 37,000 61,000
Other direct operating expenses 286,000 139,000 141,000
----------- ----------- ----------
Total non-interest direct expenses 1,395,000 676,000 708,000
----------- ----------- ----------
Revenues in excess of (less than) direct
expenses $ 506,000 (97,000) 353,000
=========== =========== ==========
See notes to consolidated financial statements.
5
FULTON DIVISON
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies:
The accounting and reporting policies of the Fulton Division and its
subsidiary (collectively the Division) conform with accounting
principles generally accepted in the United States of America and to
general practice within the banking industry. The following is a
description of the more significant accounting policies which the
Division uses in preparing and presenting its consolidated financial
statements.
Basis of Presentation
The accompanying consolidated financial statements include the amounts
of the Division and its wholly-owned subsidiary, Falls & Falls
Insurance (the Agency). All significant inter-entity transactions and
balances are eliminated in consolidation.
As more fully discussed below, the Division, prior to September 5,
2002, was a branch bank operating in Fulton, Kentucky as part of Old
National Bank headquartered in Evansville, Indiana. Accordingly, the
consolidated financial statements are presented based on information as
previously maintained by Old National Bank for individual branch
operations. The consolidated financial statements as presented are not
a full set of financial statements, but rather they present assets
acquired and liabilities assumed and revenues and direct expenses
attributable to the branch bank operations (carve out financial
statements).
Acquisition
The Division has operated as a branch bank operation of Old National
Bank since 1999. On September 5, 2002, the Division was purchased by
Heritage Bank (formerly Hopkinsville Federal Bank and a wholly-owned
subsidiary of HopFed Bancorp, Inc.). The purchase involved the transfer
of Division assets, assumption of Division liabilities and a cash
payment for intangible assets related to the Division. See footnote 6
for further information on the acquisition.
Estimates
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amount of assets and liabilities as of the date of the consolidated
statement of assets acquired and liabilities assumed and revenues and
direct expenses for the reported periods. Actual results could differ
significantly from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents are defined as cash on hand or in banks and
cash items.
6
FULTON DIVISON
Notes to Consolidated Financial Statements (Continued)
(1) Summary of Significant Accounting Policies (Continued):
Securities
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 115, Accounting for Certain Investments in Debt and Equity
Securities, the Division is required to report debt, readily-marketable
equity, mortgage-backed and mortgage related securities in one of the
following categories: (i) "held to maturity" (management has a positive
intent and ability to hold to maturity) which are to be reported at
cost, adjusted for premiums and discounts that are recognized in
interest income; (ii) "trading" (held for current resale) which are to
be reported at fair value, with unrealized gains and losses included in
earnings; and (iii) "available for sale" (all other debt, equity,
mortgage-backed and mortgage related securities) which are to be
reported at fair value, with unrealized gains and losses reported net
of tax as a separate component of equity. At the time of new security
purchases, a determination is made as to the appropriate
classification. Realized and unrealized gains and losses on trading
securities are included in net income. Unrealized gains and losses on
securities available for sale are recognized as direct increases or
decreases in stockholders' equity, net of any tax effect. Cost of
securities sold is recognized using the specific identification method.
Loans
Loans are stated at unpaid principal balances, plus and any purchase
premium and less the allowance for loan losses and discounts.
Discounts on home improvement and consumer loans are recognized over
the lives of the loans using the interest method. Loan origination fee
income is recognized as received and direct loan origination costs are
expensed as incurred. Generally accepted accounting standards requires
the recognition of loan origination fee income over the life of the
loan and the recognition of certain direct loan origination costs over
the life of the loan. However, deferral of such fees and costs would
not have a material effect on the consolidated financial statements.
Uncollectible interest on loans that are contractually past due is
charged off, or an allowance is established based on management's
periodic evaluation. The allowance is established by a charge to
interest income equal to all interest previously accrued, and income is
subsequently recognized only to the extent that cash payments are
received while the loan is classified as non-accrual. Loans may be
returned to accrual status when all principal and interest amounts
contractually due (including arrearages) are reasonably assured of
repayment within an acceptable period of time, and there is a sustained
period of repayment performance by the borrower in accordance with the
contractual terms of interest and principal.
7
FULTON DIVISON
Notes to Consolidated Financial Statements (Continued)
(1) Summary of Significant Accounting Policies (Continued):
The Division provides an allowance for loan losses and includes in
operating expenses a provision for loan losses determined by
management. Management's periodic evaluation of the adequacy of the
allowance is based on the Division's past loan loss experience, known
and inherent risks in the portfolio, adverse situations that may affect
the borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions. Management believes it has
established the allowance in accordance with accounting principles
generally accepted in the United States of America and has taken into
account the views of its regulators and the current economic
environment.
Loans are considered to be impaired when, in management's judgment,
principal or interest is not collectible according to the contractual
terms of the loan agreement. When conducting loan evaluations,
management considers various factors such as historical loan
performance, the financial condition of the borrower and adequacy of
collateral to determine if a loan is impaired.
The measurement of impaired loans generally is based on the present
value of future cash flows discounted at the historical effective
interest rate, except that collateral-dependent loans generally are
measured for impairment based on the fair value of the collateral. When
the measured amount of an impaired loan is less than the recorded
investment in the loan, the impairment is recorded as a charge to
income and a valuation allowance, which is included as a component of
the allowance for loan losses.
Premises and Equipment
Land is carried at cost. Land improvements, buildings, and furniture
and equipment are carried at cost, less accumulated depreciation and
amortization. Buildings and land improvements are depreciated generally
by the straight-line method, and furniture and equipment are
depreciated under accelerated methods over the estimated useful lives
of the assets. The estimated useful lives used to compute depreciation
are as follows:
Land improvements 5-15 years
Buildings 40 years
Furniture and equipment 5-15 years
Financial Instruments
In the ordinary course of business, the Division has entered into
off-balance-sheet financial instruments consisting of commitments to
extend credit and commercial letters of credit. Such financial
instruments are recorded in the consolidated financial statements when
they are funded or related fees are incurred or received.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Division in
estimating fair values of financial instruments as disclosed herein:
8
FULTON DIVISON
Notes to Consolidated Financial Statements (Continued)
(1) Summary of Significant Accounting Policies (Continued):
Cash and cash equivalents
The carrying amount of cash and cash equivalents approximates their
fair value.
Security
The fair value for the security is based on quoted market price.
Loans
As loans were acquired on September 5, 2002, in a transaction between
two unrelated parties, the contractual sales price is deemed as the
estimated fair value.
Deposits
The fair values for demand deposits is deemed to be the contractual
obligation for which they were assumed in accordance with the agreement
between Heritage Bank and Old National Bank which was effective as of
September 5, 2002.
Accrued interest
The carrying amounts of accrued interest approximate their fair values.
Off-balance-sheet instruments
Off-balance-sheet lending commitments approximate their fair values due
to the short period of time before the commitment expires.
Effect of New Accounting Pronouncements Business Combinations
In June 2001, the FASB issued Statement No. 141, Business Combinations
(SFAS No. 141). The Statement addresses financial accounting and
reporting for business combinations and supersedes APB Opinion No. 16,
Business Combinations, and FASB Statement No. 38, Accounting for
Preacquisition Contingencies of Purchased Enterprises. All business
combinations in the scope of SFAS No. 141 are to be accounted for using
the purchase method.
The provisions of SFAS No. 141 apply to all business combinations
initiated after June 30, 2001. SFAS No. 141 also applies to all
business combinations accounted for using the purchase method for which
the date of acquisition is July 1, 2001, or
9
FULTON DIVISON
Notes to Consolidated Financial Statements (Continued)
(1) Summary of Significant Accounting Policies (Continued):
later. The acquisition of the Division has followed the provisions of
SFAS No. 141.
Goodwill and Other Intangible Assets
In June 2001, the FASB issued Statement No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142). This statement addressed financial
accounting and reporting for acquired goodwill and other intangible
assets and supersedes APB Opinion No. 117, Intangible Assets. It
addresses how intangible assets that are acquired individually or with
a group of other assets (but not those acquired in a business
combination) should be accounted for in financial statements upon their
acquisition. SFAS No. 142 also addresses how goodwill and other
intangible assets should be accounted for after they have been
initially recognized in the financial statements.
The provisions of the SFAS No. 142 are required to be applied starting
with fiscal years beginning after December 15, 2001, except that
goodwill and intangible assets acquired after June 30, 2001, will be
subject immediately to the non-amortization and amortization provisions
of the SFAS No. 142. SFAS No. 142 is required to be applied at the
beginning of an entity's fiscal year and to be applied to all goodwill
and other intangible assets recognized in its financial statements at
that date. The acquisition of the Division has followed the provisions
of SFAS No. 142.
10
FULTON DIVISON
Notes to Consolidated Financial Statements (Continued)
(2) Concentrations of Credit Risk:
Most of the Division's business activity is with customers located
within the southwestern part of the Commonwealth of Kentucky and the
northwestern part of the State of Tennessee primarily in and around
Fulton, Kentucky.
The distribution of commitments to extend credit approximates the
distribution of loans outstanding. The contractual amounts of
credit-related financial instruments such as commitments to extend
credit and commercial letters of credit represent the amounts of
potential accounting loss should the contract be fully drawn upon, the
customer default, and the value of any existing collateral become
worthless.
(3) Security:
The security, which is a debt investment, has been classified in the
consolidated statement of assets acquired and liabilities assumed
according to management's intent. The carrying amount of the security
and its approximate fair value as of September 5, 2002, is as follows:
September 5, 2002
-----------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- --------- ---------- ------------
Available for sale security:
U.S. Treasury bill $45,003,000 - - $45,003,000
=========== ========== =========== ===========
The scheduled maturity of the debt security available for sale at
September 5, 2002, was as follows:
Amortized Fair
Cost Value
------ -------
Due within one year $45,003,000 $45,003,000
========== ==========
11
FULTON DIVISON
Notes to Consolidated Financial Statements (Continued)
(4) Loans
The components of loans in the consolidated statement of assets
acquired and liabilities assumed as of September 5, 2002, were as follows:
Real estate loans:
One-to-four family $12,612,000
Multi-family 2,147,000
Construction 518,000
Non-residential 12,893,000
-----------
Total mortgage loans 28,170,000
Other consumer loans 7,837,000
Commercial loans 6,050,000
Overdrafts 201,000
-----------
42,258,000
Less discount to market value 645,000
-----------
$41,613,000
===========
Interest income recognized on impaired loans was not significant during
the year ended December 31, 2001, or for the six months ended June 30, 2002
(unuaudited) or 2001 (unuaudited).
12
FULTON DIVISON
Notes to Consolidated Financial Statements (Continued)
(5) Premises and Equipment:
Components of premises and equipment included in the consolidated
statement of assets acquired and liabilities assumed as of September 5, 2002
consisted of the following:
Land $ 88,000
Buildings 997,000
--------
$1,085,000
==========
Depreciation expense was approximately $98,000 for the year ended
December 31, 2001 and $43,000 and $57,000 for the six months ended June
30, 2002 (unaudited) and 2001 (unaudited), respectively.
(6) Business Combination:
On September 5, 2002, Heritage Bank acquired substantially all of the
operating assets and assumed the deposits and certain liabilities of
the Division from Old National Bank. The Division is deemed to meet the
definition of a "business" for generally accepted accounting principles
and, accordingly, the allocation of the cost of the assets acquired and
liabilities assumed has been applied as established by SFAS No. 141 for
business combinations. The following table reflects the initial
accounting of the business combination:
Allocation
----------
Identified assets acquired:
Cash and cash equivalents $ 854,000
Securities 45,003,000
Loans 41,613,000
Premises and equipment 1,085,000
Accrued interest receivable 395,000
Cash surrender value of life insurance 1,534,000
Identified intangible assets 2,889,000
-------------
Total identified acquired assets 93,373,000
-------------
Liabilities assumed:
Deposits 96,532,000
Accrued interest payable 518,000
Deferred compensation 449,000
Other liabilities 83,000
-------------
Total liabilities assumed 97,582,000
-------------
Excess of liabilities assumed over identified assets acquired $ 4,209,000
=============
13
FULTON DIVISON
Notes to Consolidated Financial Statements (Continued)
(6) Business Combination (Continued):
A summary of the intangible assets from the business combination
follows:
Identified intangible assets:
Core deposit $ 2,509,000
Insurance contracts 380,000
Unidentified intangible asset (goodwill) 4,209,000
------------
$ 7,098,000
============
(7) Deposits:
Deposits at September 5, 2002 are summarized as follows:
Demand deposits $ 6,038,000
NOW and Super NOW accounts 10,936,000
Money market demand accounts 12,011,000
Savings 5,005,000
Certificates of deposit $100,000
or greater 11,143,000
Other certificates of deposit 51,399,000
-------------
$ 96,532,000
=============
At September 5, 2002, the scheduled maturities of certificate of
deposits were as follows:
Year Ended
September 5,
------------
2003 $ 29,534,000
2004 18,812,000
2005 6,519,000
2006 4,252,000
2007 3,425,000
-------------
$ 62,542,000
=============
Interest expense on deposits for the year ended December 31, 2001, and
for the six months ended June 30 2002 (unaudited) and 2001 (unaudited)
is summarized as follows:
Year Ended Six Months Ended
December 31, 2001 June 30, 2002 June 30,2001
----------------- ------------- ------------
(Unaudited) (Unaudited)
Demand and NOW accounts $ 125,000 55,000 69,000
Money market accounts 408,000 93,000 246,000
Savings 94,000 34,000 49,000
Other time deposits 3,244,000 1,502,000 1,633,000
---------- --------- ---------
$3,871,000 1,684,000 1,997,000
========== ========= =========
14
FULTON DIVISON
Notes to Consolidated Financial Statements (Continued)
(8) Employee Benefit Plan:
The Division has established a deferred compensation plan comprised of
separate individual agreements for the benefit of certain officers. The
benefits will be in the form of supplemental retirement funds and vary
for the officers.
(9) Financial Instruments:
The Division is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include commitments to
extend credit and commercial letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk
in excess of the amount recognized in the consolidated balance sheets.
The contract or notional amounts of those instruments reflect the
extent of the Division's involvement in particular classes of financial
instruments.
The Division's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and commercial letters of credit is represented by the
contractual notional amount of those instruments. The Division uses the
same credit policies in making commitments and conditional obligations
as it does for on-balance-sheet-instruments.
Unless noted otherwise, the Division does not require collateral or
other security to support financial instruments with credit risk.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since some of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Division's experience has been that most loan
commitments are drawn upon by customers. The Division has offered
standby letters of credit on a limited basis. As of September 5, 2002,
the Division has not been requested to advance funds on any of the
standby letters of credit.
The estimated fair values of financial instruments were as follows at
September 5, 2002:
Estimated
Carrying Fair
Amount Value
------ -----
Financial assets:
Cash and due from banks $ 854,000 854,000
Security available for sale 45,003,000 45,003,000
Loans 41,613,000 41,613,000
Accrued interest receivable 395,000 395,000
Financial liabilities:
Deposits 96,532,000 96,532,000
Accrued interest payable 518,000 518,000
Off-balance-sheet liabilities:
Commitments to extend credit - -
Commercial letters of credit - -
15
FULTON DIVISON
Notes to Consolidated Financial Statements (Continued)
(10) Commitments and Contingencies:
In the ordinary course of business, the Division has various
outstanding commitments and contingent liabilities that are not
reflected in the accompanying consolidated financial statements.
The Division had open loan commitments at September 5, 2002, of
approximately $4,649,000. Of these amounts, approximately $1,500,000
were for fixed rate loans. The interest rates for the fixed rate loan
commitments ranged from 4.25% to 6.75%. Unused lines of credit were
approximately $185,000 as of September 5, 2002.
In addition, the Division is at times a defendant in legal proceedings
arising in connection with its business. It is the best judgment of
management that neither the financial position nor results of
operations of the Division will be materially affected by such legal
proceedings.
Cash Flows:
For the six months ended June 30, 2002 (unaudited) and 2001
(unaudited), and for the year ended December 31, 2001, the following
cash flow items occurred:
Year Six Months Six Months
Ended Ended Ended
December 31, 2001 June 30, 2002 June 30, 2001
----------------- ------------- -------------
(Unaudited) (Unaudited)
Non-cash operating items:
Depreciation $ 98,000 43,000 57,000
Provision for possible loan losses - - -
------------- ----------- ---------
$ 98,000 43,000 57,000
------------- ----------- ---------
Investing activities:
Increase in loans $ 7,512,000 5,868,000 2,205,000
Additions to premises and equipment (115,000) - (26,000)
------------- ----------- ---------
$ 7,397,000 5,868,000 2,179,000
------------- ----------- ---------
Financing activities:
Increase (decrease) in deposits $ 8,616,000 1,314,000 2,868,000
------------- ----------- ---------
16
(b) Pro Forma Financial Information.
This pro forma financial information is the result of combining the
Registrant's reported historical financial information with the Fulton
Division (Fulton, Kentucky branch bank operations) of Old National Bank
historical financial information and making adjustments to the combined
information to reflect events that have occurred or that are assumed to
have occurred because of the acquisition. The pro forma information
should be read in conjunction with our previously reported historical
financial statements and Fulton Division's financial statements
included in this filing. This condensed consolidating pro forma
information is provided for illustrative purposes only and is not
necessarily indicative of the results of operations or financial
position which would have resulted if the combination had been effected
at the beginning of the periods presented or as of the date indicated
or the financial position or results of operation which we might obtain
in the future.
The pro forma condensed consolidating statements of income do not
include non-recurring acquisition costs estimated at $150,000. In
addition, the pro forma does not assume or include any possible cost
savings or revenue opportunities that may be realized as a result of
the combination.
The pro forma condensed consolidating balance sheet assumes the
acquisition occurred on June 30, 2002. The pro forma condensed
consolidating statements of income assume the acquisition occurred on
January 1, 2002.
17
HopFed Bancorp, Inc.
Condensed Consolidating Balance Sheet
June 30, 2002
Acquire
HopFed Fulton Pro Forma Pro Forma
Bancorp, Inc. Division Transactions Note June 30, 2002
------------ -------- ------------ ---- -------------
Assets
Cash and cash equivalents $ 5,688,000 854,000 6,542,000
Securities 82,067,000 45,003,000 127,070,000
Loans 208,799,000 41,613,000 250,412,000
Accrued interest receivable 1,706,000 395,000 2,101,000
Premises and equipment, net 3,374,000 1,085,000 4,459,000
Intangible assets - 7,098,000 3,000 A 7,101,000
Cash surrender value of life
insurance - 1,534,000 1,534,000
Other assets 684,000 - 684,000
-------------- ---------- -----------
$ 302,318,000 97,582,000 399,903,000
============== ========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 220,384,000 96,532,000 3,000 A 316,919,000
Borrowings 33,714,000 - 33,714,000
Advances from borrowers for
taxes and insurance 326,000 - 326,000
Dividends payable 396,000 - 396,000
Other liabilities 2,516,000 1,050,000 3,566,000
-------------- ---------- -----------
257,336,000 97,582,000 354,921,000
Stockholders' equity 44,982,000 - 44,982,000
-------------- ---------- -----------
$ 302,318,000 97,582,000 399,903,000
============== ========== ===========
Note:
----
A. The adjustment reflects the increase in cash held by Falls and
Falls Insurance Agency between June 30, 2002 and September 5,
2002, which was utilized to decrease goodwill at September 5,
2002.
18
HopFed Bancorp, Inc.
Condensed Consolidating Statement of Income
Year Ended December 31, 2001
Fulton HopFed Pro Forma Pro Forma
Division Bancorp, Inc. Combined Adjustments Notes Consolidated
-------- ------------- -------- ----------- ----- ------------
Interest income $ 4,751,000 17,562,000 22,313,000 1,047,000 A, B and C 23,360,000
Interest expense 3,871,000 9,752,000 13,623,000 13,623,000
----------- ---------- ---------- -------------
Net interest income 880,000 7,810,000 8,690,000 9,737,000
Provision for loan losses - 222,000 222,000 222,000
----------- ---------- ---------- -------------
Net interest income after
provision for loan losses 880,000 7,588,000 8,468,000 9,515,000
Non-interest income 1,021,000 717,000 1,738,000 (54,000) D 1,684,000
Non-interest expense 1,395,000 5,493,000 6,888,000 391,000 E and F 7,279,000
----------- ---------- ---------- -------------
Net income before income
taxes 506,000 2,812,000 3,318,000 3,920,000
Income taxes - 973,000 973,000 421,000 G 1,394,000
----------- ---------- ---------- -------------
Net income $ 506,000 1,839,000 2,345,000 2,526,000
=========== ========== ========== =============
Basic net income per share $ .67
=============
Diluted net income per share $ .67
=============
Notes:
-----
A. To reflect interest earned on excess of deposit and other liabilities over
loans and other operating assets of the Fulton Division not previously
reflected by Old National Bank. A yield of 2.5% was assumed.
B. To reflect the impact on interest earnings from the cash paid approximately
$6,695,000 to accomplish the acquisition of the Fulton Division by Heritage
Bank, the subsidiary of HopFed Bancorp, Inc. A yield of 2.5% was assumed.
C. To reflect the accretion of the discount on loans acquired of $645,000 over
an estimated life of 36 months.
D. To reflect amortization of the identified intangible asset (insurance
contracts) of approximately $380,000 over a life of 84 months.
E. To reflect additional depreciation from adjustment to market value of
$1,085,000 from acquisition over lives from 180 months to 468 months.
F. To reflect amortization of the identified intangible asset (core deposit
intangible) of approximately $2,509,000 over a life of 84 months.
G. Tax effect of pro forma adjustments at an estimated tax rate of 38% which
includes a provision for the Fulton Division.
19
HopFed Bancorp, Inc.
Condensed Consolidating Statement of Income
Six Months Ended June 30, 2001
Fulton HopFed Pro Forma Pro Forma
Division Bancorp, Inc. Combined Adjustments Notes Consolidated
-------- ------------- -------- ----------- ----- ------------
Interest income $ 2,549,000 8,682,000 11,231,000 524,000 A, B and C 11,755,000
Interest expense 1,997,000 4,833,000 6,830,000 6,830,000
----------- --------- ---------- -----------
Net interest income 552,000 3,849,000 4,401,000 4,925,000
Provision for loan losses - 102,000 102,000 102,000
----------- --------- ---------- -----------
Net interest income after
provision for loan losses 552,000 3,747,000 4,299,000 4,823,000
Non-interest income 509,000 278,000 787,000 (27,000) D 760,000
Non-interest expense 708,000 1,951,000 2,659,000 196,000 E and F 2,855,000
----------- --------- ---------- -----------
Net income before income
taxes 353,000 2,074,000 2,427,000 2,728,000
Income taxes - 744,000 744,000 249,000 G 993,000
----------- --------- ---------- -----------
Net income $ 353,000 1,330,000 1,683,000 1,735,000
=========== ========= ========== ===========
Basic net income per share $ .45
===========
Diluted net income per share $ .45
===========
Notes:
-----
A. To reflect interest earned on excess of deposit and other liabilities over
loans and other operating assets of the Fulton Division not previously
reflected by Old National Bank. A yield of 2.5% was assumed.
B. To reflect the impact on interest earnings from the cash paid approximately
$6,695,000 to accomplish the acquisition of the Fulton Division by Heritage
Bank, the subsidiary of HopFed Bancorp, Inc. A yield of 2.5% was assumed.
C. To reflect the accretion of the discount on loans acquired of $645,000 over
an estimated life of 36 months.
D. To reflect amortization of the identified intangible asset (insurance
contracts) of approximately $380,000 over a life of 84 months.
E. To reflect additional depreciation from adjustment to market value of
$1,085,000 from acquisition over lives from 180 months to 468 months.
F. To reflect amortization of the identified intangible asset (core deposit
intangible) of approximately $2,509,000 over a life of 84 months.
G. Tax effect of pro forma adjustments at an estimated tax rate of 38% which
includes a provision for the Fulton Division.
20
HopFed Bancorp, Inc.
Condensed Consolidated Statement of Income
Six Months Ended June 30, 2002
Fulton HopFed Pro Forma Pro Forma
Division Bancorp, Inc. Combined Adjustments Notes Consolidated
-------- ------------- -------- ----------- ----- ------------
Interest income $1,806,000 9,266,000 11,072,000 524,000 A, B and C 11,596,000
Interest expense 1,684,000 4,050,000 5,734,000 5,734,000
---------- --------- ---------- -----------
Net interest income 122,000 5,216,000 5,338,000 5,862,000
Provision for loan losses - 180,000 180,000 180,000
---------- --------- ---------- -----------
Net interest income after
provision for loan losses 122,000 5,036,000 5,158,000 5,682,000
Non-interest income 457,000 838,000 1,295,000 (27,000) D 1,268,000
Non-interest expense 676,000 2,277,000 2,953,000 196,000 E and F 3,149,000
---------- --------- ---------- -----------
Net income loss before income
taxes (97,000) 3,597,000 3,500,000 3,801,000
Income taxes - 1,239,000 1,239,000 77,000 G 1,316,000
---------- --------- ---------- -----------
Net income loss $ (97,000) 2,358,000 2,261,000 2,485,000
========== ========= ========== ===========
Basic net income per share $ .68
===========
Diluted net income per share $ .68
===========
Notes:
-----
A. To reflect interest earned on excess of deposit and other liabilities over
loans and other operating assets of the Fulton Division not previously
reflected by Old National Bank. A yield of 2.5% was assumed.
B. To reflect the impact on interest earnings from the cash paid
approximately $6,695,000 to accomplish the acquisition of the Fulton
Division by Heritage Bank, the subsidiary of HopFed Bancorp, Inc. A yield
of 2.5% was assumed.
C. To reflect the accretion of the discount on loans acquired of $645,000
over an estimated life of 36 months.
D. To reflect amortization of the identified intangible asset (insurance
contracts) of approximately $380,000 over a life of 84 months.
E. To reflect additional depreciation from adjustment to market value of
$1,085,000 from acquisition over lives from 180 months to 468 months.
F. To reflect amortization of the identified intangible asset (core deposit
intangible) of approximately $2,509,000 over a life of 84 months.
G. Tax effect of pro forma adjustments at an estimated tax rate of 38% which
includes a provision for the Fulton Division.
21
(c) Exhibits:
Exhibit 10.1 Fulton Division Acquisition Agreement
dated as of March 1, 2002, by and between
Old National Bank and Hopkinsville Federal
Bank -- Incorporated herein by reference to
the Registrant's Current Report on Form 8-K
dated March 1, 2002.
Exhibit 99.1 Press Release dated September 6, 2002.
22
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.
By /s/ John E. Peck
--------------------------------------
John E. Peck
President and Chief Executive Officer
Date: November 18, 2002
23