KFFB Kentucky First Federal Bancorp

Kentucky First Federal Bancorp (Nasdaq: KFFB), the holding company (the “Company”) for First Federal Savings and Loan Association of Hazard and First Federal Savings Bank of Kentucky, Frankfort, Kentucky, announced a net loss of $361,000 or ($0.05) diluted earnings per share for the three months ended December 31, 2023, compared to net earnings of $374,000 or $0.04 diluted earnings per share for the three months ended December 31, 2022, a decrease of $735,000 or 196.5%. A net loss of $536,000 or ($0.07) diluted earnings per share was announced for the six months ended December 31, 2023 compared to net earnings of $747,000 or $0.09 diluted earnings per share for the six months ended December 31, 2022, a decrease of $1.3 million or 171.8%

The decrease in net earnings for the quarter ended December 31, 2023 was primarily attributable to lower net interest income. Net interest income decreased $791,000 or 32.3% to $1.7 million due primarily to interest expense increasing more than interest income increased period to period. Interest expense increased $1.6 million or 232.4%, while interest income increased $796,000 or 25.4% to $3.9 million for the recently-ended quarter. During the unprecedented interest rate increases seen in the market since March 2022, our funding sources have repriced more quickly than our assets have repriced, which has had a negative impact on net interest income. Net income was also affected by an increase in non-interest expense of $119,000 or 5.9% and totaled $2.1 million for the three months ended December 31, 2023, primarily due to increased FDIC insurance premiums and other various expenses.

The average rate earned on interest-earning assets increased 66 basis points to 4.43% and was the primary reason for the increase in interest income, although average interest-earning assets also increased $26.8 million or 8.4% to $346.1 million for the recently-ended quarterly period. The average rate paid on interest-bearing liabilities increased 212 basis points to 2.99% and was the primary reason for the increase in interest expense. Don Jennings, Chief Executive Officer, stated, “The cost of liabilities has been increasing rapidly due to higher costs of both wholesale and retail funding.  While we expect the cost of retail funding to continue to increase somewhat as competition for deposits remains fierce, it is likely that the cost of wholesale funds has peaked and will begin to decline over the next several months.  However, the yield on our assets will continue to increase for the foreseeable future unless we see a significant drop in interest rates.  Our loan portfolio, which is heavily weighted toward adjustable-rate loans, will continue to reprice.  Current adjustments are being restricted somewhat by contractual terms including initial fixed periods and annual caps.  Over time, we expect that these loans will continue to adjust upward.  Further, loans that contractually pay down or mature can be replaced with new assets generating much higher yields.” 

On July 1, 2023, the Company adopted a new accounting standard for the calculation of its allowance for credit losses (“ACL”), which requires credit losses on most financial assets to be measured using a current expected credit loss model (“CECL”). At adoption, we recorded an increase in the ACL for loans which represented a $497,000 increase from the Allowance for Loan Losses (“ALLL”) at June 30, 2023. This transaction further resulted in an increase of $54,000 to the ACL for unfunded commitments, a decrease of $414,000 to retained earnings and a decrease to deferred income tax liability of $137,000. At December 31, 2023, our ACL for loans totaled $2.1 million, an increase of $498,000 since the adoption of CECL at July 1, 2023.

Due to negative earnings, we recorded an income tax benefit of $162,000 for the six months recently ended, compared to an income tax expense of $229,000 for the six months ended December 31, 2022.

At December 31, 2023, assets totaled $366.2 million, an increase of $17.2 million or 4.9%, from $349.0 million at June 30, 2023, due primarily to the increase in loans, net, of $11.8 million or 3.8%, as well as an increase in cash and cash equivalents. Investment securities decreased $1.2 million or 9.7% to $11.2 million primarily because of principal repayments or prepayments. Total liabilities increased $18.8 million or 6.3% to $317.1 million at December 31, 2023, as deposits increased $18.3 million or 8.1% to $244.6 million and advances increased $921,000 or 1.3% to $71.0 million. We began utilizing brokered certificates of deposit (“CDs”) prior to June 30, 2023 to diversify and expand our funding sources. The brokered CDs provide funding at interest rates comparable to advances and offer similar repayment terms. At December 31, 2023 our deposits included $44.1 million in brokered CDs.

At December 31, 2023, the Company reported its book value per share as $6.08. Shareholders’ equity decreased $1.5 million or 3.0% to $49.2 million at December 31, 2023 compared to June 30, 2023. The decrease in shareholders’ equity was primarily associated with adoption of the CECL accounting standard. Other reductions to shareholders’ equity for the period included the net loss for the period and dividends paid on common stock. The reduction was somewhat offset by a decrease in the unrealized losses on available for sale securities.

Forward-Looking Statements

This press release may contain statements that are forward-looking, as that term is defined by the Private Securities Litigation Act of 1995 or the Securities and Exchange Commission in its rules, regulations and releases. The Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors including, but not limited: general economic conditions; prices for real estate in the Company’s market areas; the interest rate environment and the impact of the interest rate environment on our business, financial condition and results of operations; our ability to successfully execute our strategy to increase earnings, increase core deposits, reduce reliance on higher cost funding sources and shift more of our loan portfolio towards higher-earning loans; our ability to pay future dividends and if so at what level; our ability to receive any required regulatory approval or non-objection for the payment of dividends from First Federal Savings and Loan Association of Hazard and First Federal Savings Bank of Kentucky to the Company or from the Company to shareholders; competitive conditions in the financial services industry; changes in the level of inflation; changes in the demand for loans, deposits and other financial services that we provide; the possibility that future credit losses may be higher than currently expected; competitive pressures among financial services companies; the ability to attract, develop and retain qualified employees; our ability to maintain the security of our data processing and information technology systems; the outcome of pending or threatened litigation, or of matters before regulatory agencies; changes in law, governmental policies and regulations, rapidly changing technology affecting financial services, and the Risk Factors described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2023. Accordingly, actual results may differ from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by the Company or any other person that results expressed therein will be achieved.

About Kentucky First Federal Bancorp

Kentucky First Federal Bancorp is the parent company of First Federal Savings and Loan Association of Hazard, which operates one banking office in Hazard, Kentucky, and First Federal Savings Bank of Kentucky, which operates three banking offices in Frankfort, Kentucky, two banking offices in Danville, Kentucky and one banking office in Lancaster, Kentucky. Kentucky First Federal Bancorp shares are traded on the Nasdaq National Market under the symbol KFFB. At December 31, 2023, the Company had approximately 8,086,715 shares outstanding of which approximately 58.5% was held by First Federal MHC.

SUMMARY OF FINANCIAL HIGHLIGHTS
Condensed Consolidated Balance Sheets
(In thousands, except share data)									December 31,					June 30,
										2023 (Unaudited)				2023
ASSETS
Cash and cash equivalents								$		14,584			$	8,167
Investment Securities										11,152				12,354
Loans available-for sale										270				--
Loans, net										325,648				313,807
Real estate acquired through foreclosure										10				70
Goodwill										947				947
Other Assets										13,636				13,677
Total Assets								$		366,247			$	349,022
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits								$		244,629			$	226,309
FHLB Advances										71,008				70,087
Other Liabilities										1,427				1,915
Total liabilities										317,064				298,311
Shareholders' Equity										49,183				50,711
Total liabilities and shareholders' equity								$		366,247			$	349,022
Book value per share								$		6.08			$	6.27
Tangible book value per share								$		5.96			$	6.15
Condensed Consolidated Statements of Income (Loss)
(In thousands, except share data)
	Six months ended December 31,							Three months ended December 31,
		2023 (Unaudited)				2022				2023 (Unaudited)				2022
Interest Income	$	7,661			$	6,016		$		3,927			$	3,131
Interest Expense		4,333				1,136				2,270				683
Net Interest Income		3,328				4,880				1,657				2,448
Provision (credit) for Losses on Loans		15				113				9				--
Non-interest Income		121				167				46				69
Other Non-interest Expense		4,132				3,958				2,149				2,030
Income (Loss) Before Income Taxes		(698	)			976				(455	)			487
Income Taxes		(162	)			229				(94	)			113
Net Income (Loss)	$	(536	)		$	747		$		(361	)		$	374
Earnings per share:
Basic and Diluted	$	(0.07	)		$	0.09		$		(0.05	)		$	0.04
Weighted average outstanding shares:
Basic and Diluted		8,098,715				8,152,477				8,098,715				8,150,718

Contact: Don Jennings, President, or Tyler Eades, Vice President

(502) 223-1638 216 West Main Street P.O. Box 535 Frankfort, KY 40602