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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: MCsweet who wrote (38330)	6/18/2010 5:05:38 PM
From: MCsweet	Read Replies (1) \| Respond to of 78710

HFBC follow up, The OTS put some restrictions on the company with respect to its commercial real estate concentration and brokered deposits see below). I think these restrictions are prudent, but I am wondering why the company wasn't smart enough to figure this out by itself. I don't think it is a good sign to have to have a regulator tell you what to do with your portfolio. I still intend on holding the shares I bought. MC Effective April 30, 2010, the Board of Directors of each of HopFed Bancorp, Inc. (the "Company") and Heritage Bank (the "Bank"), the Company's federal savings bank subsidiary, entered into a Memorandum of Understanding ("MOU") with the Office of Thrift Supervision ("OTS"). An MOU with regulatory authorities is an informal administrative agreement that is not published or publicly available and is generally used when regulatory authorities believe that circumstances warrant a milder form of action than a formal supervisory action, such as a formal written agreement or order. Under the Company MOU, among other things, the Company has agreed to the following: (1) the Company will neither accept nor request that the Bank pay any dividends or make any capital distributions, or commit to pay dividends or make other capital distributions, without prior OTS approval; (2) the Company will not declare or pay any dividends or make other capital distributions, or commit to pay dividends or make other capital distributions, without prior OTS approval; provided, however, that this restriction will not apply to dividends on currently outstanding shares of preferred stock issued to and held by the United States Department of the Treasury and obligations in connection with currently outstanding trust preferred securities if any such dividend or capital distribution does not cause the Bank's capital levels to fall below a Tier 1 core capital ratio of 8% and a total risk-based capital ratio of 12%; and (3) the Company will not, directly or indirectly, incur, issue, renew, or rollover any debt without prior OTS approval. At March 31, 2010, the Bank's Tier 1 core capital ratio was 8.02%, and its total risk-based capital ratio was 13.25%. Under the Bank MOU, among other things, the Bank has agreed to the following: (1) the Bank will not declare or pay any dividends or make other capital distributions, or commit to pay dividends or make other capital distributions, without prior OTS approval; (2) the Bank will adopt a concentration risk reduction plan to reduce the outstanding balance of commercial real estate loans relative to core capital and the allowance for loan losses; and (3) the Bank will not increase brokered deposits without prior OTS approval. In addition, the MOUs identify actions, policies and procedures to be taken and adopted by the Board of Directors and management of the Company and the Bank, as appropriate, to ensure maintenance of adequate liquidity, monitor and report compliance with the MOUs and certain applicable regulations, reduce the level of classified assets, and correct certain deficiencies and weaknesses identified by the OTS. The MOUs will remain in effect until modified or terminated by the OTS. The Company and the Bank do not expect the actions and limitations required by the MOUs to change their business strategy in any material respect. The Board of Directors and management of each of the Company and the Bank have taken various actions to comply with the terms and conditions of the MOUs, and will continue to take all actions believed to be necessary for compliance. The Board and management will continue to work closely with the OTS in order to comply with the terms and conditions of the MOUs and are committed to addressing and resolving any and all issues presented in the MOUs.