KFFB 10-K & 10-Q changes, risk factors and insider trading
Kentucky First Federal Bancorp · Nasdaq · Savings Institution, Federally Chartered · CIK 1297341 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Regulation of the financial services industry is intense, and we may be adversely affected by changes in laws and regulations.”
New heading “We may be unable to disclose some regulatory restrictions or limitations on our operations imposed by our regulators, even if material to our business.”
Removed heading “On January 16, 2024, the Company announced the suspension of quarterly dividends indefinitely. The suspension of our quarterly cash dividend could have an adverse impact on the market price of our common stock.”
Removed heading “We are required to comply with the terms of a formal written agreement and IMCRs issued by the OCC, and lack of compliance could result in monetary penalties and /or additional regulatory actions.”
Removed heading “Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.”
Largest changes
“We are subject to extensive government regulation, supervision and examination, including the imposition of restrictions on our operations, the classification of our assets and determination of the adequacy of the level of our allowance for credit losses. These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. …”see in full comparison
“We are required to comply with the terms of a formal written agreement and IMCRs issued by the OCC, and lack of compliance could result in monetary penalties and /or additional regulatory actions.”see in full comparison
“Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.”see in full comparison
“Beginning in March, 2022, the Federal Reserve Board’s Open Market Committee (“FOMC”) started raising interest rates to combat elevated inflation and a strong labor market. Rates continued to increase through August 2023 which caused significant deterioration in our profits and asset values. Net interest income in the year ended June 30, 2024 decreased $1.8 million or 20.3% compared to the fiscal year ended June 30, 2023. …”see in full comparison
“Regulation of the financial services industry is intense, and we may be adversely affected by changes in laws and regulations.”see in full comparison
“Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and define “capital” for calculating these ratios. The minimum capital requirements are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4%. …”see in full comparison
Full comparison: every changed paragraph (28)
Net interest income rose $2.8 million from June 30, 2025 to June 30, 2026 as a result of increased interest income and decreased interest expense. This time period consisted of the Federal Reserve Board (“FOMC”) decreasing interest rates, which in part improved net interest income. The FOMC has since increased their target and subsequently increased rates 25 basis points in September, 2026.
Beginning in March, 2022, the Federal Reserve
Board’s Open Market Committee (“FOMC”) started raising interest rates to combat elevated inflation and a strong labor
market. Rates continued to increase through August 2023 which caused significant deterioration in our profits and asset values. Net interest
income in the year ended June 30, 2024 decreased $1.8 million or 20.3% compared to the fiscal year ended June 30, 2023. In September
2024, the FOMC began to lower the target range for the federal funds rate by 50 basis points and has subsequently lowered rates by another
75 basis points, as of September 17, 2025. This has caused improvement in the company’s net interest income from $6.9 million in
the year ended June 30, 2024 to $8.3 million in the year ended June 30, 2025. This was primarily the result of higher returns on assets
while the cost of funds continued to increase in the earlier part of the year before beginning to decline.
Nevertheless, ifIf interest rates continue to rise in the future,
our net interest income may decline in the short term since, due to the generally shorter terms of interest-bearing liabilities, interest
expense paid on interest-bearing liabilities, increases more quickly than interest income earned on interest-earning assets, such as loans
loans and investments. In addition, rising interest rates may hurt our income because of reduced demand for new loans and refinancing loans
loans may in turn result in reduced interest and fee income earned on new loans and loan refinancings. While we believe that modest interest
rate increases will not significantly hurt our interest rate spread over the long term due to our high level of liquidity and the presence
of a significant amount of adjustable-rate mortgage loans in our loan portfolio, interest rate increases may initially reduce our interest
rate spread until such time as our loans and investments reprice to higher levels.
Inflation has risen sharply since the end of 2021
2021 to levels not seen for over 40 years. Inflationary pressures are currently expected to remain elevated throughout 2025.2026. Inflation could
could lead to increased costs to our customers, making it more difficult for them to repay their loans or other obligations. While interest
rates have declined since September 2024, the FOMC raised interest rates by a quarter of a percentage point in September 2026 and higher
interest rates may be needed to tame persistent inflationary price pressures, which
could also push down asset prices and weaken economic
activity. A deterioration in economic conditions in the United States and our markets
could result in an increase in loan delinquencies
and non-performing assets, decreases in loan collateral values and a decrease in demand
for our products and services, all of which, in
turn, would adversely affect our business, financial condition and results of operations.
In
determining the amount of the allowance for
credit loss,losses, we analyze our loss and delinquency experience by loan categories and we consider
the effect of existing economic conditions.
In addition, we make various assumptions and judgments about the collectability of our loan
portfolio, including the creditworthiness
of our borrowers and the value of the real estate and other assets serving as collateral for
the repayment of many of our loans. If the
actual results are different from our estimates, or our analyses are incorrect, our allowance
for credit losslosses may not be sufficient to
cover losses inherent in our loan portfolio, which would require additions to our allowance
and would decrease our net income. An emphasis
on loan growth or shifting the types of loans the banks make, as well as any future credit
deterioration, could require us to increase
our allowance further in the future. In addition, our banking regulators periodically review
our allowance for loan losses and could
require us to increase our provision for loan losses. Any increase in our allowance for credit loss
losses or loan charge-offs as required by
regulatory authorities may have a material adverse effect on our results of operations and financial
condition.
Our
banks operate in threefour distinct market areas.
First Federal of Hazard’s market area consists of Perry and surrounding counties
in eastern Kentucky. The economy in this market
area has been distressed in recent years due to the decline in the coal industry on which
the economy has been dependent. While the region
has seen improvement in the economy from the influx of other industries, such as health
care and manufacturing, the competition provided
by new methods of extracting natural gas has recently hurt the coal industry. As a consequence,
the economy in First Federal of Hazard’s
market area continues to lag behind the economies of Kentucky and the United States and
First Federal of Hazard has experienced insufficient
loan demand in its market area. Moreover, the slow economy in First Federal of Hazard’s
market area will limit our ability to grow
our asset base in that market.
We
plan to continue to sell our longer-term,
conforming and non-conforming fixed-rate loans that we originate to generate noninterest income.
We also earn revenue from fees we receive
for servicing mortgage loans. Changes in interest rates may impact our mortgage banking revenues,
which could negatively impact our noninterest
income. When rates rise, the demand for mortgage loans usually tends to fall, reducing
loan origination volume and the related amount
of gains on the sales of loans. Under the same conditions, net revenue from our mortgage
servicing activities can increase due to slower
prepayments, which reduces our amortization expense for mortgage servicing rights. When
rates fall, mortgage originations usually tend
to increase and the value of our mortgage servicing rights usually tends to decline, also
with some offsetting revenue effect. During
the fiscal year ended June 30, 2025,2026, non-interest income increased $249,000$129,000 or 99.2%25.8% compared
to June 30, 2025 and totaled $500,000,$629,000, primarily due to increased
net gains on sales of loans of $187,000.$108,000 or 53.7%.
On January 16, 2024, the Company announced
the suspension of quarterly dividends indefinitely. The suspension of our quarterly cash dividend could have an adverse impact on the
market price of our common stock.
On January 16, 2024, the Company announced the suspension of quarterly dividends indefinitely. Holders of our common stock are only entitled
to receive such dividends as our Board of Directors may declare out of funds available for such payments under applicable law and regulatory
guidance. We cannot predict when or whether the Company will be able to pay future common stock dividends and if so, the amount of any
such common stock dividends. Our ability to pay future dividends and if so at what level will also be dependent on numerous factors, including:
our ability to receive any required regulatory approval or non-objection to pay dividends to our shareholders; our ability to receive
regulatory approval or non-objection to pay dividends from First Federal Savings and Loan Association of Hazard and First Federal Savings
Bank of Kentucky to the Company in order for the Company to pay dividends to shareholders; our ability to fully and timely address the
deficiencies that resulted in the formal Agreement that First Federal Savings Bank of Kentucky entered into with the OCC on August 13,
2024, or any other deficiencies identified by the OCC or the Federal Reserve Bank of Cleveland; our ability to successfully execute our
strategy to increase earnings and core deposits, reduce reliance on higher cost funding sources and shift more of our loan portfolio towards
higher-earning loans; and First Federal Savings Bank of Kentucky’s ability to satisfy the IMCR’s imposed by the OCC, which
require First Federal Savings Bank of Kentucky to maintain a common equity tier 1 capital ratio of at least 9.0%, a tier 1 capital ratio
of at least 11.0%, a total capital ratio of at least 12.0%, and a leverage ratio of at least 9.0%. As of June 30, 2025, our common equity
tier 1 capital ratio was 16.83%, its tier 1 capital ratio was 16.83%, its total capital ratio was 16.83%, and its leverage ratio was 9.97%.
For additional information on the formal Agreement that First Federal Savings Bank of Kentucky has entered into with the OCC and the IMCR’s
imposed on First Federal Savings Bank of Kentucky by the OCC, please see “Management’s Discussion and Analysis-Regulatory
Developments Regarding First Federal of Kentucky.”
In previous years, First Federal MHC has received Federal Reserve Board
approval to waive quarterly dividends otherwise payable by the
Company totaling $0.40 per share annually beginning with the dividend paid
on September 28, 2012 and continuing through the dividend payable
in the third quarter of 2024. However, First Federal MHC did not seek
to obtain regulatory approval to waive dividends for periods after
the third quarter of 2024, and the prior Federal Reserve BoadBoard approval
to waive the payment of quarterly dividends that would otherwise
be payable to First Federal MHC has expired. ToOn July 28, 2026, First Federal
MHC held a meeting to vote on a proposal to permit First Federal MHC to waive its right to receive quarterly dividends aggregating up
to $0.40 per share declared by Kentucky First during the extent12-month period following member approval of the dividend waiver proposal. The
members of First Federal MHC voted and approved the waiver of First Federal MHC’s right to receive quarterly dividends and the Company
has resumesresumed the payment of dividendsdividends. inIn futurethe periods,future, it is expected
that First Federal MHC will again waive future dividends, except to the
extent dividends are needed to fund First Federal MHC’s
continuing operations, subject to the ability of First Federal MHC to obtain
regulatory approval of its requests to waive dividends and
to its ability to obtain member approval of dividend waivers. We cannot predict
whether members will continue to approve annual dividend
waiver requests or whether the Federal Reserve Board will grant future dividend
waiver requests and, if granted, there can be no assurance
as to the conditions, if any, the Federal Reserve Board will place on future
dividend waiver requests by grandfathered mutual holding
companies such as First Federal MHC. If First Federal MHC is unable to waive
the receipt of dividends, the Company’s ability to
pay dividends to our stockholders may be substantially impaired and the amounts
of any such dividends may be significantly reduced.
Regulation of the financial services industry is intense, and we may be adversely affected by changes in laws and regulations.
We are subject to extensive government regulation, supervision and examination, including the imposition of restrictions on our operations, the classification of our assets and determination of the adequacy of the level of our allowance for credit losses. These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. Such regulation, supervision and examination govern the activities in which we may engage and are intended primarily for the protection of the federal deposit insurance fund and the Banks’ depositors, rather than the protection of the Company’s stockholders. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firm. These changes could materially impact, potentially even retroactively, how we report our financial condition and results of operations. Any future legislative or regulatory changes could have a material impact on our profitability, the value of assets held for investment or the value of collateral for loans. Future legislative changes could also require changes to business practices and potentially expose us to additional costs, liabilities, enforcement action and reputational risk. Federal regulatory agencies also have the ability to take strong supervisory actions against financial institutions that have experienced increased loan production and losses and other underwriting weaknesses or have compliance weaknesses. These actions include entering into formal or informal written agreements and cease and desist orders that place certain limitations on their operations, and/or they can impose fines. If we were to become subject to a regulatory action, such action could negatively impact our ability to execute our business plan, and result in operational restrictions, as well as our ability to grow, pay dividends, repurchase stock or engage in mergers and acquisitions. On August 13, 2024, First Federal of Kentucky entered into a formal written agreement (the “Agreement”) with the OCC, which became effective as of the same date. As a result of the Agreement, pursuant to 12 C.F.R. § 5.51(c)(7)(ii), First Federal of Kentucky was deemed to be in “troubled condition,” and was not an “eligible savings association” for purposes of 12 C.F.R. § 5.3. In addition to the formal written Agreement, the OCC also imposed individual minimum capital requirements (“IMCRs”) on First Federal of Kentucky. The IMCRs required First Federal of Kentucky to maintain a common equity tier 1 capital ratio of at least 9.0%, a tier 1 capital ratio of at least 11.0%, a total capital ratio of at least 12.0%, and a leverage ratio of at least 9.0%. If the OCC were to have determined that First Federal of Kentucky was not in compliance with the Agreement, it would have available various remedies, including among others, the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to direct an increase in capital, to restrict the growth of First Federal of Kentucky, to remove officers and/or directors, to assess civil monetary penalties, and to impose limitations on our business at First Federal of Kentucky, any of which could negatively affect our ability to implement our business plan and pay dividends on our common stock, and may negatively affect the value of our common stock as well as our financial condition and results of operations. On February 19, 2026, the OCC published notification that it had terminated the Agreement. In addition to terminating the Agreement, the OCC also lifted the individual minimum capital requirements imposed on First Federal of Kentucky in connection with the Agreement. For additional information regarding the Agreement and the IMCRs and the termination of the Agreement and the IMCRs, see “Item 1: Business—Regulation and Supervision.
We may be unable to disclose some regulatory restrictions or limitations on our operations imposed by our regulators, even if material to our business.
As part of our regular examination process, our regulators may advise us to operate under various restrictions as a prudential matter. Any such actions or restrictions, if and in whatever manner imposed, could adversely affect our costs and revenues. Moreover, efforts to comply with any such nonpublic supervisory actions or restrictions may require material investments in additional resources and systems, as well as a significant commitment of managerial time and attention. As a result, such supervisory actions or restrictions, if and in whatever manner imposed, could have a material adverse effect on our business and results of operations; and, in certain instances, we may not be able to publicly disclose these matters, even if material to our business.
We are required to comply with the terms
of a formal written agreement and IMCRs issued by the OCC, and lack of compliance could result in monetary penalties and /or additional
regulatory actions.
On August 13, 2024, First Federal of Kentucky
entered into a formal written agreement (the “Agreement”) with the OCC, which became effective as of the same date. As a
result of the Agreement, pursuant to 12 C.F.R. § 5.51(c)(7)(ii), First Federal of Kentucky is in “troubled condition,”
and is not an “eligible savings association” for purposes of 12 C.F.R. § 5.3, unless otherwise informed in writing by
the OCC. In addition to the formal written Agreement, the OCC has also imposed individual minimum capital requirements (“IMCRs”)
on First Federal of Kentucky. The IMCRs require First Federal of Kentucky to maintain a common equity tier 1 capital ratio of at least
9.0%, a tier 1 capital ratio of at least 11.0%, a total capital ratio of at least 12.0%, and a leverage ratio of at least 9.0%. At June
30, 2025, First Federal of Kentucky exceeded the requirements of the IMCRs as its common equity tier 1 capital ratio was 16.83%, its
tier 1 capital ratio was 16.83%, its total capital ratio was 16.83%, and its leverage ratio was 9.97%.
Under the terms of the Agreement, First Federal
of Kentucky is required to take the following actions within the time frames specified in the Agreement:
The Agreement requires First Federal of Kentucky’s
Board to (i) ensure that First Federal of Kentucky timely adopts and implements all corrective actions required by the Agreement and
(ii) verify that First Federal of Kentucky adheres to the corrective actions and that they are effective in addressing First Federal
of Kentucky’s deficiencies that resulted in the Agreement.
The Agreement will remain in effect until it
is amended by First Federal of Kentucky and the OCC, or the OCC modifies, waives or terminates the Agreement. While First Federal of
Kentucky is subject to the Agreement, we expect that the Board and management will be required to focus considerable time and attention
on taking corrective actions to comply with its terms.
First Federal of Kentucky’s Board and management
are committed to fully addressing the provisions of the Agreement within the required time frames. The OCC may determine, however, in
its sole discretion that the issues raised by the Agreement have not been addressed satisfactorily, or that any current or past actions,
violations or deficiencies could be the subject of further regulatory enforcement actions. If the OCC were to determine that First Federal
of Kentucky was not in compliance with the Agreement, it would have available various remedies, including among others, the power to
enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation
or practice, to direct an increase in capital, to restrict the growth of First Federal of Kentucky, to remove officers and/or directors,
to assess civil monetary penalties, and to impose limitations on our business at First Federal of Kentucky, any of which could negatively
affect our ability to implement our business plan and pay dividends on or our common stock, and may negatively affect the value of our
common stock as well as our financial condition and results of operations.
Changes in laws and regulations and the
cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.
The Banks are subject to extensive regulation,
supervision and examination by the OCC. The Company is subject to extensive regulation, supervision and examination by the Federal Reserve
Board. Such regulation and supervision govern the activities in which an institution and its holding company may engage and is intended
primarily for the protection of the federal deposit insurance fund and the depositors of the Banks rather than the protection of the
Company’s stockholders. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including
the imposition of restrictions on our operations, the classification of our assets and determination of the adequacy of the level of
our allowance for credit losses. These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules,
standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives
and tax compliance, and govern financial reporting and disclosures. Any change in such regulation and oversight, whether in the form
of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations. Further, changes
in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent
accounting firm. These changes could materially impact, potentially even retroactively, how we report our financial condition and results
of operations.
Changes in tax laws contained in the Tax Cuts and Jobs Act, which was
enacted in December 2017, and the legislation commonly known as
the “One Big Beautiful Bill Act” signed into law on July 4,
2025, includeincludes a number of provisions that will have an impact
on the banking industry, borrowers and the market for residential real
estate. Included in this legislation were: (i) a lower limit on
the deductibility of mortgage interest on single-family residential mortgage
loans, (ii) the elimination of interest deductions for home
equity loans, (iii) a limitation on the deductibility of business interest
expense and (iv) a limitation on the deductibility of property
taxes and state and local income taxes.
Federal regulators require federally insured depository institutions to meet several minimum capital standards: (1) total capital to risk-weighted assets of 8.0%; (2) tier 1 capital to risk-weighted assets of 6.0%; (3) common equity tier 1 capital to risk-weighted assets of 4.5%; and (4) tier 1 capital to adjusted total assets of 4.0%. In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The regulators established a framework for the classification of savings institutions into five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Generally, an institution is considered well capitalized if it has: a total capital to risk-weighted assets ratio of at least 10.0%, a tier 1 capital to risk-weighted assets ratio of at least 8.0%, a common tier 1 capital to risk-weighted assets ratio of at least 6.5%, and a tier 1 capital to adjusted total assets ratio of at least 5.0%. In August 2024, First Federal of Kentucky entered into an Agreement with the OCC and the OCC imposed IMCRs which required First Federal of Kentucky to achieve and maintain capital levels in excess of the minimum capital standards required under OCC’s Prompt Corrective Action framework. Under the IMCRs, First Federal of Kentucky was required to achieve and maintain a common equity tier 1 capital ratio of at least 9.0%, a tier 1 capital ratio of at least 11.0%, a total capital ratio of at least 12.0%, and a leverage ratio of at least 9.0%. On February 19, 2026, the OCC published a notification that it had terminated the Agreement. In addition to terminating the Agreement, the OCC also lifted the IMCRs imposed on First Federal of Kentucky in connection with the Agreement.
Federal regulations establish minimum capital
requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and define “capital”
for calculating these ratios. The minimum capital requirements are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier
1 to risk-based assets capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and
(iv) a Tier 1 leverage ratio of 4%. The regulations also establish a “capital conservation” buffer of 2.5%, and will result
in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7%; (ii) a Tier 1 to risk-based assets capital ratio of
8.5%; and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement was phased in beginning in January 2016
at 0.625% of risk-weighted assets and increased each year until fully implemented in January 2019. An institution will be subject to
limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the
buffer amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such actions.
As of June 30, 2025, the capital levels of First Federal of Hazard and First Federal of Kentucky exceed the required capital amounts
according to the Community Bank Leverage Ratio regulations and we believe they also meet the fully-phased in minimum capital requirements.
As previously discussed, in August 2024, First Federal of Kentucky entered into an Agreement with the OCC. The OCC has also imposed IMCRs
which require First Federal of Kentucky to achieve and maintain capital levels in excess of the minimum capital standards required under
OCC’s Prompt Corrective Action framework. Under the IMCRs, First Federal of Kentucky must achieve and maintain a common equity
tier 1 capital ratio of at least 9.0%, a tier 1 capital ratio of at least 11.0%, a total capital ratio of at least 12.0%, and a leverage
ratio of at least 9.0%. At June 30, 2025, First Federal of Kentucky exceeded the requirements of the IMCRs as its common equity tier
1 capital ratio was 16.83%, its tier 1 capital ratio was 16.83%, its total capital ratio was 16.83%, and its leverage ratio was 9.97%.
See Note K-Stockholders’ Equity and Regulatory Capital of Notes to Consolidated Financial Statements.
Our
ability to pay future dividends is
subject to the ability of First Federal of Hazard and First Federal of Kentucky to make capital distributions
to Kentucky First Federal
and the waiver of dividends by First Federal MHC. On January 16, 2024, we announced that the Board had determined to suspend the payment
of dividends indefinitely.
On January 16, 2024, we announced that the Board had determined to suspend the payment of quarterly dividends. On July 28, 2026, First Federal MHC approved a proposal to permit First Federal MHC to waive its right to receive quarterly dividends aggregating up to $0.40 per share declared by Kentucky First during the 12-month period following member approval of the dividend waiver proposal. Following the approval of the dividend waiver, the Company’s Board of Directors announced the resumption of the dividend and declared a cash dividend of $0.05 per share payable on September 21, 2026 to shareholders of record on August 31, 2026. It is expected that First Federal MHC will continue to waive future dividends, to the extent Kentucky First continues to pay dividends in future periods, except to the extent dividends are needed to fund First Federal MHC’s continuing operations, subject to the ability of First Federal MHC to obtain regulatory approval of its requests to waive dividends and to its ability to obtain member approval of dividend waivers. We cannot predict whether members will continue to approve annual dividend waiver requests or whether the Federal Reserve Board will grant future dividend waiver requests and, if granted, there can be no assurance as to the conditions, if any, the Federal Reserve Board will place on future dividend waiver requests by grandfathered mutual holding companies such as First Federal MHC. If First Federal MHC is unable to waive the receipt of dividends, our ability to pay dividends to our stockholders may be substantially impaired and the amounts of any such dividends may be significantly reduced.
On January 16, 2024, we announced that the Board
had determined to suspend the payment of dividends indefinitely. For additional information regarding suspension of our quarterly dividend,
please see “Liquidity Risk - On January 16, 2024, the Company announced the suspension of quarterly dividends
indefinitely. The suspension of our quarterly cash dividend could have an adverse impact on the market price of our common stock.”
Management's Discussion & Analysis (MD&A)
The information contained in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report, is incorporated herein by reference.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
What changed in the latest 10-Q
Risk Factors
Please see “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended June 30, 2025 for information regarding risk factors that could materially affect the Company’s business, financial condition, or future results of operations. Except as relates to the termination of the Agreement with the OCC and the lifting of the IMCRs as disclosed in “Management’s Discussion and Analysis of Financial Condition -- Regulatory Developments Regarding First Federal of Kentucky”, as of March 31, 2026, the risk factors of the Company have not materially changed from those disclosed in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended June 30, 2025.
Largest changes
Please see “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended June 30, 2025 for information regarding risk factors that could materially affect the Company’s business, financial condition, or future results of operations.see in full comparisonAsExcept as relates to the termination ofDecemberthe Agreement with the OCC and the lifting of the IMCRs as disclosed in “Management’s Discussion and Analysis of Financial Condition -- Regulatory Developments Regarding First Federal of Kentucky”, as of March 31,2025,2026, the risk factors of the Company have not materially changed from those disclosed in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended June 30, 2025.
Full comparison: every changed paragraph (1)
Please see “Item 1A. Risk
Factors” of the Company’s
Annual Report on Form 10-K for the year ended June 30, 2025 for information regarding risk
factors that could materially affect the Company’s
business, financial condition, or future results of operations. AsExcept as
relates to the termination of Decemberthe Agreement with the OCC and the lifting of the IMCRs as disclosed in “Management’s
Discussion and Analysis of Financial Condition -- Regulatory Developments Regarding First Federal of Kentucky”, as of March
31, 2025,2026, the risk factors of the Company have not materially
changed from those disclosed in “Item 1A. Risk Factors” of
the Company’s Annual Report on Form 10-K for the year ended
June 30, 2025.
Management's Discussion & Analysis (MD&A)
New heading “Kentucky First Federal Bancorp”
Largest changes
“The Agreement requires First Federal of Kentucky’s Board to (i) ensure that First Federal of Kentucky timely adopts and implements all corrective actions required by the Agreement and (ii) verify that First Federal of Kentucky adheres to the corrective actions and that they are effective in addressing First Federal of Kentucky’s deficiencies that resulted in the Agreement. First Federal of Kentucky’s Board and management are committed to fully addressing the provisions of the Agreement within the required time frames. …”see in full comparison
“At December 31, 2025 the Company and the Banks were considered well-capitalized with capital ratios in excess of regulatory requirements. However, an extended economic recession could adversely impact the Company’s and the Banks’ capital position and Company in its Current Report on Form 8-K filed on August 15, 2024, in addition to the formal written Agreement, the OCC has also imposed individual minimum capital requirements (“IMCRs”) on First Federal Savings Bank of Kentucky. …”see in full comparison
“In addition to terminating the Agreement, the OCC also lifted the individual minimum capital requirements imposed on First Federal of Kentucky in connection with the Agreement. For additional information, see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 19, 2026. , see Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange on February 19, 2026.”see in full comparison
see in full comparisonGeneralGeopolitical volatility and recent inflation results lead general market participantsbelievetothatconcludethethereFOMCwillcontinuelikely be no interest ratedecreases.decreases by the FOMC in this calendar year. OurDecemberMarch 31,20252026 EVE is anticipated to decrease by approximately 1.9% and increase byapproximately 4.1% and 0.6%7.5% under sudden and sustained decrease in prevailing market interest rates of 100 basis points and 200 basis points,respectively.respectively, and increase by 0.8% under a sudden and sustained increase in prevailing market rates of 100 basis points The company continues to strive for acceptable EVE in both increasing and decreasing interest rate environments. Computations or prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments, and deposit run-offs. These computations should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions the Banks may undertake in response to changes in interest rates. Certain shortcomings are inherent in this method of computing EVE. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in differing degrees to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates.
“At March 31, 2026, the Company and the Banks were considered well-capitalized with capital ratios in excess of regulatory requirements. However, an extended economic recession could adversely impact the Company’s and the Banks’ capital position.”see in full comparison
Full comparison: every changed paragraph (46)
Certain statements contained in this report,
as well as other periodic
reports filed with the Securities and Exchange Commission, that are not historical facts are considered “forward-looking
statements”
under the Private Securities Litigation Reform Act of 1995, that are subject to certain risks and uncertainties. These
forward-looking forward-looking
statements may be identified by the use of words such as “believe,” “expect,” “anticipate,”
“plan,”
“estimate,” “intend” and “potential,” or words of similar meaning, or future
or conditional verbs
such as “should,” “could,” or “may.” Forward-looking statements include statements
of our goals, intentions
and expectations; statements regarding our ability to fully and timely address the deficiencies that resulted in the Agreement that First
Federal Savings Bank of Kentucky has entered into with the Office of the Comptroller of the Currency (“OCC”); First Federal
Savings Bank of Kentucky’s ability to satisfy the Individual Minimum Capital Requirements imposed by the OCC; statements regarding
our business plans, prospects, growth and operating strategies; statements
regarding the quality of our loan and investment portfolios;
and estimates of our risks and future costs and benefits. 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; 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; the success of our recently restructured management team; our ability to receive any required regulatory approval
or non-objection
to pay dividends to shareholders; our ability to pay dividends from First Federal Savings and Loan Association of Hazard
and First Federal
Savings Bank of Kentucky to the Company in order for the Company to pay dividends to shareholders; the ability of First
Federal MHC to
receive approval of its members to waive the payment of any Company dividends to First Federal MHC; competitive conditions
in the financial
services industry; changes in the level of inflation; the impacts of tariffs, sanctions and other trade policies of
the United States
and its global trading counterparts; 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 other matters mentioned
in Item 1A of the Company’s
Annual Report on Form 10-K for the year ended June 30, 2025. 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.
Kentucky First Federal Bancorp
On August 13, 2024, First Federal of Kentucky entered into a formal written agreement (the “Agreement”) with the OCC, which became effective as of the same date. On February 19, 2026, the OCC published notification that it has terminated the Agreement. As a result of the termination of the Agreement, First Federal of Kentucky is no longer considered to be in “troubled condition” pursuant to 12 C.F.R. § 5.51(c)(7)(ii) and is an “eligible savings association” for purposes of 12 C.F.R. § 5.3.
In addition to terminating the Agreement, the OCC also lifted the individual minimum capital requirements imposed on First Federal of Kentucky in connection with the Agreement. For additional information, see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 19, 2026. , see Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange on February 19, 2026.
On August 13, 2024, First Federal of Kentucky
entered into a formal written agreement (the “Agreement”) with the OCC, which became effective as of the same date. The
Agreement will remain effective until it is amended by First Federal of Kentucky and the OCC, or the OCC modifies, waives or
terminates the Agreement. As a result of the Agreement, pursuant to 12 C.F.R. § 5.51(c)(7)(ii), First Federal of Kentucky is in
“troubled condition,” and is not an “eligible savings association” for purposes of 12 C.F.R. § 5.3,
unless otherwise informed in writing by the OCC. In addition to the Agreement, the OCC has also imposed individual minimum capital
requirements (“IMCRs”) on First Federal of Kentucky. The IMCRs require First Federal of Kentucky to maintain a common
equity tier 1 capital ratio of at least 9.0%, a tier 1 capital ratio of at least 11.0%, a total capital ratio of at least 12.0%, and
a leverage ratio of at least 9.0%. As of December 31, 2025, First Federal Savings Bank of Kentucky’s common equity tier 1
capital ratio was 13.99%, its tier 1 capital ratio was 13.99%, its total capital ratio was 14.76%, and its leverage ratio was
10.37%. As First Federal of Kentucky has not been designated as “less than well capitalized” and has maintained capital
levels in excess of the IMCRs, there have been no restrictions or waiver requirements imposed on First Federal of Kentucky for
rolling brokered deposits or other types of wholesale deposits.
Under the terms of the Agreement, First Federal of
Kentucky is required to take the following actions within the time frames specified in the Agreement:
The Agreement requires First Federal of Kentucky’s Board to (i)
ensure that First Federal of Kentucky timely adopts and implements all corrective actions required by the Agreement and (ii) verify that
First Federal of Kentucky adheres to the corrective actions and that they are effective in addressing First Federal of Kentucky’s
deficiencies that resulted in the Agreement. First Federal of Kentucky’s Board and management are committed to fully addressing
the provisions of the Agreement within the required time frames. As of the date of this filing, First Federal of Kentucky’s Board
and management believe that First Federal of Kentucky has addressed the deficiencies that resulted in the Agreement. For additional
information, see Exhibit 10.1 to the Company Current Report on Form 8-K filed with the Securities and Exchange Commission on August 15,
2024 and Item 1A, “Risk Factors - We are required to comply with the terms of a formal written agreement and IMCRs issued
by the OCC, and lack of compliance could result in monetary penalties and /or additional regulatory actions” and Note K - Stockholders’
Equity and Regulatory Capital of the Notes to Consolidated Financial Statements included in Item 8 of the Company’s Annual Report
on Form 10-K filed with the Securities and Exchange Commission on September 30, 2025.
GeneralGeopolitical volatility and recent inflation results lead general market
participants believeto thatconclude thethere FOMC
will continuelikely be no interest rate decreases.decreases by the FOMC in this calendar year. Our DecemberMarch 31, 20252026 EVE is
anticipated to decrease by approximately 1.9% and increase by approximately 4.1%
and 0.6%7.5% under sudden and sustained decrease in prevailing market interest rates
of 100
basis points and 200 basis points, respectively.respectively, and increase by 0.8% under a sudden and sustained increase in prevailing market
rates of 100 basis points The company continues to strive for acceptable EVE in both increasing and decreasing
interest rate environments.
Computations or prospective effects of hypothetical interest rate changes are based on numerous assumptions,
including relative levels
of market interest rates, loan prepayments, and deposit run-offs. These computations should not be relied upon
as indicative of actual
results. Further, the computations do not contemplate any actions the Banks may undertake in response to changes
in interest rates. Certain
shortcomings are inherent in this method of computing EVE. For example, although certain assets and liabilities
may have similar maturities
or periods to repricing, they may react in differing degrees to changes in market interest rates. The interest
rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on
other types may lag behind
changes in market rates.
The following table represents the average balance
sheets for the six-monthnine-month periods ended DecemberMarch 31, 20252026 and 2024,2025, along with the related calculations of tax-equivalent net interest income,
income, net interest margin and net interest spread for the related periods.
The following table represents the average balance
sheets for the three-month periods ended DecemberMarch 31, 20252026 and 2024,2025, along with the related calculations of tax-equivalent net interest income,
income, net interest margin and net interest spread for the related periods.
Discussion of Financial Condition Changes from
June 30, 2025 to DecemberMarch 31, 20252026
At March 31, 2026, the Company and the Banks were considered well-capitalized with capital ratios in excess of regulatory requirements. However, an extended economic recession could adversely impact the Company’s and the Banks’ capital position.
At December 31, 2025 the Company and the Banks were
considered well-capitalized with capital ratios in excess of regulatory requirements. However, an extended economic recession could adversely
impact the Company’s and the Banks’ capital position and Company in its Current Report on Form 8-K filed on August 15, 2024,
in addition to the formal written Agreement, the OCC has also imposed individual minimum capital requirements (“IMCRs”) on
First Federal Savings Bank of Kentucky. The IMCRs require First Federal Savings Bank of Kentucky to maintain a common equity tier 1 capital
ratio of at least 9.0%, a tier 1 capital ratio of at least 11.0%, a total capital ratio of at least 12.0%, and a leverage ratio of at
least 9.0%. As of December 31, 2025, First Federal Savings Bank of Kentucky’s common equity tier 1 capital ratio was 13.99%,
its tier 1 capital ratio was 13.99%, its total capital ratio was 14.76%, and its leverage ratio was 10.37%. As First Federal of Kentucky has not been designated as “less
than well capitalized” and has maintained capital levels in excess of the IMCRs, there have been no restrictions or waiver requirements
imposed on First Federal of Kentucky for rolling brokered deposits or other types of wholesale deposits.
Assets: At DecemberMarch 31, 2025,2026, the Company’s
assets totaled $375.3$374.5 million, an increase of $4.1$3.3 million, or 1.1%,0.9%, from total assets at June 30, 2025, due primarily to the increase
in loans,cash and cash equivalents, as well as an increaseincreases in loans, net and securities available-for-sale.
Cash and cash equivalents: Cash
and and
cash equivalents overall increased $192,000$1.8 million or 1.0%9.3% to $19.7$21.3 million at DecemberMarch 31, 2025.2026. Most of the Company’s cash and cash
equivalents equivalents
are held in interest-bearing demand deposits that increased $5.5$5.4 million or 64.5%,62.8%, which were slightlypartially offset by fed funds
sold decreasing
$5.3 $3.5 million or 61.9%40.9% compared to June 30, 2025.
InvestmentDebt securities: At DecemberMarch 31, 2026,
2025, our securities portfolio, which consisted of mortgage-backed securities, increased $1.4 million$580,000 or 14.2%5.2% and totaled $11.3$10.3 million, compared
compared to June 30, 2025.
Loans: Loans, net and loans
held-for-sale held-for-sale
in the aggregate increased $2.3 million$760,000 or 0.8%0.2% and totaled $330.5$328.9 million at DecemberMarch 31, 2025.2026. Loans receivable, net, increased
by $2.6
$1.0 million or 0.7%0.3% to $329.8$328.2 million at DecemberMarch 31, 2025.2026. Loans held-for-sale decreased $254,000$215,000 and totaled $623,000$662,000 at DecemberMarch 31,
2026. 2025.
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. Because market interest rates have become
more favorable,
the Company has had more success in selling mortgages into the secondary market, which has led to elevated balances of
loans held-for-sale.
Non-performing and classified loans: At
DecemberMarch 31, 2025,2026, the Company had non-performing loans (loans 90 or more days past due and still accruing or loans on nonaccrual status)
of approximately $2.4
million, or 0.7% of total loans compared to $3.9 million or 1.2%, of total loans at June 30, 2025. The Company’s
ACL totaled $2.2
million at both DecemberMarch 31, 20252026 and June 30, 2025. The ACL at DecemberMarch 31, 2025,2026, represented 92.7%92.3% of nonperforming loans
and 0.7% of
total loans, while at June 30, 2025, ACL represented 54.1% of nonperforming loans and 0.7% of total loans.
The Company had $6.3$6.4 million in assets
classified classified
as substandard for regulatory purposes at DecemberMarch 31, 2025,2026, with $0 in real estate owned (“REO”). ClassifiedSubstandard loans
as a percentage
of total loans (including loans acquired) was 1.9% and 1.9% at DecemberMarch 31, 20252026 and June 30, 2025, respectively. Of substandard
loans, loans,
100.0% were secured by real estate on which the Banks have priority lien position.
Discussion of Financial Condition Changes from
June 30, 2025 to March 31, 2026 (continued) The table below shows the aggregate amounts of
our our
assets classified for regulatory purposes at the dates indicated:
The Company had no real estate acquired through
foreclosure foreclosure
at DecemberMarch 31, 20252026 or June 30, 2025. During the period presented the Company made no loans to facilitate the purchase of its
other real
estate owned by qualified buyers. Loans to facilitate the sale of other real estate owned, which were included in substandard
loans, totaled
$0 and $0 at DecemberMarch 31, 202531,2026 and June 30, 2025, respectively.
DiscussionAt of Financial Condition Changes from
June 30, 2025 to DecemberMarch 31, 2025 (continued) At December 31, 20252026 and June 30, 2025, the Company
had $661,000$65,000 and $672,000 of loans classified as special mention, respectively. This category includes assets which do not currently expose
us to a sufficient degree of risk to warrant classification, but do possess credit deficiencies or potential weaknesses deserving our
close attention.
Liabilities: Total liabilities
increased increased
$3.3$2.0 million, or 1.0%0.6% to $326.2$324.9 million at DecemberMarch 31, 2025,2026, as Federal Home Loan Bank advances increased $8.7$6.2 million or 20.3% 14.4%
to $51.4
$48.9 million and demand deposit accounts increased $874,000$3.4 million or 3.0%.11.4%.
Savings account deposits decreased $5.1$4.9 million
or 10.5%10.1% and totaled
43.5 $43.7 million at DecemberMarch 31, 20252026 primarily related to a decrease in savings accounts associated with distributions
of funds in administration
of various estate accounts. Certificates of deposit decreased $123,000$2.3 million or 0.1%,1.2%, due to brokered certificates
of deposit decreasing $5.6
$5.7 million or 12.8%12.9% to $38.4$38.3 million, which were offset by retailnational market deposits increasing $4.1 million and
totaling $5.7 million. National market deposits are an online listing service that offer certificate of deposits to national customers,
attracting additional certificates of deposit increasingunder $5.5 million or 3.6%.$250,000.
Shareholders’ Equity: At
March December
31, 2025,2026, the Company’s shareholders’ equity totaled $49.1$49.7 million, an increase of $732,000$1.3 million or 1.5%2.7% from June 30,
2025. The
increase in shareholders’ equity was primarily associated with net income of $648,000,$1.2 million, as well as accumulated other
comprehensive comprehensive
loss decreasing $84,000$60,000 or 57.9%41.4% from a loss of $145,000 at June 30, 2025 to a loss of $61,000$85,000 at DecemberMarch 31, 2025.2026.
On January 16, 2024, the Company announced the
suspension suspension
of quarterly dividends indefinitely. Holders of our common stock are only entitled to receive such dividends as our Board
of Directors
may declare out of funds available for such payments under applicable law and regulatory guidance. We cannot predict when
or whether the
Company will be able to pay future common stock dividends and if so, the amount of any such common stock dividends. Our
ability to pay
future dividends and if so at what level will also be dependent on numerous factors, including: our ability to receive
any required regulatory
approval or non-objection to pay dividends or 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; our ability to fully and timely address the
deficiencies that resulted in the Agreement that First Federal Savings Bank of Kentucky has entered into with the OCC; First Federal Savings
Bank of Kentucky’s ability to satisfy the IMCR’s imposed by the OCC;shareholders, the ability of First
Federal MHC to receive approval
of its members to waive the payment of any Company dividends to First Federal MHC; and our ability to
successfully execute our strategy
to increase earnings and core deposits, reduce reliance on higher cost funding sources and shift more
of our loan portfolio towards higher-earning
loans. See “Risk Factors” in Part II, Item 1A, of the Company’s Annual
Report on Form 10-K for the year ended June 30,
2025 for additional discussion regarding dividends.
Comparison of Operating Results for the Six-monthNine-month
Periods Ended DecemberMarch 31, 20252026 and 20242025 General Net income totaled $648,000$1.2 million or $0.08$0.15 diluted earnings per share for
the six-months ended December 31, 2025, an increase of $650,000 from net loss of $2,000 or ($0.00) diluted earnings per share for the nine-months ended March 31, 2026, an increase of $1.2 million from net earnings of $5,000 or $0.00 diluted
earnings per share for the same period in 2024.2025. The increase in net earnings for the six-monthsnine months ended DecemberMarch 31, 2025,2026, was primarily
attributable to increased
net interest income, which was partially offset by higher non-interest expense.
Net interest income increased $1.3$2.0 million or
33.0% 32.1%
to $5.2$8.0 million due primarily to increased interest income and decreased interest expense. Interest income increased $825,000$1.2 million
or 8.8%
8.7% due to an increase in the average rate earned on interest-earning assets, which increased 4849 basis points to 5.65%.5.69%. Average interest-earning
assets decreased $1.6$2.5 million or 0.5%0.7% to $362.1$363.0 million for the recently-ended quarterlynine period.months. The average rate earned on assets was due
due primarily to an increase in the rate earned on loans, which was the result of new loan production carrying higher interest rates and
adjustable rate mortgages continuing to reprice upward. Interest expense decreased $428,000$754,000 or 7.8%9.2% to $5.1$7.5 million for the six-monthsnine-months
recently ended due to a decrease in the average balance of interest-bearing liabilities as well as a decrease in the average rate paid
on those funds. Average interest-bearing liabilities decreased $1.7$1.9 million or 0.5%0.6% to $308.7$309.9 million for the quarterly period just ended,
while the average rate paid decreased 2632 basis points to 3.28%4.33% for the period.
The increase in interest income from loans period-to-period
was due to the average rate earned on loans increasing 6061 basis points to 5.80%5.86% despite the average balance of loans decreasing $4.3$3.4 million
or 1.3%1.0% compared to the sixnine months ended DecemberMarch 31, 2024.2025.
Net interest spread increased from 1.63%1.69% for the
prior year nine-month period to 2.48% for the prior
year six-month period to 2.37% for the six-monthnine-month period ended DecemberMarch 31, 2025.2026.
Management determined that a $10,000$51,000 provision
for for
credit loss was prudent during the recently-ended six-monthnine period.month period due to shifts in loan concentrations.
Non-interest Income
Comparison of Operating Results for the Six-month
Periods Ended December 31, 2025 and 2024 (continued) Non-interest Income Non-interest income increased $23,000$81,000 or 7.5% 20.8%
to $331,000
$470,000 for the six-monthsnine-months ended DecemberMarch 31, 20252026 compared to the prior year period, primarily because of an increase in net gains
from sale
of loans of $25,000$66,000 or 17.7%.40.7%. Recently, the market has become more conducive to the sale of fixed rate mortgages to the secondary
market.
Non-interest expense increased $412,000$446,000 or 9.8%7.0% to
$4.6 $6.8 million for
the sixnine months ended DecemberMarch 31, 2025,2026, primarily due to higher data processing expense, outside service fees, and employee compensation
compensation and benefits. Data processing expense increased $180,000$244,000 or 66.4%,54.1% due to increased core processing rates, outside service fees increased $169,000
$134,000 or 75.1%,35.5%, and
employee compensation and benefits increased $119,000$198,000 or 5.0%.5.5% due to annual performance-based adjustments and higher
health insurance costs. These were slightlypartially offset by professional fees decreasing $81,000
$142,000 or 35.4%.49.0%.
Income tax expense increased $219,000$386,000 to an
income income
tax expense of $206,000$380,000 for the sixnine months ended DecemberMarch 31, 2025,2026, compared to the prior year period due to increased
earnings. The effective
tax ratesrate for the six-monthnine-month periodsperiod ended DecemberMarch 31, 20252026 andwas 2024 were 24.1% and 86.7%, respectively.23.6%. Included in net income is earnings
of $44,000$66,000 on bank-owned life insurance which is non-taxable.
Comparison of Operating Results for the Three-month
Periods Ended DecemberMarch 31, 20252026 and 20242025 General Net income totaled $304,000$581,000 or $0.04$0.07 diluted earnings
per share for the three months ended DecemberMarch 31, 2025,2026, an increase of $291,000$574,000 from net income of $13,000$7,000 or $0.00 diluted earnings per share
share for the same period in 2024.2025. The increase in net earnings for the quarter ended DecemberMarch 31, 2025,2026 was primarily attributable to
higher net
interest income, which was partially offset by higher nonnon-interest interestexpense, expensehigher provision for credit losses, and higher income taxes.
The average rate earned on interest-earning assets
increased 4448 basis points to 5.72%5.76% and was the primary reason for the increase in interest income, as average interest-earning assets
decreased $623,000$2.2 million or 0.2%0.6% to $361.7$365.1 million for the recently-ended quarterly period. The increase in interest income was due primarily
to an increase of $447,000$501,000 or 10.1%11.2% in interest income from loans, which totaled $4.9$5.0 million for the period.
The increase in interest income from loans period-to-period
was due to the average rate earned on loans increasing 5862 basis points to 5.89%.5.97%. The average balance of loans decreased $2.3 million$882,000 or 0.3%
0.7% to $331.4$332.3 million for the three months ended DecemberMarch 31, 2025.2026.
The average balance of interest-bearing liabilities
decreased $2.9$3.8 million or 0.9%1.2% to $308.2$312.9 million for the quarter just ended, and the average rate paid decreased 2637 basis points to 3.27%.3.06%.
The cost of liabilities decreased primarily due to decreased FHLBcertificates advanceof deposit expense, which was $248,000$203,000 or 33.0%10.1% less than the
same period
ended DecemberMarch 31, 2024.2025. WhileThe average rate paid on certificates of deposit decreasing 55 basis points to 3.62% is the primary
reason for the decrease. Interest expense on FHLB advances also decreased $123,000 as the average balance decreased $8.6 million or 15.3%
and the average rate paid on FHLB advances decreased 2924 basis points to 4.35%,4.18% theperiod primaryto reason for
the decrease was the average balance decreasing $18.5 million or 28.5%.period.
Net interest spread increased from 1.75%1.85% for the
prior prior
year quarterly period to 2.45%2.70% for the three-month period ended DecemberMarch 31, 2025.2026.
Management determined that a $10,000$41,000 provision
for for
credit loss was prudent due to our current expected credit loss analysis performed during the recently-ended quarter.quarter and shifting
loan concentrations.
Non-interest Income
Comparison of Operating Results for the Three-month
Periods Ended December 31, 2025 and 2024 (continued) Non-interest Income Non-interest income increased $7,000$58,000 or 4.1% 71.6%
to $178,000
$139,000 for the recently ended quarter primarily due to increased net gain of sale on loans, increasing $20,000$41,000 or 24.7%186.4% for the
three months
recently ended. Recently, the market has become more conducive to the sale of fixed rate mortgages to the secondary market.
Non-interest expense increased $220,000$34,000 or 10.0%1.6%
and and
totaled $2.4$2.2 million for the three months ended DecemberMarch 31, 2025,2026, primarily due to increased data processing expense,expense and employee compensation
and benefits, and outside service fees.benefits.
Income Tax
Income taxes expense increased $104,000$166,000 to an expense
of $97,000 from a benefit of $94,000$174,000 for the three months ended DecemberMarch 31, 2024 for the recently-ended period.2026. The effective tax rates
rate for the three-month periodsperiod ended DecemberMarch 31, 20252026, and 2024, were 24.2% and -116.7%, respectively.was
23.0%. Included in net income is earnings
of $22,000$29,000 on bank-owned life insurance which is non-taxable.
KFFB insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding KFFB (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 11,941 | $60.7K | 0.0% | New position |