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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2004

OR

Commission File Number: 000-23667

HOPFED BANCORP, INC.

(Exact name of registrant as specified in its charter)

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.

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CONTENTS

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HOPFED BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

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.

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HOPFED BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

See accompanying Notes to Unaudited Condensed Financial Statements.

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HOPFED BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

See accompanying Notes to Unaudited Condensed Financial Statements

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HOPFED BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

See accompanying Notes to Unaudited Condensed Financial Statements.

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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.

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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:

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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,

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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.

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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, 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

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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

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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

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ISSUER PURCHASES OF EQUITY SECURITIES

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:

There were no abstentions or broker non-votes.

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

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

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.

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