Financial Position - As of June 30, 2022, Kentucky First Federal Bancorp had total assets of $328.1 million, deposits of $239.9 million, and stockholders' equity of $52.0 million[15]. - First Federal of Hazard had total assets of $84.2 million, net loans of $72.2 million, and deposits of $48.2 million as of June 30, 2022[17]. - First Federal of Kentucky reported total assets of $243.8 million, net loans of $202.3 million, and deposits of $193.8 million as of June 30, 2022[18]. Loan Portfolio Composition - The loan portfolio primarily consists of residential mortgage loans, totaling $232.0 million, or 84.0% of the total loan portfolio as of June 30, 2022[26]. - Adjustable-rate residential mortgage loans accounted for $205.1 million, or 88.4% of the residential mortgage loan portfolio as of June 30, 2022[27]. - Multi-family loans totaled $14.3 million, or 5.2% of the total loan portfolio as of June 30, 2022[34]. - Nonresidential real estate loans amounted to $31.4 million, or 11.4% of the total loan portfolio as of June 30, 2022[35]. - Commercial non-mortgage loans totaled $1.0 million, representing 0.4% of the total loan portfolio[37]. - Consumer loans amounted to $9.2 million, or 3.3% of the total loan portfolio, with home equity loans making up $7.7 million[38]. - Loans secured by savings accounts totaled 0.3% of the total loan portfolio as of June 30, 2022[39]. - At June 30, 2022, $23.2 million in loans were being serviced for the Federal Home Loan Bank of Cincinnati[41]. - As of June 30, 2022, 88.4% of the residential real estate loan portfolio consists of adjustable-rate loans, which may be impacted by rising interest rates[118]. - As of June 30, 2022, $216.4 million, or 78.4%, of the loan portfolio is secured by one-to-four family real estate, all located in Kentucky[130]. - Approximately 96.3% of the loan portfolio as of June 30, 2022, is collateralized by real estate, making it vulnerable to market disruptions[129]. Market and Economic Conditions - The unemployment rate in Perry County was 5.4% in July 2022, higher than the state and national averages of 3.8% and 3.7%, respectively[21]. - The median household income in Perry County was $28,287, significantly lower than the state average of $48,182 and the national average of $67,862[21]. - The distressed economy in the market area of First Federal of Hazard continues to lag behind Kentucky and the U.S., limiting loan demand and growth potential[131]. - Inflationary pressures are expected to remain elevated throughout 2022, potentially increasing loan delinquencies and non-performing assets[125]. - The ongoing COVID-19 pandemic has led to significant economic disruptions, affecting business operations and financial markets[119]. - Approximately $4.7 trillion in fiscal stimulus has been appropriated by Congress in response to the COVID-19 pandemic, impacting the economic environment[121]. Regulatory Environment - The company is subject to extensive regulation and supervision by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation[66]. - The Dodd-Frank Act significantly changed the financial regulatory regime in the U.S., impacting First Federal of Kentucky's operations[67]. - Federal regulations require a 4.0% Tier 1 leverage ratio and a 4.5% common equity Tier 1 ratio for insured depository institutions[72]. - The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 provides limited regulatory relief to financial institutions with less than $10 billion in assets, benefiting First Federal of Kentucky[69]. - Federal savings associations are subject to a capital directive or cease and desist order, with civil penalties potentially reaching $1 million per day for egregious violations[84]. - The current deposit insurance limit per account owner is $250,000, with assessment rates ranging from 1.5 to 30 basis points of total average assets[86]. - The FDIC may adjust insurance assessment rates, which could adversely affect the operating expenses of the banks[87]. - Savings and loan holding companies with less than $3.0 billion in assets are exempt from consolidated capital requirements unless directed otherwise by the Federal Reserve Board[101]. Competition and Market Share - The company faces significant competition for deposits and loan origination, with larger competitors holding greater resources[62]. - First Federal of Hazard had a deposit market share of 6.9% in Perry County as of June 30, 2022[63]. - First Federal of Kentucky had a deposit market share of 8.2%, 7.0%, and 16.9% in Franklin, Boyle, and Garrard counties respectively as of June 30, 2022[64]. - The largest competitors for deposits include Boyle Bancorp, Inc. at 24.5%, Wesbanco Bank, Inc. at 17.3%, and Community Trust Bancorp, Inc. at 6.8% market share[64]. - As of June 30, 2022, Wesbanco Bank, Inc. had assets of $16.8 billion, Boyle Bancorp, Inc. had $791.2 million, and Community Trust Bancorp, Inc. had $5.4 billion in assets[64]. Capital and Financial Management - The capital levels of First Federal of Hazard and First Federal of Kentucky exceed the minimum required capital amounts for capital adequacy as of June 30, 2022[74]. - The capital levels of First Federal of Hazard and First Federal of Kentucky exceed the required capital amounts as of June 30, 2022, according to Community Bank Leverage Ratio regulations[140]. - The company does not intend to pay dividends in the future that would result in a recapture of any portion of its bad debt reserves[111]. - First Federal MHC has successfully obtained Federal Reserve Board approval to waive dividends of $0.10 per common share through May 2023, with expectations to continue waiving future dividends as needed for operations[104]. - The company is subject to regulatory scrutiny regarding dividend waivers, which could impair its ability to pay dividends to stockholders[154]. Operational and Technological Risks - Effective liquidity management is essential, as a failure to maintain adequate liquidity could materially affect business operations[135]. - Security measures may not be sufficient to mitigate the risk of cyber attacks, potentially jeopardizing confidential information and operations[142]. - The company has established policies to prevent systems failures, but there is no assurance that these measures will be effective, which could adversely impact business operations[144]. - Any systems failures may require the company to find alternative service sources, potentially damaging its reputation and resulting in customer loss[145]. - The company must keep pace with technological changes to remain competitive, as failure to do so could materially impact its financial condition[146]. Employee and Management Information - First Federal of Kentucky had 62 full-time employees and two part-time employees as of June 30, 2022[65]. - The company's management has evaluated the effectiveness of its disclosure controls and procedures, concluding they are effective as of the end of the reporting period[169]. - The company's management assessed the effectiveness of internal control over financial reporting as of June 30, 2022, concluding it is effective[175]. - There were no changes in internal control over financial reporting during the quarter ended June 30, 2022, that materially affected its effectiveness[178]. - The company currently has no equity-based compensation plans in place[195]. Shareholder Actions - The company repurchased 63,520 shares at an average price of $7.55 during June 2022, with a total of 131,500 shares available for repurchase under announced programs[162]. - First Federal MHC has historically waived its right to dividends, significantly increasing the dividends paid to public stockholders[150]. Business Operations - The company operates in three distinct market areas, focusing on community-oriented banking services[20]. - The company conducts business through seven offices, with the main office in Hazard, Kentucky, opened in 2016[156]. - The company is not currently involved in any legal proceedings that could materially affect its financial condition[158].
Kentucky First Federal Bancorp(KFFB) - 2022 Q4 - Annual Report