Company Quick10K Filing
Kentucky First Federal Bancorp
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 8 $66
10-Q 2020-02-14 Quarter: 2019-12-31
10-Q 2019-11-14 Quarter: 2019-09-30
10-K 2019-09-30 Annual: 2019-06-30
10-Q 2019-05-10 Quarter: 2019-03-31
10-Q 2019-02-14 Quarter: 2018-12-31
10-Q 2018-11-14 Quarter: 2018-09-30
10-K 2018-09-28 Annual: 2018-06-30
10-Q 2018-05-15 Quarter: 2018-03-31
10-Q 2018-02-14 Quarter: 2017-12-31
10-Q 2017-11-14 Quarter: 2017-09-30
10-K 2017-09-28 Annual: 2017-06-30
10-Q 2017-05-16 Quarter: 2017-03-31
10-Q 2017-02-14 Quarter: 2016-12-31
10-Q 2016-11-14 Quarter: 2016-09-30
10-K 2016-09-28 Annual: 2016-06-30
10-Q 2016-05-16 Quarter: 2016-03-31
10-Q 2016-02-16 Quarter: 2015-12-31
10-Q 2015-11-16 Quarter: 2015-09-30
10-K 2015-09-28 Annual: 2015-06-30
10-Q 2015-05-15 Quarter: 2015-03-31
10-Q 2015-02-17 Quarter: 2014-12-31
10-Q 2014-11-14 Quarter: 2014-09-30
10-K 2014-09-29 Annual: 2014-06-30
10-Q 2014-05-15 Quarter: 2014-03-31
10-Q 2014-02-14 Quarter: 2013-12-31
10-Q 2013-11-19 Quarter: 2013-09-30
10-K 2013-09-30 Annual: 2013-06-30
10-Q 2013-05-15 Quarter: 2013-03-31
10-Q 2013-02-21 Quarter: 2012-12-31
10-Q 2012-11-16 Quarter: 2012-09-30
10-K 2012-09-28 Annual: 2012-06-30
10-Q 2012-05-15 Quarter: 2012-03-31
10-Q 2012-02-14 Quarter: 2011-12-31
10-Q 2011-11-14 Quarter: 2011-09-30
10-K 2011-09-28 Annual: 2011-06-30
10-Q 2011-05-16 Quarter: 2011-03-31
10-Q 2011-02-15 Quarter: 2010-12-31
10-Q 2010-11-15 Quarter: 2010-09-30
10-K 2010-10-06 Annual: 2010-06-30
10-Q 2010-05-17 Quarter: 2010-03-31
10-Q 2010-02-16 Quarter: 2009-12-31
8-K 2020-01-31 Earnings, Exhibits
8-K 2020-01-10 Other Events, Exhibits
8-K 2019-10-04 Other Events, Exhibits
8-K 2019-08-28 Earnings, Exhibits
8-K 2019-07-05 Other Events, Exhibits
8-K 2019-05-03 Earnings, Exhibits
8-K 2019-04-18 Other Events, Exhibits
8-K 2019-01-31 Earnings, Exhibits
8-K 2019-01-17 Other Events, Exhibits
8-K 2019-01-02 Officers
8-K 2018-12-19 Other Events, Exhibits
8-K 2018-10-29 Earnings, Exhibits
8-K 2018-10-18 Other Events, Exhibits
8-K 2018-08-29 Earnings, Exhibits
8-K 2018-07-05 Other Events, Exhibits
8-K 2018-05-08 Earnings, Exhibits
8-K 2018-04-04 Other Events, Exhibits
8-K 2018-02-07 Earnings, Exhibits
8-K 2018-01-10 Other Events, Exhibits
KFFB 2019-12-31
Part I
Item 1: Financial Statements
Item 2: Management's Discussion and Analysis of Financial Condition
Item 3: Quantitative and Qualitative Disclosures About Market Risk
Item 4: Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures.
Item 5. Other Information
Item 6. Exhibits
EX-31.1 f10q1219ex31-1_kentuckyfirst.htm
EX-31.2 f10q1219ex31-2_kentuckyfirst.htm
EX-32.1 f10q1219ex32-1_kentuckyfirst.htm
EX-32.2 f10q1219ex32-2_kentuckyfirst.htm

Kentucky First Federal Bancorp Earnings 2019-12-31

KFFB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
CFBI 76 305 228 0 0 1 4 56 14.7 0%
IROQ 75 724 641 0 0 4 14 16 1.2 0%
FFBW 73 258 197 0 0 1 4 68 16.0 0%
MGYR 68 633 578 0 0 3 11 60 5.6 0%
KFFB 66 331 264 0 0 1 4 56 13.2 0%
HFBL 62 442 392 0 0 5 11 44 4.0 1%
CBMB 59 221 160 0 0 1 2 43 18.5 0%
HBK 55 496 440 0 0 -4 2 79 50.0 -1%
CFBK 53 721 670 0 0 6 19 37 0% 2.0 1%

10-Q 1 f10q1219_kentuckyfirst.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2019

 

OR

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from ____________ to _______________

 

Commission File Number: 0-51176

 

KENTUCKY FIRST FEDERAL BANCORP

(Exact name of registrant as specified in its charter)

 

United States of America   61-1484858
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

655 Main Street, Hazard, Kentucky 41702

(Address of principal executive offices)(Zip Code)

 

(502) 223-1638

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading symbol(s)   Name of each exchange on which registered
Common Stock, $0.01 par value per share   KFFB   The NASDAQ Stock Market LLC

 

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 90 days:  Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer
Non-Accelerated filer   Smaller Reporting Company
      Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shall company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: At February 12, 2020, the latest practicable date, the Corporation had 8,288,015 shares of $.01 par value common stock outstanding.

 

 

 

 

 

 

INDEX

 

      Page
       
PART I - ITEM 1 FINANCIAL STATEMENTS  
       
    Condensed Consolidated Balance Sheets 1
       
    Condensed Consolidated Statements of Income 2
       
    Condensed Consolidated Statements of Comprehensive Income 3
       
    Consolidated Statements of Changes in Shareholders’ Equity 4
       
    Condensed Consolidated Statements of Cash Flows 6
       
    Notes to Condensed Consolidated Financial Statements 8
       
  ITEM 2   Management’s Discussion and Analysis of Financial Condition and Results of Operations 29
       
  ITEM 3  Quantitative and Qualitative Disclosures About Market Risk 39
       
  ITEM 4 Controls and Procedures 39
       
PART II - OTHER INFORMATION 40
       
SIGNATURES 41

 

i

 

 

PART I

 

ITEM 1: Financial Statements

 

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)

 

   December 31,   June 30, 
   2019   2019 
ASSETS        
         
Cash and due from financial institutions  $1,499   $1,870 
Interest-bearing demand deposits   10,385    7,991 
Cash and cash equivalents   11,884    9,861 
           
Time deposits in other financial institutions   2,970    6,962 
Securities available-for-sale   545    1,045 
Securities held-to-maturity, at amortized cost- approximate fair value of $659 and $775 at December 31, and June 30, 2019, respectively   652    775 
Loans held for sale   251     
Loans, net of allowance of $1,447 and $1,456 at December 31, and June 30, 2019, respectively   281,568    280,969 
Real estate owned, net   766    710 
Premises and equipment, net   5,036    5,028 
Federal Home Loan Bank stock, at cost   6,482    6,482 
Accrued interest receivable   690    758 
Bank-owned life insurance   2,557    2,518 
Goodwill   14,507    14,507 
Prepaid federal income taxes   145    266 
Prepaid expenses and other assets   723    890 
           
Total assets  $328,776   $330,771 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
           
Deposits  $199,959   $195,836 
Federal Home Loan Bank advances   61,615    66,703 
Advances by borrowers for taxes and insurance   231    763 
Accrued interest payable   30    28 
Deferred federal income taxes   701    701 
Other liabilities   431    462 
Total liabilities   262,967    264,493 
           
Commitments and contingencies        
           
Shareholders’ equity          
Preferred stock, 500,000 shares authorized, $.01 par value; no shares issued and outstanding        
Common stock, 20,000,000 shares authorized, $.01 par value; 8,596,064 shares issued   86    86 
Additional paid-in capital   35,011    35,056 
Retained earnings   33,663    33,867 
Unearned employee stock ownership plan (ESOP), 38,269 shares and 47,607 shares at, December 31, and June 30, 2019, respectively   (383)   (476)
Treasury shares at cost, 308,049 and 266,549 common shares at December 31, and June 30, 2019, respectively   (2,571)   (2,259)
Accumulated other comprehensive income   3    4 
Total shareholders’ equity   65,809    66,278 
           
Total liabilities and shareholders’ equity  $328,776   $330,771 

 

See accompanying notes to condensed consolidated financial statements.

 

1

 

 

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share data)

 

   Six months ended
December 31,
   Three months ended
December 31,
 
   2019   2018   2019   2018 
Interest income                
Loans, including fees  $6,297   $5,894   $3,125   $3,006 
Mortgage-backed securities   11    16    5    8 
Other securities   11    4    5    3 
Interest-bearing deposits and other   272    310    128    161 
Total interest income   6,591    6,224    3,263    3,178 
                     
Interest expense                    
Interest-bearing demand deposits   11    12    6    6 
Savings   103    110    51    56 
Certificates of Deposit   1,082    807    551    425 
Deposits   1,196    929    608    487 
Borrowings   673    568    314    310 
Total interest expense   1,869    1,497    922    797 
Net interest income   4,722    4,727    2,341    2,381 
Provision for loan losses   64    11    5     
Net interest income after provision for loan losses   4,658    4,716    2,336    2,381 
                     
Non-interest income                    
Earnings on bank-owned life insurance   38    37    19    18 
Net gain on sales of loans   40    20    34    6 
Net gain on sales of real estate owned   7    12    7    7 
Valuation adjustment for real estate owned   (24)   (54)   (24)   (36)
Other   91    97    42    48 
Total non-interest income   152    112    78    43 
Non-interest expense                    
Employee compensation and benefits   2,768    2,917    1,408    1,463 
Occupancy and equipment   279    335    136    165 
Voice and data communications   100    133    39    68 
Advertising   92    131    44    64 
Outside service fees   94    72    43    34 
Data processing   239    214    134    109 
Auditing and accounting   99    66    52    32 
Franchise and other taxes   129    126    64    63 
Foreclosure and real estate owned expenses (net)   40    60    6    37 
Other   370    400    182    195 
Total non-interest expense   4,210    4,454    2,108    2,230 
                     
Income before income taxes   600    374    306    194 
                     
Federal income tax expense   118    69    58    27 
                     
NET INCOME  $482   $305   $248   $167 
                     
EARNINGS PER SHARE                    
Basic and diluted  $0.06   $0.04   $0.03   $0.02 
DIVIDENDS PER SHARE  $0.20   $0.20   $0.10   $0.10 

 

See accompanying notes to condensed consolidated financial statements.

 

2

 

 

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

 

   Six months ended
December 31,
   Three months ended
December 31,
 
   2019   2018   2019   2018 
                 
Net income  $482   $305   $248   $167 
                     
Other comprehensive gains (losses), net of tax:                    
Unrealized holding Gains (losses) on securities designated as available-for-sale, net of taxes of $0, $0, $0 and $1 during the respective periods   (1)   1    (1)   2 
Comprehensive income  $481   $306   $247   $169 

  

See accompanying notes to condensed consolidated financial statements.

 

3

 

 

Kentucky First Federal Bancorp

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the six months ended

(Dollar amounts in thousands, except per share data)

 

December 31, 2019

 

               Unearned             
               employee             
               stock       Accumulated     
       Additional       ownership       other     
   Common   paid-in   Retained   plan   Treasury   comprehensive     
   stock   capital   earnings   (ESOP)   shares   income   Total 
                             
Balance at June 30, 2019  $86   $35,056   $33,867   $(476)  $(2,259)  $4   $66,278 
                                    
Net income           482                482 
Allocation of ESOP shares       (45)       93            48 
Acquisition of shares for Treasury                   (312)       (312)
Other comprehensive loss                       (1)   (1)
Cash dividends of $0.20 per common share           (686)               (686)
                                    
Balance at December 31, 2019  $86   $35,011   $33,663   $(383)  $(2,571)  $3   $65,809 

  

December 31, 2018

 

               Unearned             
               employee             
               stock       Accumulated     
       Additional       ownership       other     
   Common   paid-in   Retained   plan   Treasury   comprehensive     
   stock   capital   earnings   (ESOP)   shares   income   Total 
                             
Balance at June 30, 2018  $86   $35,085   $34,050   $(663)  $(1,355)  $      –   $67,203 
                                    
Net income           305                305 
Allocation of ESOP shares       (29)       94            65 
Acquisition of shares for treasury                   (487)       (487)
Change in accounting method           441                441 
Other comprehensive income                       1    1 
Cash dividends of $0.20 per common share           (718)               (718)
                                    
Balance at December 31, 2018  $86   $35,056   $34,078   $(569)  $(1,842)  $1   $66,810 

 

See accompanying notes to condensed consolidated financial statements.

 

4

 

 

Kentucky First Federal Bancorp

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the three months ended

(Dollar amounts in thousands, except per share data)

 

December 31, 2019

 

               Unearned             
               employee             
               stock       Accumulated     
       Additional       ownership       other     
   Common   paid-in   Retained   plan   Treasury   comprehensive     
   stock   capital   earnings   (ESOP)   shares   income   Total 
                             
Balance at September 30, 2019  $86   $35,022   $33,767   $(429)  $(2,410)  $         4   $66,040 
                                    
Net income           248                248 
Allocation of ESOP shares       (11)       46            35 
Acquisition of shares for Treasury                   (161)       (161)
Other comprehensive loss                       (1)   (1)
Cash dividends of $0.10 per common share           (352)               (352)
                                    
Balance at December 31, 2019  $86   $35,011   $33,663   $(383)  $(2,571)  $3   $65,809 

  

December 31, 2018

 

               Unearned             
               employee             
               stock       Accumulated     
       Additional       ownership       other     
   Common   paid-in   Retained   plan   Treasury   comprehensive     
   stock   capital   earnings   (ESOP)   shares   income   Total 
                             
Balance at September 30, 2018  $86   $35,085   $34,264   $(616)  $(1,444)  $      (1)  $67,374 
                                    
Net income           167                167 
Allocation of ESOP shares       (29)       47            18 
Acquisition of shares for treasury                   (398)       (398)
Change in accounting method                            
Other comprehensive income                       2    2 
Cash dividends of $0.10 per common share           (353)               (353)
                                    
Balance at December 31, 2018  $86   $35,056   $34,078   $(569)  $(1,842)  $1   $66,810 

 

See accompanying notes to condensed consolidated financial statements.

 

5

 

 

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

   Six months ended 
   December 31, 
   2019   2018 
         
Cash flows from operating activities:        
Net income  $482   $305 
Adjustments to reconcile net income to net cash provided by operating activities          
Depreciation   133    151 
Accretion of purchased loan credit discount   (56)   (41)
Amortization of purchased loan premium   5    6 
Amortization of deferred loan origination costs (fees)   45    35 
Amortization of premiums on investment securities   5    4 
Net gain on sale of loans   (40)   (20)
Net gain on sale of real estate owned   (7)   (12)
Valuation adjustments of real estate owned   24    54 
ESOP compensation expense   48    65 
Earnings on bank-owned life insurance   (38)   (37)
Provision for loan losses   64    11 
Origination of loans held for sale   (1,376)   (600)
Proceeds from loans held for sale   1,165    620 
Increase (decrease) in cash, due to changes in:          
Accrued interest receivable   68    (6)
Prepaid expenses and other assets   167    141 
Accrued interest payable   2    2 
Other liabilities   (32)   (179)
Federal income taxes   121    (30)
Net cash provided by operating activities   780    469 
           
Cash flows from investing activities:          
Purchase of available-for-sale securities       (501)
Purchase of time deposits in other financial institutions       (990)
Maturities of time deposits in other financial institutions   3,992    1,728 
Securities maturities, prepayments and calls:          
Held to maturity   118    142 
Available for sale   499    2 
Loans originated for investment, net of principal collected   (882)   (2,878)
Proceeds from sale of real estate owned   172     
Additions to real estate owned   (20)   (76)
Additions to premises and equipment, net   (141)   (54)
Net cash provided by (used in) investing activities   3,738    (2,627)
           
Cash flows from financing activities:          
Net increase in deposits   4,123    1,624 
Payments by borrowers for taxes and insurance, net   (532)   (546)
Proceeds from Federal Home Loan Bank advances   10,800    16,600 
Repayments on Federal Home Loan Bank advances   (15,888)   (14,116)
Treasury stock purchased   (312)   (487)
Dividends paid on common stock   (686)   (718)
Net cash provided by (used in) financing activities   (2,495)   2,357 
           
Net increase in cash and cash equivalents   2,023    199 
           
Beginning cash and cash equivalents   9,861    9,943 
           
Ending cash and cash equivalents  $11,884   $10,142 

 

See accompanying notes to condensed consolidated financial statements.

 

6

 

 

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

(In thousands)

 

   Six months ended 
   December 31, 
   2019   2018 
         
Supplemental disclosure of cash flow information:        
Cash paid during the period for:        
Federal income taxes  $   $100 
           
Interest on deposits and borrowings  $1,872   $1,495 
           
Transfers of loans to real estate owned, net  $295   $262 
           
Loans made on sale of real estate owned  $70   $196 

 

See accompanying notes to condensed consolidated financial statements.

 

7

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(unaudited)

 

The Kentucky First Federal Bancorp (“Kentucky First” or the “Company”) was incorporated under federal law in March 2005, and is the mid-tier holding company for First Federal Savings and Loan Association of Hazard, Hazard, Kentucky (“First Federal of Hazard”) and Frankfort First Bancorp, Inc. (“Frankfort First”). Frankfort First is the holding company for First Federal Savings Bank of Kentucky, Frankfort, Kentucky (“First Federal of Kentucky”). First Federal of Hazard and First Federal of Kentucky (hereinafter collectively the “Banks”) are Kentucky First’s primary operations, which consist of operating the Banks as two independent, community-oriented savings institutions.

 

In December 2012, the Company acquired CKF Bancorp, Inc., a savings and loan holding company which operated three banking locations in Boyle and Garrard Counties in Kentucky. In accounting for the transaction the assets and liabilities of CKF Bancorp were recorded on the books of First Federal of Kentucky in accordance with accounting standard ASC 805, Business Combinations.

 

1. Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements, which represent the condensed consolidated balance sheets and results of operations of the Company, were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) which are necessary for a fair presentation of the condensed consolidated financial statements have been included. The results of operations for the six-month period ended December 31, 2019, are not necessarily indicative of the results which may be expected for an entire fiscal year. The condensed consolidated balance sheet as of June 30, 2019 has been derived from the audited consolidated balance sheet as of that date. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report for 2019 filed with the Securities and Exchange Commission.

 

Principles of Consolidation - The consolidated financial statements include the accounts of the Company, Frankfort First, and its wholly-owned banking subsidiaries, First Federal of Hazard and First Federal of Kentucky (collectively hereinafter “the Banks”). All intercompany transactions and balances have been eliminated in consolidation.

 

Reclassifications - Certain amounts presented in prior periods have been reclassified to conform to the current period presentation. Such reclassifications had no impact on prior years’ net income or shareholders’ equity.

 

8

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

1. Basis of Presentation (continued)

 

New Accounting Standards

 

FASB ASC 326 - In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The final standard will change estimates for credit losses related to financial assets measured at amortized cost such as loans, held-to-maturity debt securities, and certain other contracts. For estimating credit losses, the FASB is replacing the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model. The Company will now use forward-looking information to enhance its credit loss estimates. The amendment requires enhanced disclosures to aid investors and other users of financial statements to better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of our portfolio. The largest impact to the Company will be on its allowance for loan and lease losses, although the ASU also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standard is effective for public companies for annual periods and interim periods within those annual periods beginning after December 15, 2019. However, the FASB has delayed the implementation of the ASU for smaller reporting companies until years beginning after December 15, 2022, or in the Company’s case the fiscal year beginning July 1, 2023.  ASU 2016-13 will be applied through a cumulative effect adjustment to retained earnings (modified-retrospective approach), except for debt securities for which an other-than-temporary impairment had been recognized before the effective date. A prospective transition approach is required for these debt securities. We have formed a functional committee that is assessing our data and system needs and are evaluating the impact of adopting the new guidance. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements. However, the Company does expect ASU 2016-13 to add complexity and costs to its current credit loss evaluation process.

 

FASB ASC 842 – In March 2017, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance changes lease accounting by introducing the core principle that a lessee should recognize the assets and liabilities that arise from operating leases under the premise that all leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement No. 6, Elements of Financial Statements. The Company adopted this ASU effective July 1, 2019, with no recordation of right-to-use lease assets or operating lease liabilities, because the level of operating leases was determined to be immaterial.

 

FASB ASC 350 – In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment. This guidance modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. For public business entities, the amendments in this update are effective for fiscal years, and the interim periods within those fiscal years, beginning after December 15, 2019, or July 1, 2020, with respect to the Company.

  

FASB ASC 820 – In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. This guidance reduces the level of detail surrounding the processes used by the Company in determining the fair value of some of its assets. For public business entities, the amendments in this update are effective for fiscal years, and the interim periods within those fiscal years, beginning after December 15, 2019, or July 1, 2020, with respect to the Company.

 

9

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

1. Basis of Presentation (continued)

 

New Accounting Standards (continued)

 

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

 

2. Earnings Per Share

 

Diluted earnings per share is computed taking into consideration common shares outstanding and dilutive potential common shares to be issued or released under the Company’s share-based compensation plans. The factors used in the basic and diluted earnings per share computations follow:

 

   Six months ended
December 31,
   Three months ended
December 31,
 
(in thousands)  2019   2018   2019   2018 
Net income allocated to common shareholders, basic and diluted  $482   $305   $248   $167 

 

   Six months ended
December 31,
   Three months ended
December 31,
 
   2019   2018   2019   2018 
Weighted average common shares outstanding, basic and diluted   8,266,204    8,362,486    8,255,255    8,348,165 

  

There were no stock option shares outstanding for the six- or three-month periods ended December 31, 2019 and 2018.

 

10

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

3. Investment Securities

 

The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at December 31, 2019 and June 30, 2019, the corresponding amounts of gross unrealized gains recognized in accumulated other comprehensive income and gross unrecognized gains and losses:

 

   December 31, 2019 
(in thousands)  Amortized
cost
   Gross
unrealized/
unrecognized
gains
   Gross
unrealized/
unrecognized
losses
   Estimated
fair value
 
                 
Available-for-sale Securities                
Agency mortgage-backed: residential  $41   $1   $       –   $42 
Agency bonds   500    3        503 
   $541   $4   $   $545 
                     
Held-to-maturity Securities                    
Agency mortgage-backed: residential  $652   $12   $5   $659 
                     
   June 30, 2019 
(in thousands)  Amortized
cost
   Gross
unrealized/
unrecognized
gains
   Gross
unrealized/
unrecognized
losses
   Estimated
fair value
 
                 
Available-for-sale Securities                
U.S. Treasury securities  $496   $         1   $   $497 
Agency bonds   501    4        505 
Agency mortgage-backed: residential   43            43 
   $1,040   $5   $   $1,045 
                     
Held-to-maturity Securities                    
Agency mortgage-backed: residential  $775   $14   $14   $775 

 

The amortized cost and fair market value of securities as of December 31, 2019, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities without a single maturity, primarily mortgage-backed securities, are not shown.

 

(in thousands)  Amortized Cost   Fair Value 
Available for sale:        
Within one year  $500   $503 

11

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

3. Investment Securities (continued)

 

Our pledged securities (including overnight and time deposits in other financial institutions) totaled $1.9 million and $2.1 million at both December 31 and June 30, 2019, respectively.

 

We evaluated securities in unrealized loss positions for evidence of other-than-temporary impairment, considering duration, severity, financial condition of the issuer, our intention to sell or requirement to sell. Those securities were agency mortgage backed securities, which carry a very limited amount of risk. Also, we have no intention to sell nor feel that we will be compelled to sell such securities before maturity. Based on our evaluation, no impairment has been recognized through earnings.

 

4. Loans receivable

 

The composition of the loan portfolio was as follows:

  

   December 31,   June 30, 
(in thousands)  2019   2019 
         
Residential real estate        
One- to four-family  $220,496   $216,066 
Multi-family   12,626    15,928 
Construction   4,193    3,757 
Land   1,226    852 
Farm   2,087    3,157 
Nonresidential real estate   31,111    30,419 
Commercial nonmortgage   1,502    2,075 
Consumer and other:          
Loans on deposits   1,372    1,415 
Home equity   7,653    8,214 
Automobile   83    91 
Unsecured   666    451 
    283,015    282,425 
Allowance for loan losses   (1,447)   (1,456)
   $281,568   $280,969 

  

12

 

  

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

4. Loans receivable (continued)

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended December 31, 2019:

 

(in thousands)  Beginning
balance
   Provision for
loan losses
   Loans
charged off
   Recoveries   Ending
balance
 
                     
Residential real estate:                    
One- to four-family  $685   $64   $(65)  $        –   $684 
Multi-family   200    (28)           172 
Construction   6                6 
Land   1    1            2 
Farm   6    (2)           4 
Nonresidential real estate   336    25            361 
Commercial nonmortgage   5    (1)           4 
Consumer and other:                         
Loans on deposits   3    (1)           2 
Home equity   14    (3)           11 
Automobile       8    8         
Unsecured       1            1 
Unallocated   200                200 
Totals  $1,456   $64   $(73)  $   $1,447 

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December 31, 2019:

 

(in thousands)  Beginning
balance
   Provision for
loan losses
   Loans
charged off
   Recoveries   Ending
balance
 
                     
Residential real estate:                    
One- to four-family  $686   $(2)  $   $       –   $684 
Multi-family   193    (21)           172 
Construction   6                6 
Land   1    1            2 
Farm   6    (2)           4 
Nonresidential real estate   339    22            361 
Commercial nonmortgage   5    (1)           4 
Consumer and other:                         
Loans on deposits   2                2 
Home equity   12    (1)           11 
Automobile       8    (8)        
Unsecured       1            1 
Unallocated   200                200 
Totals  $1,450   $5   $(8)  $   $1,447 

  

13

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

4. Loans receivable (continued)

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended December 31, 2018:

 

(in thousands)  Beginning
balance
   Provision for
loan losses
   Loans
charged off
   Recoveries   Ending
balance
 
                     
Residential real estate:                    
One- to four-family  $795   $17   $(117)  $      39   $734 
Multi-family   225    (5)           220 
Construction   8    (5)           3 
Land   1                1 
Farm   6    (1)           5 
Nonresidential real estate   321    25            346 
Commercial nonmortgage   3                3 
Consumer and other:                         
Loans on deposits   3                3 
Home equity   13                13 
Automobile                    
Unsecured   1    (20)       20    1 
Unallocated   200                200 
Totals  $1,576   $11   $(117)  $59   $1,529 

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December 31, 2018:

 

(in thousands)  Beginning
balance
   Provision for
loan losses
   Loans
charged off
   Recoveries   Ending
balance
 
                     
Residential real estate:                    
One- to four-family  $781   $(5)  $(58)  $       16   $734 
Multi-family   232    (12)           220 
Construction   4    (1)           3 
Land   1                1 
Farm   6    (1)           5 
Nonresidential real estate   323    23            346 
Commercial nonmortgage   4    (1)           3 
Consumer and other:                         
Loans on deposits   3                3 
Home equity   16    (3)           13 
Automobile                    
Unsecured   1                1 
Unallocated   200                200 
Totals  $1,571   $   $(58)  $16   $1,529 

14

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

4. Loans receivable (continued)

 

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of December 31, 2019. The recorded investment in loans excludes accrued interest receivable due to immateriality.

 

December 31, 2019:                        
                         
(in thousands)  Loans
individually
evaluated
   Loans
acquired
with
deteriorated
credit
quality
   Unpaid
principal
balance
and
recorded
investment
   Ending
allowance
attributed
to loans
   Unallocated
allowance
   Total
allowance
 
Loans individually evaluated for impairment:                        
Residential real estate:                        
One- to four-family  $4,007   $924   $4,931   $   $   $ 
Multi-family   682        682             
Farm   310        310             
Nonresidential real estate   720        720             
    5,719    924    6,643             
                               
Loans collectively evaluated for impairment:                              
Residential real estate:                              
One- to four-family            $215,565   $684   $   $684 
Multi-family             11,944    172        172 
Construction             4,193    6        6 
Land             1,226    2        2 
Farm             1,777    4        4 
Nonresidential real estate             30,391    361        361 
Commercial nonmortgage             1,502    4        4 
Consumer:                              
Loans on deposits             1,372    2        2 
Home equity             7,653    11        11 
Automobile             83             
Unsecured             666    1        1 
Unallocated                     200    200 
              276,372    1,247    200    1,447 
             $283,015   $1,247   $200   $1,447 

   

15

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

4. Loans receivable (continued)

 

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of June 30, 2019.

 

June 30, 2019:                        
                         
(in thousands)  Loans
individually
evaluated
   Loans
acquired
with
deteriorated
credit
quality
   Unpaid
principal
balance
and
recorded
investment
   Ending
allowance
attributed
to loans
   Unallocated
allowance
   Total
allowance
 
Loans individually evaluated for impairment:                        
Residential real estate:                        
One- to four-family  $3,837   $949   $4,786   $   $   $ 
Multi-family   685        685             
Farm   309        309             
Nonresidential real estate   683        683             
    5,514    949    6,463             
                               
Loans collectively evaluated for impairment:                              
Residential real estate:                              
One- to four-family            $210,595   $685   $   $685 
Multi-family             15,928    200        200 
Construction             3,757    6        6 
Land             852    1        1 
Farm             2,848    6        6 
Nonresidential real estate             29,736    336        336 
Commercial nonmortgage             2,075    5        5 
Consumer:                              
Loans on deposits             1,415    3        3 
Home equity             8,214    14        14 
Automobile             91             
Unsecured             451             
Unallocated                     200    200 
              275,962    1,256    200    1,456 
             $282,425   $1,256   $200   $1,456 

 

16

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

4. Loans receivable (continued)

 

The following table presents loans individually evaluated for impairment by class of loans as of and for the six months ended December 31:

   

(in thousands)  Average
Recorded
Investment
   Interest
Income
Recognized
   Cash Basis
Income
Recognized
   Average
Recorded
Investment
   Interest
Income
Recognized
   Cash Basis
Income
Recognized
 
   2019   2018 
With no related allowance recorded:                        
Residential real estate:                        
One- to four-family  $3,922   $62   $62   $3,654   $75   $75 
Multi-family   684    17    17             
Farm   309    5    5    310         
Nonresidential real estate   702    14    14    409    14    14 
Purchased credit-impaired loans   936    35    35    1,066    36    36 
    6,553    133    133    5,439    125    125 
With an allowance recorded:                              
One- to four-family                        
   $6,553   $133   $133   $5,439   $125   $125 

 

The following table presents interest income on loans individually evaluated for impairment by class of loans for the three months ended December 31:

 

(in thousands)  Average Recorded Investment   Interest
Income Recognized
   Cash Basis Income Recognized   Average Recorded Investment   Interest
Income
Recognized
   Cash Basis Income Recognized 
   2019   2018 
With no related allowance recorded:                        
Residential real estate:                        
One- to four-family  $3,780   $28   $28   $4,432   $59   $59 
Multi-family   682    6    6             
Farm   309    5    5    310         
Nonresidential real estate   724    7    7    698    14    14 
Purchased credit-impaired loans   913    17    17    982    28    28 
    6,408    63    63    6,422    101    101 
With an allowance recorded:                              
One- to four-family                        
   $6,408   $63   $63   $6,422   $101   $101 

 

17

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

4. Loans receivable (continued)

 

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of December 31, 2019 and June 30, 2019:

 

   December 31, 2019   June 30, 2019 
(in thousands)  Nonaccrual   Loans
Past Due
Over
90  Days Still
Accruing
   Nonaccrual   Loans
Past Due Over 90 Days
Still
Accruing
 
                 
Residential real estate:                
One- to four-family residential real estate  $4,651   $1,228   $4,545   $1,747 
Multifamily   682        685     
Construction       63         
Farm   310        309     
Nonresidential real estate and land   720        683    49 
Commercial and industrial   1        1     
Consumer   5        9     
   $6,369   $1,291   $6,232   $1,796 

  

One- to four-family loans in process of foreclosure totaled $860,000 and $1.2 million at December 31, and June 30, 2019, respectively.

 

Troubled Debt Restructurings:

 

A Troubled Debt Restructuring (“TDR”) is the situation where the Bank grants a concession to the borrower that the Banks would not otherwise have considered due to the borrower’s financial difficulties. All TDRs are considered “impaired.”

 

At December 31, 2019 and June 30, 2019, the Company had $1.9 million and $1.6 million of loans classified as TDRs, respectively. Of the TDRs at December 31, 2019, approximately 21.5% were related to the borrower’s completion of Chapter 7 bankruptcy proceedings with no reaffirmation of the debt to the Banks.

 

During the six months ended December 31, 2019, the Company had two loans restructured as TDRs. One borrower refinanced a piece of one- to four-family, non-owner occupied, residential property to bring to current amounts owed on other loans with the Bank. Because the borrower’s financial condition had deteriorated, it was unlikely that the borrower could have secured financing elsewhere. The restructured loan is collateralized and cross-collateralized by real estate. Another single family residential borrower filed for Chapter 7 bankruptcy protection and did not reaffirm the debt personally, although the Company’s collateral position remains intact.

 

 During the six months ended December 31, 2018, the Company had two loans restructured as TDRs. A second mortgage loan of $219,000 was renewed and an additional $30,000 was loaned to a borrower to finish construction of an 8-plex, because construction project had experienced cost overruns. The Company carries the first mortgage on this project and both the primary and secondary loans are secured by the 8-plex and additional real estate collateral. The Company also refinanced an existing single-family mortgage loan and provided additional funds to a borrower attempting to consolidate his debt.

 

18

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

4. Loans receivable (continued)

 

The following table summarizes TDR loan modifications that occurred during the six months ended December 31, 2019 and 2018, and their performance, by modification type:

 

(in thousands)  Troubled Debt
Restructurings
Performing to
Modified
Terms
   Troubled Debt
Restructurings
Not
Performing to
Modified
Terms
   Total
Troubled Debt
Restructurings
 
             
Six months ended December 31, 2019            
Residential real estate:            
Terms extended  $682   $        –   $682 
Terms extended and additional funds advanced  $119   $   $119 
Chapter 7 bankruptcy  $21   $   $21 
                
Six months ended December 31, 2018               
Residential real estate:               
Terms extended  $324   $   $324 

 

The following table summarizes TDR loan modifications that occurred during the three months ended December 31, 2019 and 2018, and their performance, by modification type:

  

(in thousands)  Troubled Debt
Restructurings
Performing to
Modified
Terms
   Troubled Debt
Restructurings
Not
Performing to
Modified
Terms
   Total
Troubled Debt
Restructurings
 
             
Three months ended December 31, 2019            
Residential real estate:            
Terms extended  $682   $   $682 
Chapter 7 bankruptcy  $21   $   $21 
                
Three months ended December 31, 2018               
Residential real estate:               
Terms extended and additional funds advanced  $75   $   $75 

   

No TDRs defaulted during the six-month periods ended December 31, 2019 or 2018.

 

19

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

4. Loans receivable (continued)

 

The following table presents the aging of the principal balance outstanding in past due loans as of December 31, 2019, by class of loans:

 

(in thousands)  30-89 Days Past Due   90 Days or
Greater
Past Due
   Total Past
Due
   Loans Not
Past Due
   Total 
                     
Residential real estate:                    
One-to four-family  $2,563   $2,986   $5,549   $214,947   $220,496 
Multi-family   250        250    12,376    12,626 
Construction       63    63    4,130    4,193 
Land   76        76    1,150    1,226 
Farm   109    310    419    1,668    2,087 
Nonresidential real estate   333    303    636    30,475    31,111 
Commercial non-mortgage               1,502    1,502 
Consumer and other:                         
Loans on deposits               1,372    1,372 
Home equity               7,653    7,653 
Automobile               83    83 
Unsecured               666    666 
Total  $3,331   $3,662   $6,993   $276,022   $283,015 

  

The following tables present the aging of the principal balance outstanding in past due loans as of June 30, 2019, by class of loans:

 

(in thousands)  30-89 Days
Past Due
   90 Days or
Greater
Past Due
   Total Past
Due
   Loans Not
Past Due
   Total 
                     
Residential real estate:                    
One-to four-family  $4,021   $3,479   $7,500   $208,566   $216,066 
Multi-family       248    248    15,680    15,928 
Construction   753        753    3,004    3,757 
Land               852    852 
Farm   2        2    3,155    3,157 
Nonresidential real estate   362    49    411    30,008    30,419 
Commercial nonmortgage               2,075    2,075 
Consumer:                         
Loans on deposits               1,415    1,415 
Home equity   38        38    8,176    8,214 
Automobile   8        8    83    91 
Unsecured               451    451 
Total  $5,184   $3,776   $8,960   $273,465   $282,425 

  

20

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

4. Loans receivable (continued)

 

Credit Quality Indicators:

 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on an annual basis. The Company uses the following definitions for risk ratings:

 

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

 

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

 

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

 

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans. Loans listed that are not rated are included in groups of homogeneous loans and are evaluated for credit quality based on performing status. See the aging of past due loan table above. As of December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

  

(in thousands)  Pass   Special
Mention
   Substandard   Doubtful 
                 
Residential real estate:                
One- to four-family  $212,106   $619   $7,771   $ 
Multi-family   11,944        682     
Construction   4,193             
Land   1,226             
Farm   1,777        310     
Nonresidential real estate   29,322    736    1,053     
Commercial nonmortgage   1,267        235     
Consumer:                    
Loans on deposits   1,372             
Home equity   7,634        19     
Automobile   83             
Unsecured   661        5     
   $271,585   $1,355   $10,075   $ 

  

21

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

4. Loans receivable (continued)

 

At June 30, 2019, the risk category of loans by class of loans was as follows:

 

(in thousands)  Pass   Special
Mention
   Substandard   Doubtful 
                 
Residential real estate:                
One- to four-family  $206,489   $894   $8,683   $            – 
Multi-family   15,243        685     
Construction   3,757             
Land   852             
Farm   2,848        309     
Nonresidential real estate   28,990    746    683     
Commercial nonmortgage   1,584        491     
Consumer:                    
Loans on deposits   1,415             
Home equity   8,053    137    24     
Automobile   91             
Unsecured   446        5     
   $269,768   $1,777   $10,880   $ 

 

Purchased Credit Impaired Loans:

 

The Company purchased loans during fiscal year 2013 for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans, net of a purchase credit discount of $351,000 and $351,000 at December 31, 2019 and June 30, 2019, respectively, is as follows:

 

(in thousands)   December 31,
2019
    June 30,
2019
 
                 
One- to four-family residential real estate   $        924     $ 949  

 

22

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

4. Loans receivable (continued)

 

Accretable yield, or income expected to be collected, is as follows

 

(in thousands)  Six months
ended
December 31,
2019
   Twelve months
ended
June 30,
2019
 
         
Balance at beginning of period  $544   $634 
Accretion of income   (56)   (90)
Disposals, net of recoveries        
Balance at end of period  $488   $544 

  

For those purchased loans disclosed above, the Company made no increase in allowance for loan losses for the year ended June 30, 2019, nor for the six-month period ended December 31, 2019. Neither were any allowance for loan losses reversed during those periods.

 

5. Disclosures About Fair Value of Assets and Liabilities

 

ASC topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (exit price) at the measurement date. ASC topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes six levels of inputs that may be used to measure fair value:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

 

Securities

 

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics. Level 2 securities include agency mortgage-backed securities and agency bonds.

 

23

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

5. Disclosures About Fair Value of Assets and Liabilities (continued)

 

Impaired Loans

 

At the time a loan is considered impaired, it is evaluated for loss based on the fair value of collateral securing the loan if the loan is collateral dependent. If a loss is identified, a specific allocation will be established as part of the allowance for loan losses such that the loan’s net carrying value is at its estimated fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral-dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

 

Other Real Estate

 

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

 

Financial assets measured at fair value on a recurring basis are summarized below:

  

   Fair Value Measurements Using 
(in thousands)  Fair Value   Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
 
                 
December 31, 2019                
Agency bonds  $503   $       –   $503   $       – 
Agency mortgage-backed: residential   42        42     
   $545   $   $545   $ 
                     
June 30, 2019                    
U.S. Treasury notes  $497   $   $497   $ 
Agency bonds   505        505     
Agency mortgage-backed: residential   43        43     
   $1,045   $   $1,045   $ 

 

24

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

5. Disclosures About Fair Value of Assets and Liabilities (continued)

 

Assets measured at fair value on a non-recurring basis are summarized below:

 

   Fair Value Measurements Using 
(in thousands)  Fair Value   Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
 
                 
December 31, 2019                
Loans                
One- to four-family  $9   $       –   $      –   $9 
                     
Other real estate owned, net                    
One- to four-family  $577           $577 
                     
June 30, 2019                    
Loans                    
One- to four-family  $593   $   $   $593 
                     
Other real estate owned, net                    
One- to four-family  $117   $   $   $117 

 

There was one impaired loan, which was measured using the fair value of the collateral for collateral-dependent loans, at December 31, 2019, and seven impaired loans at June 30, 2019. Amounts charged off were $8,000 for the six-month period ended December 31, 2019 and $23,000 off for the six-month period ended December 31, 2018.

 

Other real estate owned was written down $24,000 during the six- and three-months ended December 31, 2019. Other real estate owned measured at fair value less costs to sell, had a carrying amount of $577,000 and $117,000 at December 31, 2019 and June 30, 2019, respectively. Other real estate owned was written down $54,000 and $36,000 during the six- and three-month periods ended December 31, 2018, respectively.

 

25

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

5. Disclosures About Fair Value of Assets and Liabilities (continued)

  

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2019 and June 30, 2019:

 

             Range
   Fair Value   Valuation  Unobservable  (Weighted
December 31, 2019  (in thousands)   Technique(s)  Input(s)  Average)
              
Loans:              
One- to four-family  $9   Sales comparison approach  Adjustments for differences between comparable sales  -82.2% to 151.3%
(20.5%)
               
Foreclosed and repossessed assets:              
One- to four-family  $577   Sales comparison approach  Adjustments for differences between comparable sales  -2.7% to 41.2%
(17.9%)

  

             Range
   Fair Value   Valuation  Unobservable  (Weighted
June 30, 2019  (in thousands)   Technique(s)  Input(s)  Average)
              
Loans:             
One- to four-family  $593   Sales comparison approach  Adjustment for differences between comparable sales  25.3% to 50.6%
(-0.6%)
               
Foreclosed and repossessed assets:              
One- to four-family  $117   Sales comparison approach  Adjustments for differences between comparable sales  8.6% to 31.0%
(29.0%)

  

The following is a disclosure of the fair value of financial instruments, both assets and liabilities, whether or not recognized in the consolidated balance sheet, for which it is practicable to estimate that value. For financial instruments where quoted market prices are not available, fair values are based on estimates using present value and other valuation methods.

 

The methods used are greatly affected by the assumptions applied, including the discount rate and estimates of future cash flows. Therefore, the fair values presented may not represent amounts that could be realized in an exchange for certain financial instruments.

 

26

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

5. Disclosures About Fair Value of Assets and Liabilities (continued)

 

Based on the foregoing methods and assumptions, the carrying value and fair value of the Company’s financial instruments at December 31, 2019 and June 30, 2019 are as follows:

  

       Fair Value Measurements at 
   Carrying   December 31, 2019 Using 
(in thousands)  Value   Level 1   Level 2   Level 3   Total 
Financial assets                    
Cash and cash equivalents  $11,884   $11,884             $11,884 
Time deposits in other financial institutions   2,970    2,979              2,979 
Available-for-sale securities   545        $545         545 
Held-to-maturity securities   652         659         659 
Loans held for sale   251             $251    251 
Loans receivable - net   281,568              285,831    285,831 
Federal Home Loan Bank stock   6,482                   n/a 
Accrued interest receivable   690         690         690 
                          
Financial liabilities                         
Deposits  $199,959   $68,113   $131,853         199,996 
Federal Home Loan Bank advances   61,615         61,741         61,741 
Advances by borrowers for taxes and insurance   231         231         231 
Accrued interest payable   30         30         30 
                          
       Fair Value Measurements at 
   Carrying   June 30, 2019 Using 
(in thousands)  Value   Level 1   Level 2   Level 3   Total 
Financial assets                    
Cash and cash equivalents  $9,861   $9,861             $9,861 
Term deposits in other financial institutions   6,962    6,963              6,963 
Available-for-sale securities   1,045        $1,045         1,045 
Held-to-maturity securities   775         775         775 
Loans receivable – net   280,969             $285,700    285,700 
Federal Home Loan Bank stock   6,482                   n/a 
Accrued interest receivable   758         758         758 
                          
Financial liabilities                         
Deposits  $195,836   $69,944   $123,920        $193,864 
Federal Home Loan Bank advances   66,703         66,719         66,719 
Advances by borrowers for taxes and insurance   763         763         763 
Accrued interest payable   28         28         28 

 

27

 

  

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2019

(unaudited)

 

6. Other Comprehensive Income (Loss)

 

The Company’s other comprehensive income is comprised solely of unrealized gains and losses on available-for-sale securities. The following is a summary of the accumulated other comprehensive income balances, net of tax:

 

   Six months
ended
December 31,
2019
 
     
Beginning balance  $4 
Current year change   (1)
Ending balance  $3 

  

Other comprehensive income (loss) components and related tax effects for the periods indicated were as follows:

 

   Six months ended
December 31,
 
(in thousands)  2019   2018 
         
Unrealized holding gains (losses) on available-for-sale securities  $(1)  $1 
Tax effect        
Net-of-tax amount  $(1)  $1 

 

   Three months ended
December 31,
 
(in thousands)  2019   2018 
         
Unrealized holding gains (losses) on available-for-sale securities  $(1)  $2 
Tax effect       1 
Net-of-tax amount  $(1)  $1 

 

28

 

 

Kentucky First Federal Bancorp

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

Certain statements contained in this report that are not historical facts are forward-looking statements that are subject to certain risks and uncertainties. When used herein, the terms “anticipates,” “plans,” “expects,” “believes,” and similar expressions as they relate to Kentucky First Federal Bancorp or its management are intended to identify such forward looking statements. Kentucky First Federal Bancorp’s actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions, prices for real estate in the Company’s market areas, interest rate environment, competitive conditions in the financial services industry, changes in law, governmental policies and regulations, rapidly changing technology affecting financial services and the other matters mentioned in Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2019. Except as required by applicable law or regulation, the Company does not undertake the responsibility, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

 

29

 

 

Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

 

Average Balance Sheets

 

The following table represents the average balance sheets for the six month periods ended December 31, 2019 and 2018, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

  

   Six Months Ended December 31, 
   2019   2018 
  

Average

Balance

  

Interest

And

Dividends

  

Yield/

Cost

   Average
Balance
  

Interest
And Dividends

  

Yield/

Cost

 
   (Dollars in thousands) 
Interest-earning assets:                              
Loans 1  $282,210   $6,297    4.46%  $271,460   $5,894    4.34%
Mortgage-backed securities   749    11    2.94    963    16    3.32 
Other securities   835    11    2.64    296    4    2.70 
Other interest-earning assets   21,705    272    2.51    20,595    310    3.01 
Total interest-earning assets   305,499    6,591    4.32    293,314    6,224    4.24 
                               
Less: Allowance for loan losses   (1,443)             (1,552)          
Non-interest-earning assets   26,110              26,450           
Total assets  $330,166             $318,212           
                               
Interest-bearing liabilities:                              
Demand deposits  $14,302   $11    0.15%  $15,571   $12    0.15%
Savings   50,484    103    0.41    55,576    110    0.40 
Certificates of deposit   128,156    1,082    1.69    121,947    807    1.32 
Total deposits   192,942    1,196    1.24    193,094    929    0.96 
Borrowings   63,091    673    2.13    50,562    568    2.25 
Total interest-bearing liabilities   256,033    1,869    1.46    243,656    1,497    1.23 
                               
Noninterest-bearing demand deposits   6,019              5,227           
Noninterest-bearing liabilities   2,066              2,035           
Total liabilities   264,118              250,918           
                               
Shareholders’ equity   66,048              67,294           
Total liabilities and shareholders’ equity  $330,166             $318,212           
Net interest spread       $4,722    2.85%       $4,727    3.02%
Net interest margin             3.09%             3.22%
Average interest-earning assets to average interest-bearing liabilities             119.32%             120.83%

 

1 Includes loan fees, immaterial in amount, in both interest income and the calculation of yield on loans. Also includes loans on nonaccrual status.

30

 

 

Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

 

Average Balance Sheets (continued)

 

The following table represents the average balance sheets for the three-month periods ended December 31, 2019 and 2018, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

 

    Three Months Ended December 31,  
    2019     2018  
   

Average

Balance

   

Interest

And

Dividends

   

Yield/

Cost

    Average
Balance
   

Interest

And Dividends

   

Yield/

Cost

 
    (Dollars in thousands)  
Interest-earning assets:                                    
Loans 1   $ 282,774     $ 3,125       4.42 %   $ 272,616     $ 3,006       4.41 %
Mortgage-backed securities     710       5       2.82       927       8       3.45  
Other securities     668       5       2.99       500       3       2.40  
Other interest-earning assets     22,043       128       2.32       20,803       161       3.10  
Total interest-earning assets     306,195       3,263       4.26       294,846       3,178       4.31  
                                                 
Less: Allowance for loan losses     (1,450 )                     (1,559 )                
Non-interest-earning assets     26,113                       26,401                  
Total assets   $ 330,858                     $ 319,688                  
                                                 
Interest-bearing liabilities:                                                
Demand deposits   $ 14,202     $ 6       0.17 %   $ 15,856     $ 6       0.15 %
Savings     49,854       51       0.41       54,855       56       0.41  
Certificates of deposit     129,375       551       1.70       122,989       425       1.38  
Total deposits     193,431       608       1.26       193,700       487       1.01  
Borrowings     63,386       314       1.98       52,235       310       2.37  
Total interest-bearing liabilities     256,817       922       1.44       245,935       797       1.30  
                                                 
Noninterest-bearing demand deposits     6,262                       5,066                  
Noninterest-bearing liabilities     1,929                       1,407                  
Total liabilities     265,008                       252,408                  
                                                 
Shareholders’ equity     65,850                       67,280                  
Total liabilities and shareholders’ equity   $ 330,858                     $ 319,688                  
Net interest spread           $ 2,341       2.83 %           $ 2,381       3.02 %
Net interest margin                     3.06 %                     3.23 %
Average interest-earning assets to average interest-bearing liabilities                     119.23 %                     119.89 %

 

1 Includes loan fees, immaterial in amount, in both interest income and the calculation of yield on loans. Also includes loans on nonaccrual status.

31

 

 

Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

  

Discussion of Financial Condition Changes from June 30, 2019 to December 31, 2019

 

Assets: At December 31, 2019, the Company’s assets totaled $328.8 million, a decrease of $2.0 million, or 0.6%, from total assets at June 30, 2019. This decrease was attributed primarily to a decrease in time deposits in other financial institutions, and was somewhat offset by increases in cash and cash equivalents and loans, net.

 

Cash and cash equivalents: Cash and cash equivalents increased $2.0 million or 20.5% to $11.9 million at December 31, 2019. Most of the Company’s cash and cash equivalents are held in interest-bearing demand deposits.

 

Time deposits in other financial institutions: Time deposits in other financial institutions decreased by $4.0 million or 57.3% to $3.0 million at December 31, 2019. As short-term time deposits matured the funds were used to repay FHLB advances or reinvested at the highest earning level possible.

 

Investment securities: At December 31, 2019 our securities portfolio consisted of an agency bond and mortgage-backed securities. Investment securities decreased $623,000 or 34.2% to $1.2 million at December 31, 2019.

 

Loans: Loans receivable, net, increased by $599,000 or 0.2% to $281.6 million at December 31, 2019. Management continues to look for high-quality loans to add to its portfolio and will continue to emphasize loan originations to the extent that it is profitable, prudent and consistent with our interest rate risk strategies.

 

Non-Performing and Classified Loans: At December 31, 2019, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of approximately $7.7 million, or 2.7% of total loans (including loans purchased in the acquisition), compared to $8.0 million or 2.8%, of total loans at June 30, 2019. The Company’s allowance for loan losses totaled $1.4 million and $1.5 million at December 31, 2019 and June 30, 2019, respectively. The allowance for loan losses at December 31, 2019, represented 18.7% of nonperforming loans and 0.5% of total loans (including loans purchased in the acquisition), while at June 30, 2019, the allowance represented 18.1% of nonperforming loans and 0.5% of total loans.

 

The Company had $10.9 million in assets classified as substandard for regulatory purposes at December 31, 2019, including loans ($10.1 million), including loans acquired in the CKF Bancorp transaction and real estate owned (“REO”) ($766,000.) Classified loans as a percentage of total loans (including loans acquired) was 3.6% and 3.9% at December 31, 2019 and June 30, 2019, respectively. Of substandard loans, 97.6% were secured by real estate on which the Banks have priority lien position.

 

32

 

 

Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

 

Discussion of Financial Condition Changes from June 30, 2019 to December 31, 2019 (continued)

  

The table below shows the aggregate amounts of our assets classified for regulatory purposes at the dates indicated:

 

(dollars in thousands)  December  31,
2019
   June 30,
2019
 
         
Substandard assets  $10,859   $11,590 
Doubtful assets        
Loss assets        
Total classified assets  $10,859   $11,590 

  

At December 31, 2019, the Company’s real estate acquired through foreclosure represented 7.1% of substandard assets compared to 6.1% at June 30, 2019. During the periods presented the Company made loans to facilitate the purchase of its other real estate owned by qualified buyers. During the six months ended December 31, 2019, the Company sold property with a carrying value of $190,000 for $200,000, while during the year ended June 30, 2019, prope