Kentucky First Federal Bancorp(US:KFFB)2025-05-15 18:24PART I FINANCIAL INFORMATION ITEM 1: Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, changes in shareholders' equity, and cash flows, highlighting a net income of $5 thousand for the nine-month period and total asset growth to $380.7 million Condensed Consolidated Balance Sheets Total assets increased by 1.5% to $380.7 million, driven by a $9.5 million rise in cash, while liabilities grew due to a $21.2 million increase in deposits Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Assets | $380,737 | $374,968 | | Cash and cash equivalents | $27,753 | $18,287 | | Loans, net | $330,551 | $333,025 | | Total Liabilities | $332,585 | $326,971 | | Deposits | $277,386 | $256,139 | | Federal Home Loan Bank advances | $53,427 | $68,988 | | Total Shareholders' Equity | $48,152 | $47,997 | Condensed Consolidated Statements of Operations The company reported a net income of $5 thousand for the nine months ended March 31, 2025, a significant turnaround from a $643 thousand net loss in the prior year Key Operating Results (in thousands, except per share data) | Metric | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $6,038 | $5,092 | $2,131 | $1,765 | | Provision for credit losses | $36 | $(13) | $21 | $(28) | | Total Non-interest Income | $389 | $199 | $81 | $78 | | Total Non-interest Expense | $6,392 | $6,147 | $2,176 | $2,016 | | Net Income (Loss) | $5 | $(643) | $7 | $(107) | | EPS (Basic and diluted) | $0.00 | $(0.08) | $0.00 | $(0.01) | Condensed Consolidated Statements of Comprehensive Income (Loss) Comprehensive income for the nine months ended March 31, 2025, was $155 thousand, a significant improvement from a $612 thousand comprehensive loss in the prior year Comprehensive Income (Loss) Summary (in thousands) | Component | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $5 | $(643) | $7 | $(107) | | Other comprehensive income (loss), net of tax | $150 | $31 | $90 | $(62) | | Comprehensive income (loss) | $155 | $(612) | $97 | $(169) | Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased slightly to $48.2 million at March 31, 2025, driven by net income and other comprehensive income, with no dividends paid - Total shareholders' equity increased to $48.15 million at March 31, 2025, from $48.00 million at June 30, 2024, primarily due to net income and other comprehensive income14 - No cash dividends were paid during the nine months ended March 31, 2025, whereas $671 thousand ($0.20 per share) was paid in the comparable period of the prior year15 Condensed Consolidated Statements of Cash Flows Net cash and cash equivalents increased by $9.5 million, primarily driven by cash provided from financing and investing activities, with minimal cash used in operations Cash Flow Summary (in thousands) | Activity | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(115) | $(1,268) | | Net cash provided by (used in) investing activities | $4,256 | $(12,712) | | Net cash provided by financing activities | $5,325 | $21,236 | | Net increase in cash and cash equivalents | $9,466 | $7,256 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, including the adoption of ASC 326 (CECL) which increased the allowance for credit losses, and provide insights into the loan portfolio and investment securities - The company adopted ASC 326 (CECL) on July 1, 2023, resulting in a $497 thousand increase in the allowance for credit losses for loans and a $54 thousand increase for unfunded commitments, with a corresponding $414 thousand decrease to retained earnings383941 - The loan portfolio is primarily composed of one-to-four-family residential real estate loans, totaling $256.4 million at March 31, 202555 - The allowance for credit losses (ACL) was $2.16 million at March 31, 2025, compared to $2.13 million at June 30, 202455 ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operating results, focusing on the OCC regulatory agreement, the return to profitability driven by increased net interest income, and balance sheet changes including deposit growth and dividend suspension Regulatory Developments Regarding First Federal of Kentucky First Federal of Kentucky entered a formal agreement with the OCC on August 13, 2024, designating it in "troubled condition" and imposing Individual Minimum Capital Requirements (IMCRs), which the bank currently exceeds - First Federal of Kentucky entered into a formal agreement with the OCC on August 13, 2024, and is now considered to be in "troubled condition"115 Individual Minimum Capital Requirements (IMCRs) vs. Actual Ratios | Ratio | IMCR Requirement | Actual at Mar 31, 2025 | | :--- | :--- | :--- | | Common equity tier 1 capital | ≥ 9.0% | 16.72% | | Tier 1 capital | ≥ 11.0% | 16.72% | | Total capital | ≥ 12.0% | 16.72% | | Leverage ratio | ≥ 9.0% | 10.13% | Discussion of Financial Condition Total assets increased by $5.8 million to $380.7 million, driven by cash growth and a shift in funding mix from FHLB advances to deposits, while non-performing loans decreased - Total assets increased by $5.8 million to $380.7 million, mainly from a $9.5 million increase in cash and cash equivalents125 - Deposits increased by $21.2 million, while Federal Home Loan Bank advances decreased by $15.6 million, indicating a shift in funding mix134135 - Non-performing loans were $3.8 million, or 1.1% of total loans, down from $3.9 million, or 1.2% of total loans at June 30, 2024129 Comparison of Operating Results for the Nine-month Periods Ended March 31, 2025 and 2024 Net income improved by $648 thousand to $5 thousand for the nine months ended March 31, 2025, driven by an 18.6% increase in net interest income and an expanded net interest margin - Net income improved by $648 thousand year-over-year, from a loss of $643 thousand to income of $5 thousand139 - Net interest income increased by $946 thousand (18.6%) to $6.0 million, driven by a 69 basis point increase in the average rate on interest-earning assets140141 - Net interest margin improved to 2.20% for the nine months ended March 31, 2025, up from 1.94% in the prior year period121 Comparison of Operating Results for the Three-month Periods Ended March 31, 2025 and 2024 Quarterly net income was $7 thousand, a $114 thousand improvement from a net loss in the prior-year quarter, driven by a 20.7% increase in net interest income and an expanded net interest margin - Quarterly net income was $7 thousand, an increase of $114 thousand from a net loss of $107 thousand in the prior-year quarter150 - Net interest income for the quarter increased by $366 thousand (20.7%) to $2.1 million151 - The quarterly net interest margin improved to 2.32% from 1.98% in the prior year's quarter123 ITEM 3: Quantitative and Qualitative Disclosures About Market Risk This item is not applicable as the company qualifies as a smaller reporting company - The company is a smaller reporting company and is therefore not required to provide these disclosures161 ITEM 4: Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no significant changes to internal controls over financial reporting identified during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period162 - No significant changes in internal control over financial reporting occurred during the quarter ended March 31, 2025163 PART II OTHER INFORMATION ITEM 1: Legal Proceedings The company reported no material pending legal proceedings - There are no legal proceedings to report165 ITEM 1A: Risk Factors The company highlights the indefinite suspension of dividend payments, contingent on resolving OCC agreement deficiencies, satisfying IMCRs, and obtaining regulatory approvals - The Board of Directors suspended the payment of dividends indefinitely on January 16, 2024167168 - Future dividend payments are subject to the company's ability to resolve the formal agreement with the OCC and satisfy the imposed individual minimum capital requirements167168 - The ability of the majority shareholder, First Federal MHC, to obtain regulatory and member approval to waive its receipt of dividends is a key factor that could impact the company's ability to pay dividends to public shareholders in the future169 ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any common stock during the quarter ended March 31, 2025 - No shares of common stock were repurchased during the three months ended March 31, 2025172173 ITEM 5: Other Information No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter176 ITEM 6: Exhibits This section lists the exhibits filed with the Form 10-Q, including charter, bylaws, CEO/CFO certifications, and XBRL data files