Kentucky First Federal Bancorp(KFFB) - 2023 Q3 - Quarterly Report

PART I Financial Statements Unaudited financial statements for March 31, 2023, show assets grew to $342.9 million, but net income fell to $891,000 due to higher interest expense Condensed Consolidated Balance Sheets Total assets increased to $342.9 million by March 31, 2023, driven by loan growth and FHLB advances, offsetting deposit decreases and a slight decline in equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | June 30, 2022 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $342,914 | $328,080 | $14,834 | 4.5% | | Cash and cash equivalents | $8,085 | $25,823 | ($17,738) | -68.7% | | Loans, net | $306,960 | $274,583 | $32,377 | 11.8% | | Total Liabilities | $291,775 | $276,055 | $15,720 | 5.7% | | Deposits | $209,391 | $239,857 | ($30,466) | -12.7% | | Federal Home Loan Bank advances | $80,899 | $34,066 | $46,833 | 137.5% | | Total Shareholders' Equity | $51,139 | $52,025 | ($886) | -1.7% | Condensed Consolidated Statements of Operations Net income for the nine months ended March 31, 2023, decreased to $891,000 from $1.38 million, primarily due to increased interest expense and a loan loss provision Statements of Operations Highlights (Nine Months Ended March 31, in thousands) | Metric | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $6,925 | $6,976 | -0.7% | | Provision (credit) for loan losses | $113 | ($106) | N/A | | Non-interest Income | $236 | $422 | -44.1% | | Non-interest Expense | $5,874 | $5,746 | 2.2% | | Net Income | $891 | $1,384 | -35.6% | Statements of Operations Highlights (Three Months Ended March 31, in thousands) | Metric | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $2,045 | $2,138 | -4.4% | | Provision (credit) for loan losses | $– | ($106) | N/A | | Net Income | $144 | $334 | -56.9% | Earnings Per Share (Basic and Diluted) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Nine months ended March 31 | $0.11 | $0.17 | | Three months ended March 31 | $0.02 | $0.04 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for the nine months ended March 31, 2023, significantly decreased to $530,000, primarily due to unrealized holding losses on available-for-sale securities Comprehensive Income (in thousands) | Metric | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Income | $891 | $1,384 | | Other comprehensive loss, net of tax | ($361) | $– | | Comprehensive Income | $530 | $1,384 | Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity decreased from $52.0 million to $51.1 million, primarily due to dividends, treasury share acquisitions, and other comprehensive loss, despite net income - Key activities impacting shareholders' equity for the nine months ended March 31, 2023 included net income of $891,000, cash dividends of $1.026 million, acquisition of $394,000 in treasury shares, and an other comprehensive loss of $361,000[18] Condensed Consolidated Statements of Cash Flows Net cash and cash equivalents decreased by $17.7 million for the nine months ended March 31, 2023, as cash used in investing activities for loans outpaced operating and financing inflows Cash Flow Summary (Nine Months Ended March 31, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,002 | $1,144 | | Net cash (used in) provided by investing activities | ($33,424) | $28,976 | | Net cash provided by (used in) financing activities | $14,684 | ($5,707) | | Net (decrease) increase in cash and cash equivalents | ($17,738) | $24,413 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, CECL model adoption, loan portfolio composition, allowance for loan losses, and fair value measurements, with non-performing loans at $5.9 million - The company will adopt the Current Expected Credit Loss (CECL) model effective July 1, 2023, which is expected to add complexity and costs to its credit loss evaluation process[35][36] Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2023 | June 30, 2022 | | :--- | :--- | :--- | | One- to four-family | $236,796 | $216,432 | | Multi-family | $19,859 | $14,252 | | Construction | $9,234 | $1,363 | | Nonresidential real estate | $30,014 | $31,441 | | Other | $10,440 | $10,286 | | Total Loans | $308,593 | $276,112 | - The allowance for loan losses increased to $1.63 million at March 31, 2023, from $1.53 million at June 30, 2022, with a provision of $113,000 recorded for the nine-month period[64] - Nonaccrual loans totaled $5.4 million and loans past due over 90 days still accruing totaled $0.5 million as of March 31, 2023[72] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operations, noting asset growth driven by loans, but net income decreased to $891,000 due to rising interest expense and increased loan loss provision Discussion of Financial Condition Total assets increased to $342.9 million, driven by a $32.4 million growth in net loans, while cash decreased and non-performing loans remained stable at $5.9 million - Asset growth was primarily driven by a $32.4 million (11.8%) increase in net loans, reaching $307.0 million at March 31, 2023[107][109] - Non-performing loans (90+ days past due or nonaccrual) were $5.9 million, or 1.9% of total loans, at March 31, 2023, compared to $5.8 million, or 2.1%, at June 30, 2022[110] - The allowance for loan losses was $1.6 million, representing 27.8% of nonperforming loans and 0.5% of total loans at March 31, 2023[110] Comparison of Operating Results for the Nine-month Periods Net income for the nine months ended March 31, 2023, fell 35.6% to $891,000, driven by a surge in interest expense and a provision for loan losses, despite increased interest income - Net income decreased by $493,000 (35.6%) to $891,000 for the nine months ended March 31, 2023, compared to the prior year[113] - Interest expense increased by $961,000 (71.7%) due to a 49 basis point increase in the average rate paid on interest-bearing liabilities, driven by FOMC rate hikes[114][115] - A provision for loan loss of $113,000 was recorded, reflecting the $32.4 million (11.8%) increase in the net loan portfolio[118] - Non-interest income decreased by $186,000 (44.1%), primarily due to a $225,000 reduction in net gains on sales of loans as rising rates reduced demand for long-term fixed-rate loans[120] Comparison of Operating Results for the Three-month Periods Net income for the quarter ended March 31, 2023, decreased 56.9% to $144,000, driven by a significant surge in interest expense that compressed the net interest spread - Net income for the quarter decreased by $190,000 (56.9%) to $144,000 compared to the same period in 2022[126] - Quarterly interest expense surged by $742,000 (175.4%), driven by higher rates on borrowings and a shift in funding from deposits to FHLB advances[127][129] - The net interest spread for the quarter decreased to 2.22% from 2.51% in the prior year period[130] 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 not required to provide these disclosures[138] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no significant changes to internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period[139] - There were no significant changes in the Company's internal control over financial reporting during the quarter ended March 31, 2023[140] PART II OTHER INFORMATION Legal Proceedings The company reported no legal proceedings - There are no legal proceedings to report[142] Risk Factors New risk factors include potential deposit outflows due to banking failures, with the company noting its uninsured deposits at 13.2% and $80.7 million in off-balance sheet liquidity - A new risk factor has been identified concerning financial challenges at other banks (e.g., Silicon Valley Bank, Signature Bank) potentially causing diminished depositor confidence and disruptive deposit outflows across the industry[144] - The company's uninsured deposits are estimated to be approximately $27.8 million, or 13.2% of total deposits, as of March 31, 2023[144] - The company has off-balance sheet liquidity sources totaling $80.7 million, including $59.7 million in additional borrowing capacity at the FHLB of Cincinnati[144] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 42,000 shares of common stock during the quarter ended March 31, 2023, under its publicly announced repurchase plan Common Stock Repurchases (Quarter Ended March 31, 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2023 | – | $– | | February 2023 | 10,000 | $7.07 | | March 2023 | 32,000 | $6.75 | Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, CEO/CFO certifications, and XBRL data files