Kentucky First Federal Bancorp(US:KFFB)2020-09-28 19:11Financial Position - As of June 30, 2020, Kentucky First had total assets of $321.1 million, deposits of $212.3 million, and stockholders' equity of $51.9 million[17]. - At June 30, 2020, First Federal of Hazard had total assets of $82.1 million, net loans of $74.1 million, and deposits of $47.9 million[19]. - At June 30, 2020, First Federal of Kentucky had total assets of $241.7 million, net loans of $211.7 million, and deposits of $168.8 million[20]. - First Federal of Kentucky had 61 full-time employees and two part-time employees as of June 30, 2020[70]. - As of June 30, 2020, First Federal of Hazard had investments in Federal Home Loan Bank of Cincinnati stock amounting to $2.0 million, while First Federal of Kentucky had $4.5 million[95]. Loan Portfolio Composition - Residential mortgage loans accounted for $238.9 million, or 83.1%, of the total loan portfolio as of June 30, 2020[28]. - Adjustable-rate residential mortgage loans made up $208.6 million, or 72.6%, of the residential mortgage loan portfolio[29]. - Construction loans totaled $4.0 million, or 1.4%, of the total loan portfolio as of June 30, 2020[34]. - Multi-family loans amounted to $12.4 million, or 4.3%, of the total loan portfolio as of June 30, 2020[36]. - Nonresidential loans totaled $36.6 million, or 12.8%, of the total loan portfolio as of June 30, 2020[37]. - As of June 30, 2020, commercial non-mortgage loans totaled $2.2 million, representing 0.8% of the total loan portfolio[39]. - Consumer loans amounted to $9.6 million, or 3.3% of the total loan portfolio, with home equity loans making up $7.6 million[41]. - Home equity loans accounted for 2.7% of the total loan portfolio, with terms of up to 15 years and variable interest rates indexed to the prime rate[41]. - Loans secured by savings deposits totaled 0.4% of the total loan portfolio as of June 30, 2020[42]. - Approximately 95.9% of the loan portfolio is collateralized by real estate, indicating a high dependency on the real estate market[132]. Economic and Market Conditions - The unemployment rate in Perry County was 9.8% in July 2020, compared to 6.2% in Kentucky and 10.5% in the United States[23]. - Per capita personal income in Perry County averaged $38,523 in 2018, lower than the state average of $42,458 and the national average of $54,446[23]. - The distressed economy in First Federal of Hazard's market area continues to lag behind the economies of Kentucky and the U.S., limiting loan demand[135]. - Demand for products and services may decline, making it difficult for the company to grow assets and income, particularly in the hospitality, energy, retail, and restaurant industries[160]. - If the economy does not substantially reopen, high levels of unemployment could lead to increased loan delinquencies and foreclosures, adversely affecting net income[160]. Regulatory Environment - The Dodd-Frank Act resulted in increased regulatory burden and compliance for First Federal MHC and its banks[72]. - The Economic Growth, Regulatory Relief and Consumer Protection Act allows for a "Community Bank Leverage Ratio" of between 8% and 10% for institutions with less than $10 billion in assets[74]. - First Federal of Kentucky is required to maintain a Tier 1 leverage ratio of 4.0% and a total capital ratio of 8% under Basel III regulations[79]. - The prompt corrective action regulations classify institutions as well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, or critically undercapitalized[82]. - The Dodd-Frank Act has significantly restructured the regulation of depository institutions, impacting operational practices and compliance costs[137]. - The Dodd-Frank Act extends the "source of strength" doctrine to savings and loan holding companies, requiring them to provide capital and support in times of financial stress[105]. Capital and Dividends - The capital levels of First Federal of Hazard and First Federal of Kentucky exceeded the minimum required capital amounts for capital adequacy as of June 30, 2020[81]. - The ability to pay dividends is contingent upon the ability of First Federal of Hazard and First Federal of Kentucky to make capital distributions, with historical waivers of dividends by First Federal MHC significantly increasing dividends to public stockholders[145]. - First Federal MHC has received approval to waive quarterly dividends totaling $0.40 per share annually, expected to continue through the third quarter of 2021[149]. - The company may face limitations on paying dividends or repurchasing shares if capital levels fall below regulatory requirements[142]. Financial Performance - The return on average equity for the year ended June 30, 2020, was -19.0%, indicating a low performance compared to other companies due to a high level of capital[140]. - The implementation of the Current Expected Credit Loss (CECL) accounting standard may require an increase in the allowance for loan losses, potentially adversely affecting financial condition and results of operations[156]. - A $13.6 million impairment charge was recorded during the most recent evaluation of goodwill and intangibles, which could impact financial covenants under debt agreements[157]. Operational Risks - The company is subject to risks related to technology, including potential cyber attacks that could compromise customer information and operations[151]. - Increased credit risks are anticipated due to the volume of loan-related work, including processing loan deferrals and PPP loan requests[161]. - The ongoing COVID-19 pandemic has significantly increased economic uncertainty and reduced economic activity, impacting the company's operations and financial condition[159]. - The company's allowance for loan losses may need to be increased due to borrowers experiencing financial difficulties, which would negatively impact net income[160]. Corporate Governance - Kentucky First Federal Bancorp has adopted a Code of Ethics and Business Conduct applicable to all directors, officers, and employees[196]. - The financial statements include consolidated balance sheets as of June 30, 2020, and 2019, and consolidated statements of income for the years ended June 30, 2020, and 2019[206]. - The company has various employment agreements with key executives, which are amended and restated[206]. - The company has not disclosed any new product developments or market expansion strategies in the provided documents[206]. - There are no significant related transactions or relationships disclosed in the proxy statement[201]. - The company has not provided specific future performance guidance or outlook in the available documents[206].