UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
For the transition period from ____________ to _______________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)(Zip Code)
(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 | ||
| The |
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:
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 | ☐ |
| ☒ | 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 shell 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
9, 2024, the latest practicable date, the Corporation had
INDEX
i
PART I-FINANCIAL INFORMATION
ITEM 1: Financial Statements
Kentucky First Federal Bancorp
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
| December 31, | June 30, | |||||||
| 2023 | 2023 | |||||||
| ASSETS | ||||||||
| Cash and due from financial institutions | $ | $ | ||||||
| Fed funds sold | ||||||||
| Interest-bearing demand deposits | ||||||||
| Cash and cash equivalents | ||||||||
| Securities available-for-sale | ||||||||
| Securities held-to-maturity, at amortized cost- approximate fair value of $ | ||||||||
| Loans held for sale | ||||||||
| Loans, net of allowance for credit loss of $ | ||||||||
| Real estate owned, net | ||||||||
| Premises and equipment, net | ||||||||
| Federal Home Loan Bank stock, at cost | ||||||||
| Accrued interest receivable | ||||||||
| Bank-owned life insurance | ||||||||
| Goodwill | ||||||||
| Prepaid federal income taxes | ||||||||
| Prepaid expenses and other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Deposits | $ | $ | ||||||
| Federal Home Loan Bank advances | ||||||||
| Advances by borrowers for taxes and insurance | ||||||||
| Accrued interest payable | ||||||||
| Accrued income taxes | ||||||||
| Deferred income taxes | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity | ||||||||
| Preferred stock, | ||||||||
| Common stock, | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Unearned employee stock ownership plan (ESOP) | ||||||||
| Treasury shares at cost, | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income (loss) | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| 1 |
See accompanying notes to condensed consolidated financial statements.
1
Kentucky First Federal Bancorp
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share data)
| Six months ended December 31, | Three months ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Interest income | ||||||||||||||||
| Loans, including fees | $ | $ | $ | $ | ||||||||||||
| Mortgage-backed securities | ||||||||||||||||
| Interest-bearing deposits and other | ||||||||||||||||
| Total interest income | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Interest-bearing demand deposits | ||||||||||||||||
| Savings | ||||||||||||||||
| Certificates of Deposit | ||||||||||||||||
| Deposits | ||||||||||||||||
| Borrowings | ||||||||||||||||
| Total interest expense | ||||||||||||||||
| Net interest income | ||||||||||||||||
| Provision for loan losses | -- | |||||||||||||||
| Net interest income after provision for loan losses | ||||||||||||||||
| Non-interest income | ||||||||||||||||
| Earnings on bank-owned life insurance | ||||||||||||||||
| Net gain on sales of loans | ( | ) | ||||||||||||||
| Net gain (loss) on sales of real estate owned | ||||||||||||||||
| Net gain on sale of property and equipment held for sale | ||||||||||||||||
| Other | ||||||||||||||||
| Total non-interest income | ||||||||||||||||
| Non-interest expense | ||||||||||||||||
| Employee compensation and benefits | ||||||||||||||||
| Data processing | ||||||||||||||||
| Occupancy and equipment | ||||||||||||||||
| FDIC insurance premiums | ||||||||||||||||
| Voice and data communications | ||||||||||||||||
| Advertising | ||||||||||||||||
| Outside service fees | ||||||||||||||||
| Auditing and accounting | ||||||||||||||||
| Regulatory assessments | ||||||||||||||||
| Foreclosure and real estate owned expenses (net) | ||||||||||||||||
| Franchise and other taxes | ||||||||||||||||
| Other | ||||||||||||||||
| Total non-interest expense | ||||||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||||||
| NET INCOME (LOSS) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| EARNINGS PER SHARE | ||||||||||||||||
| $ | ( | ) | $ | $ | ( | ) | $ | |||||||||
| DIVIDENDS PER SHARE | $ | $ | $ | $ | ||||||||||||
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, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Other comprehensive gains (losses), net of tax: | ||||||||||||||||
| Unrealized holding gains (losses) on securities designated as available-for-sale, net of taxes of $ | ( | ) | ||||||||||||||
| Comprehensive income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
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, 2023
| Common stock | Additional paid-in capital | Retained earnings | Treasury shares | Accumulated other comprehensive income (loss) | Total | |||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
| Cumulative impact of adoption of ASC 326, net tax | – | ( | ) | ( | ) | |||||||||||||||||||
| Balance at July 1, 2023 | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||||||
| Other comprehensive loss | – | |||||||||||||||||||||||
| Cash dividends of $ | – | ( | ) | ( | ) | |||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
December 31, 2022
| Common stock | Additional paid-in capital | Retained earnings | Unearned employee stock ownership plan (ESOP) | Treasury shares | Accumulated other comprehensive loss | Total | ||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||
| Net income | – | |||||||||||||||||||||||||||
| Allocation of ESOP shares | – | |||||||||||||||||||||||||||
| Acquisition of shares for Treasury | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cash dividends of $ | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
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, 2023
| Common stock | Additional paid-in capital | Retained earnings | Unearned employee stock ownership plan (ESOP) | Treasury shares | Accumulated other comprehensive income | Total | ||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Net income (loss) | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Allocation of ESOP shares | – | |||||||||||||||||||||||||||
| Acquisition of shares for Treasury | – | |||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||
| Cash dividends of $ | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
December 31, 2022
| Common stock | Additional paid-in capital | Retained earnings | Unearned employee stock ownership plan (ESOP) | Treasury shares | Accumulated other comprehensive income | Total | ||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net income | – | |||||||||||||||||||||||||||
| Allocation of ESOP shares | – | |||||||||||||||||||||||||||
| Acquisition of shares for Treasury | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||
| Cash dividends of $ | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
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, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation | ||||||||
| Accretion of purchased loan credit discount | ( | ) | ( | ) | ||||
| Amortization of deferred loan origination costs (fees) | ( | ) | ||||||
| Amortization of premiums on investment securities | ( | ) | ( | ) | ||||
| Net gain on sale of loans | ( | ) | ( | ) | ||||
| Net (gain) loss on sale of real estate owned | ( | ) | ||||||
| Net (gain) loss on sale of property & equipment | ( | ) | ||||||
| ESOP compensation expense | ||||||||
| Earnings on bank-owned life insurance | ( | ) | ( | ) | ||||
| Provision for loan losses | ||||||||
| Origination of loans held for sale | ( | ) | ( | ) | ||||
| Proceeds from loans held for sale | ||||||||
| Deferred Income Taxes | ( | ) | ||||||
| Increase (decrease) in cash, due to changes in: | ||||||||
| Accrued interest receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Accrued interest payable | ||||||||
| Other liabilities | ( | ) | ||||||
| Income taxes | ||||||||
| Net cash used in operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of investments available for sale | ( | ) | ||||||
| Maturities of time deposits in other financial institutions | ||||||||
| Securities maturities, prepayments and calls: | ||||||||
| Held to maturity | ||||||||
| Available for sale | ||||||||
| Proceeds from sale of FHLB stock | ||||||||
| Purchase of FHLB stock | ( | ) | ( | ) | ||||
| Loans originated for investment, net of principal collected | ( | ) | ( | ) | ||||
| Proceeds from sale of property and equipment held for sale | ||||||||
| Proceeds from sale of real estate owned | ||||||||
| Additions to premises and equipment, net | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Net increase (decrease) in deposits | ( | ) | ||||||
| Payments by borrowers for taxes and insurance, net | ( | ) | ( | ) | ||||
| Proceeds from Federal Home Loan Bank advances | ||||||||
| Repayments on Federal Home Loan Bank advances | ( | ) | ( | ) | ||||
| Treasury stock purchased | ( | ) | ||||||
| Dividends paid on common stock | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Beginning cash and cash equivalents | ||||||||
| Ending cash and cash equivalents | $ | $ | ||||||
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, | ||||||||
| 2023 | 2022 | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | $ | ||||||
| Interest on deposits and borrowings | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
7
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(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.
Note 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, 2023, 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, 2023, 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 2023 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.
Critical Accounting Policies and Estimates
Investments – Management determines the classification of debt securities at purchase as held-to-maturity, trading, or available-for-sale. Held-to-maturity securities are those we have both the intent and ability to hold to maturity and are reported at amortized cost. Securities that are not considered held-to-maturity are considered either trading or available-for-sale securities in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 320, Investments – Debt Securities, and are reported at fair value in the statement of financial position. We have no trading securities. The adjustment to fair value for available-for-sale securities for unrealized gains and losses is included as a separate component of shareholders’ equity, net of tax.
Loans – Loans for which we have the ability and intent to hold until maturity and/or payoff are reported at the carrying value of the unpaid principal reduced by unearned interest, an allowance for credit losses and unamortized deferred fees and costs and premiums. Interest income is accrued on a level yield basis. In circumstances where management believes that collection of interest income is uncollectible on specific loans, after considering economic and business conditions, collateral value and collection efforts, interest accrual is discontinued. Interest income may be recognized on the cash basis when received unless a determination has been made by management to apply all of the payment against principal.
8
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 1. Basis of Presentation (continued)
Critical Accounting Policies and Estimates (continued)
Allowance for Credit Losses – We account for the allowance for credit losses under ASC 326, Measurement of Credit Losses on Financial Instruments, which is commonly known as CECL. We measure expected credit losses of financial assets on a weighted average remaining maturity (WARM) basis.
We maintain an allowance for credit losses (“ACL”) at a level that is appropriate to cover estimated credit losses on individually evaluated loans, as well as estimated credit losses inherent in the estimated life of the loan portfolio. Credit losses are charged to and recoveries are credited to the ACL.
Loans with similar risk characteristics are evaluated on a collective basis within homogeneous loan pools under ASC 326. Our homogeneous loan pools are primarily determined by loan purpose and collateral type. Pools include residential real estate (composed of one-to four-family, multi-family, and construction), land, farm, nonresidential real estate, commercial and industrial, and consumer loans (composed of Loans on deposit, home equity, automobile, and unsecured). Credits that are nonaccrual status are subject to individual evaluation.
Historical loss rates for loans are adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition. Qualitative factors used to derive our ACL include delinquency trends, current economic conditions and trends, strength of supervision and administration of the loan portfolio, levels of underperforming loans, trends in loan losses and underwriting exceptions. Reasonable and supportable economic forecasts that may offset collectibility are also included as factors in our ACL model. Management continually reevaluates the other subjective factors included in its ACL analysis.
Income Taxes – Income tax expense is based on the taxes due on the consolidated tax return plus deferred taxes on the expected future tax benefits and consequences of temporary differences between carrying amounts and tax bases of assets and liabilities, using enacted tax rates.
New Accounting Standards
FASB ASC 326 - In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard requires credit losses on most financial assets and certain other instruments to be measured using an expected loss model, which is referred to as the current expected credit loss (CECL) model. Under this model entities estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications) from the date of initial recognition of that instrument. The ASU replaces the current accounting model for purchased credit impaired and debt securities. The allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination (referred to as “PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase price to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described herein.
9
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 1. Basis of Presentation (continued)
New Accounting Standards (continued)
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 was on its allowance for loan and lease losses, although the ASU also amends the accounting for credit losses on available-for-sale debt securities, held-to-maturity securities, and purchased financial assets with credit deterioration. The standard was effective for public companies for annual periods and interim periods within those annual periods beginning after December 15, 2019. However, the FASB 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 was applied through a cumulative effect adjustment to retained earnings (modified-retrospective approach).
In addition, ASC 326 made changes to the accounting for available-for-sale (“AFS”) debt securities. One such change requires credit losses to be presented as an allowance rather than as a write-down on AFS securities. Management does not intend to sell or believes that it is more likely than not that they will be required to sell.
We adopted ASC 326 effective July 1, 2023, using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet (“OBS”) credit exposures. Results for reporting periods beginning after July 1, 2023 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP.
Upon
adoption of the ASU we recorded an increase in the allowance for credit loss (“ACL”) for loans which represented a $
| As Reported | Pre-ASC | Impact of | ||||||||||
| Under | 326 | ASC 326 | ||||||||||
| (Dollars in thousands) | ASC 326 | Adoption | Adoption | |||||||||
| Assets: | ||||||||||||
| Loans | ||||||||||||
| Residential real estate: | ||||||||||||
| One- to four-family | $ | $ | $ | |||||||||
| Multi-family | ( | ) | ||||||||||
| Construction | ||||||||||||
| Land | ||||||||||||
| Farm | ||||||||||||
| Nonresidential real estate | ( | ) | ||||||||||
| Commercial and industrial | ( | ) | ||||||||||
| Consumer and other: | - | |||||||||||
| Loans on deposits | ( | ) | ||||||||||
| Home equity | ||||||||||||
| Automobile | ||||||||||||
| Unsecured | ||||||||||||
| Allowance for credit losses on loans | $ | |||||||||||
| Liabilities: | ||||||||||||
| Allowance for credit losses on unfunded credit exposures | $ | |||||||||||
10
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 1. Basis of Presentation (continued)
New Accounting Standards (continued)
ASU 2019-05, Financial Instruments-Credit Losses, Targeted Transition Relief, allows entities to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of ASC 326-20, if the instruments are eligible for the fair value option under ASC 825-10. The fair value option election does not apply to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. ASU 2019-05 has the same effective date as ASU 2016-13. We adopted ASU 2019-05 on July 1, 2023, and did not elect the fair value option on any financial instruments.
ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, eliminates the accounting guidance for troubled debt restructurings (“TDRs”) by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, for entities that have adopted the current expected credit loss model introduced by ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2022-02 also requires disclosure by public business entities of current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost. The Company adopted the standard on July 1, 2023.
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.
Note 2. Earnings Per Share
| Six months ended December 31, | Three months ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net income allocated to common shareholders, basic and diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| EARNINGS PER SHARE | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||
There were stock option shares outstanding for the six- or three-month periods ended December 31, 2023 and 2022.
11
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 3. Investment Securities
| December 31, 2023 | ||||||||||||||||
| (in thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair value | ||||||||||||
| Available-for-sale Securities | ||||||||||||||||
| Agency mortgage-backed: residential | $ | $ | $ | $ | ||||||||||||
| Held-to-maturity Securities | ||||||||||||||||
| Agency mortgage-backed: residential | $ | $ | $ | $ | ||||||||||||
| June 30, 2023 | ||||||||||||||||
| (in thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair value | ||||||||||||
| Available-for-sale Securities | ||||||||||||||||
| Agency mortgage-backed: residential | $ | $ | $ | $ | ||||||||||||
| Held-to-maturity Securities | ||||||||||||||||
| Agency mortgage-backed: residential | $ | $ | $ | $ | ||||||||||||
At December 31, 2023 and June 30, 2023 the Company’s debt securities consisted of mortgage-backed securities, which do not have a single maturity date. 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.
Our
pledged securities totaled $
We
evaluated securities in unrealized loss positions for evidence of credit loss, 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 reserve for credit loss was considered necessary. Debt securities in an unrealized loss position as a percent
of total debt securities were
December 31, 2023
Available-for-Sale
| (in thousands) | Amortized Cost | Gross Unrealized (losses) | Fair Value | |||||||||
| Less Than 12 Months | ||||||||||||
| Agency mortgage-backed securities | $ | $ | $ | |||||||||
| 12 Months or More | ||||||||||||
| Agency mortgage-backed securities | ( | ) | ||||||||||
| Total temporarily impaired AFS securities | $ | $ | ( | ) | $ | |||||||
12
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 3. Investment Securities (continued)
Held to Maturity
| (in thousands) | Amortized Cost | Gross Unrealized (losses) | Fair Value | |||||||||
| Less Than 12 Months | ||||||||||||
| Agency mortgage-backed securities | $ | $ | ( | ) | $ | |||||||
| 12 Months or More | ||||||||||||
| Agency mortgage-backed securities | ( | ) | ||||||||||
| Total temporarily impaired HTM securities | $ | $ | ( | ) | $ | |||||||
June 30, 2023
Available-for-Sale
| (in thousands) | Amortized Cost | Gross Unrealized (losses) | Fair Value | |||||||||
| Less Than 12 Months | ||||||||||||
| Agency mortgage-backed securities | $ | $ | $ | |||||||||
| 12 Months or More | ||||||||||||
| Agency mortgage-backed securities | ||||||||||||
| Total temporarily impaired AFS securities | $ | $ | $ | |||||||||
Held to Maturity
| (in thousands) | Amortized Cost | Gross Unrealized Losses | Fair Value | |||||||||
| Less Than 12 Months | ||||||||||||
| Agency mortgage-backed securities | $ | $ | $ | |||||||||
| 12 Months or More | ||||||||||||
| Agency mortgage-backed securities | ||||||||||||
| Total temporarily impaired HTM securities | $ | $ | $ | |||||||||
Note 4. Loans receivable
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, adjusted for deferred loan origination costs, net, discounts on purchased loans, and the allowance for credit losses. Interest income is accrued on the unpaid principal balance unless the collectability of the loan is in doubt. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments. Interest income on one- to four-family residential loans is generally discontinued at the time a loan is 180 days delinquent and on other loans at the time a loan is 90 days delinquent. All other loans are moved to non-accrual status in accordance with the Company’s policy, typically 90 days after the loan becomes delinquent. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.
13
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 4. Loans receivable (continued)
| December 31, | June 30, | |||||||
| (in thousands) | 2023 | 2023 | ||||||
| Residential real estate | ||||||||
| One- to four-family | $ | $ | ||||||
| Multi-family | ||||||||
| Construction | ||||||||
| Land | ||||||||
| Farm | ||||||||
| Nonresidential real estate | ||||||||
| Commercial nonmortgage | ||||||||
| Consumer and other: | ||||||||
| Loans on deposits | ||||||||
| Home equity | ||||||||
| Automobile | ||||||||
| Unsecured | ||||||||
| Allowance for loan losses | ( | ) | ( | ) | ||||
| $ | $ | |||||||
The
amounts above include net deferred loan costs of $
The allowance for credit losses is a valuation allowance that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected for the loans. Loan losses are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
Management estimates the allowance balance required using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience, derived from the Company’s data, provides the basis for estimation of expected credit losses, although management also compares the Company’s data with peer group data. Adjustments to historical loss information may be made for differences in: lending policy, procedures and practice; economic conditions; the nature and volume of the loan portfolio; volume delinquent and problem loans; the current and anticipated economic conditions in the primary lending area; and other external factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the pool evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the sale of the collateral, the expected credit losses are based on the fair value of the collateral at the reporting date, less any discounts and selling costs.
Management
monitors loan performance on a monthly basis and performs a quarterly evaluation of the adequacy of the ACL. The Banks begin enhanced
monitoring of all loans rated 5-Watch or worse and obtain a new appraisal or asset valuation for most loans placed on nonaccrual status.
New appraisals are usually not obtained on loans with outstanding principal amounts of $
14
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 4. Loans receivable (continued)
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments, when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a modification will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Banks.
The Banks categorize 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, and current economic trends, among other factors. Management utilizes a risk rating scale ranging from 1-Highest Pass to 9-Loss to evaluate loan quality. Consumer purpose loans are identified as either performing or nonperforming based on the payment status of the loans. Nonperforming consumer loans are loans that are nonaccrual or 90 days or more past due and still accruing.
Our portfolio segments include residential real estate, nonresidential real estate, farm, land, commercial and industrial, and consumer and other loans. Risk factors associated with our portfolio segments are as follows:
Residential Real Estate
Our primary lending activity is the origination of mortgage loans, which enable a borrower to purchase or refinance existing homes in the Banks’ respective market areas. We further classify our residential real estate loans as one- to four-family (owner-occupied vs nonowner-occupied), multi-family or construction. We believe that our first mortgage position on loans secured by residential real estate presents lower risk than our other loans, with the exception of loans secured by deposits.
We
offer a mix of adjustable-rate and fixed-rate mortgage loans with terms up to 30 years for owner-occupied properties. For these properties
a borrower may be able to borrow up to
We
offer loans on one- to four-family rental properties at a maximum of
We
also originate loans to individuals to finance the construction of residential dwellings for personal use or for use as rental property.
We lend to builders for construction of speculative or custom residential properties for resale. Construction loans are generally less
than one year in length, do not exceed
Multi-family Loans
We
offer mortgage loans secured by residential multi-family (five or more units). Generally, these loans are originated for 25 years or
less and do not exceed
15
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 4. Loans receivable (continued)
Nonresidential Loans
We
offer mortgage loans secured by nonresidential real estate comprised generally of commercial office buildings, churches and properties
used for other purposes. Generally, these loans are originated for
Consumer lending
Our
consumer loans include home equity lines of credit, loans secured by savings deposits, automobile loans, and unsecured loans. Home equity
loans are generally second mortgage loans subordinate only to first mortgages also held by the bank and do not exceed
Impaired loans
The Banks choose the most appropriate method for accounting for impaired loans. For secured loans, which make up the vast majority of the loans in the Banks’ portfolio, this method involves determining the fair value of the collateral, reduced by estimated selling costs. Where appropriate, the Banks would account for impaired loans by determining the present value of expected future cash flows discounted at the loan’s effective interest rate.
A loan is considered impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Although most of our loans are secured by collateral, we rely heavily on the capacity of our borrowers to generate sufficient cash flow to service their debt. As a result, our loans do not become collateral-dependent until there is deterioration in the borrower’s cash flow and financial condition, which makes it necessary for us to look to the collateral for our sole source of repayment. Collateral-dependent loans which are more than ninety days delinquent are considered to constitute more than a minimum delay in repayment and are evaluated for impairment under the policy at that time.
We utilize updated independent appraisals to determine fair value for collateral-dependent loans, adjusted for estimated selling costs, in determining our specific reserve. In some situations, management does not secure an updated independent appraisal. These situations may involve small loan amounts or loans that, in management’s opinion, have an abnormally low loan-to-value ratio.
With respect to the Banks’ investment in troubled debt restructurings, multi-family and nonresidential loans, and the evaluation of impairment thereof, such loans are nonhomogenous and, as such, may be deemed to be collateral-dependent when they become more than 90 days delinquent. We obtain updated independent appraisals in these situations or when we suspect that the previous appraisal may no longer be reflective of the property’s current fair value. This process varies from loan to loan, borrower to borrower, and also varies based on the nature of the collateral
16
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 4. Loans receivable (continued)
December 31, 2023:
| (in thousands) | Pre-ASC 326 Adoption | Impact of ASC 326 Adoption | As Reported Under ASC 326 | Provision (credit) for loan losses | Loans charged off | Recoveries | Credit
Losses for Unfunded | Ending balance | ||||||||||||||||||||||||
| Residential real estate | ||||||||||||||||||||||||||||||||
| One- to four-family | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Multi-family | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Construction | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Land | ||||||||||||||||||||||||||||||||
| Farm | ( | ) | ||||||||||||||||||||||||||||||
| Nonresidential real estate | ( | ) | ||||||||||||||||||||||||||||||
| Commercial and industrial | ( | ) | ||||||||||||||||||||||||||||||
| Consumer and other | ||||||||||||||||||||||||||||||||
| Loans on deposits | ( | ) | - | |||||||||||||||||||||||||||||
| Home equity | ( | ) | ||||||||||||||||||||||||||||||
| Automobile | ( | ) | - | |||||||||||||||||||||||||||||
| Unsecured | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
For
the six months ended December 31, 2023, the provision for credit losses totaled $
The following table presents the activity in the ALLL by portfolio segment for the six months ended December 31, 2022:
| (in thousands) | Beginning balance | Provision for loan losses | Loans charged off | Recoveries | Ending balance | |||||||||||||||
| Residential real estate: | ||||||||||||||||||||
| One- to four-family | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Multi-family | ||||||||||||||||||||
| Construction | ||||||||||||||||||||
| Land | ( | ) | ||||||||||||||||||
| Farm | ||||||||||||||||||||
| Nonresidential real estate | ( | ) | ||||||||||||||||||
| Commercial nonmortgage | ||||||||||||||||||||
| Consumer and other: | ||||||||||||||||||||
| Loans on deposits | ||||||||||||||||||||
| Home equity | ||||||||||||||||||||
| Automobile | ||||||||||||||||||||
| Unsecured | ||||||||||||||||||||
| Totals | $ | $ | $ | $ | $ | |||||||||||||||
17
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 4. Loans receivable (continued)
The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December 31, 2023:
| (in thousands) | Beginning balance | Provision for loan losses | Loans charged off | Recoveries | Credit Losses for Unfunded Liabilities | Ending balance | ||||||||||||||||||
| Residential real estate: | ||||||||||||||||||||||||
| One- to four-family | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| Multi-family | ||||||||||||||||||||||||
| Construction | ( | ) | - | |||||||||||||||||||||
| Land | ||||||||||||||||||||||||
| Farm | ||||||||||||||||||||||||
| Nonresidential real estate | ||||||||||||||||||||||||
| Commercial nonmortgage | ||||||||||||||||||||||||
| Consumer and other: | ||||||||||||||||||||||||
| Loans on deposits | ||||||||||||||||||||||||
| Home equity | - | |||||||||||||||||||||||
| Automobile | ||||||||||||||||||||||||
| Unsecured | ||||||||||||||||||||||||
| Totals | $ | $ | $ | $ | - | $ | ||||||||||||||||||
The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December 31, 2022:
| (in thousands) | Beginning balance | Provision for loan losses | Loans charged off | Recoveries | Ending balance | |||||||||||||||
| Residential real estate: | ||||||||||||||||||||
| One- to four-family | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Multi-family | ( | ) | ||||||||||||||||||
| Construction | ||||||||||||||||||||
| Land | ||||||||||||||||||||
| Farm | ( | ) | ||||||||||||||||||
| Nonresidential real estate | ||||||||||||||||||||
| Commercial nonmortgage | ||||||||||||||||||||
| Consumer and other: | ||||||||||||||||||||
| Loans on deposits | ||||||||||||||||||||
| Home equity | ||||||||||||||||||||
| Automobile | ||||||||||||||||||||
| Unsecured | ||||||||||||||||||||
| Totals | $ | $ | $ | $ | $ | |||||||||||||||
18
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 4. Loans receivable (continued)
December 31, 2023:
| (in thousands) | Amortized Cost Basis | Ending allowance on collateral- dependent loans | ||||||
| Loans individually evaluated for impairment: | ||||||||
| Residential real estate: | ||||||||
| One- to four-family | $ | $ | ||||||
| Nonresidential real estate | ||||||||
| Commercial and industrial | ||||||||
Real estate stands as collateral for loans individually evaluated for impairment.
The following tables present the balance in the ALLL and the recorded investment in loans by portfolio class and based on impairment method as of December 31, 2023.
December 31, 2023:
| (in thousands) | Loans individually evaluated | Loans acquired with deteriorated credit quality* | Ending loans balance | Ending allowance attributed to loans | ||||||||||||
| Loans individually evaluated for impairment: | ||||||||||||||||
| Residential real estate | ||||||||||||||||
| One- to four-family | $ | $ | $ | $ | ||||||||||||
| Nonresidential real estate | ||||||||||||||||
| Home Equity | ||||||||||||||||
| Loans collectively evaluated for impairment: | ||||||||||||||||
| Residential real estate | ||||||||||||||||
| One- to four-family | $ | $ | ||||||||||||||
| Multi-family | ||||||||||||||||
| Construction | ||||||||||||||||
| Land | ||||||||||||||||
| Farm | ||||||||||||||||
| Nonresidential real estate | ||||||||||||||||
| Commercial and industrial | ||||||||||||||||
| Consumer and other | ||||||||||||||||
| Loans on deposits | ||||||||||||||||
| Home equity | ||||||||||||||||
| Automobile | ||||||||||||||||
| Unsecured | ||||||||||||||||
| $ | $ | |||||||||||||||
| * |
19
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 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, 2023.
June 30, 2023:
| (in thousands) | Loans individually evaluated | Loans acquired with deteriorated credit quality* | Ending loans balance | Ending allowance attributed to loans | ||||||||||||
| Loans individually evaluated for impairment: | ||||||||||||||||
| Residential real estate | ||||||||||||||||
| One- to four-family | $ | $ | $ | $ | ||||||||||||
| Nonresidential real estate | ||||||||||||||||
| Home Equity | ||||||||||||||||
| Loans collectively evaluated for impairment: | ||||||||||||||||
| Residential real estate | ||||||||||||||||
| One- to four-family | $ | $ | ||||||||||||||
| Multi-family | ||||||||||||||||
| Construction | ||||||||||||||||
| Land | ||||||||||||||||
| Farm | ||||||||||||||||
| Nonresidential real estate | ||||||||||||||||
| Commercial and industrial | ||||||||||||||||
| Consumer and other | ||||||||||||||||
| Loans on deposits | ||||||||||||||||
| Home equity | ||||||||||||||||
| Automobile | ||||||||||||||||
| Unsecured | ||||||||||||||||
| $ | $ | |||||||||||||||
| * | These loans were evaluated at acquisition date at their estimated fair value and there has been no subsequent deterioration since acquisition. |
20
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 4. Loans receivable (continued)
| Average Recorded Investment | Interest Income Recognized | Cash Basis Income Recognized | Average Recorded Investment | Interest Income Recognized | Cash Basis Income Recognized | |||||||||||||||||||
| (in thousands) | 2023 | 2022 | ||||||||||||||||||||||
| With no related allowance recorded: | ||||||||||||||||||||||||
| One- to four-family | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Multi-family | ||||||||||||||||||||||||
| Farm | ||||||||||||||||||||||||
| Nonresidential real estate | | |||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||
| Purchased credit-impaired loans | ||||||||||||||||||||||||
| With an allowance recorded: | ||||||||||||||||||||||||
| One- to four-family | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
The following table presents interest income on loans individually evaluated for impairment by class of loans for the three months ended December 31:
| Average Recorded Investment | Interest Income Recognized | Cash Basis Income Recognized | Average Recorded Investment | Interest Income Recognized | Cash Basis Income Recognized | |||||||||||||||||||
| (in thousands) | 2023 | 2022 | ||||||||||||||||||||||
| With no related allowance recorded: | ||||||||||||||||||||||||
| Residential real estate: | ||||||||||||||||||||||||
| One- to four-family | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Multi-family | ||||||||||||||||||||||||
| Farm | ||||||||||||||||||||||||
| Nonresidential real estate | ||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||
| Purchased credit-impaired loans | ||||||||||||||||||||||||
| With an allowance recorded: | ||||||||||||||||||||||||
| One- to four-family | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
21
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 4. Loans receivable (continued)
| December 31, 2023 | June 30, 2023 | |||||||||||||||
| (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 | $ | $ | $ | $ | ||||||||||||
| Nonresidential real estate and land | ||||||||||||||||
| Consumer | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
One- to four-family loans in process of foreclosure
totaled $
Troubled Debt Restructurings:
Prior to the adoption of ASC 326 a Troubled Debt Restructuring (“TDR”) was the situation where the Bank granted 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 June 30, 2023, the Company had $
During the six months ended December 31, 2023 there were no loans modified to borrowers experiencing financial difficulty.
22
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2023
(unaudited)
Note 4. Loans receivable (continued)
| (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 | $ | $ | $ | $ | $ | |||||||||||||||
| Multi-family | ||||||||||||||||||||
| Construction | ||||||||||||||||||||
| Land | ||||||||||||||||||||
| Farm | ||||||||||||||||||||
| Nonresidential real estate | ||||||||||||||||||||
| Commercial non-mortgage | ||||||||||||||||||||
| Consumer and other: | ||||||||||||||||||||
| Loans on deposits | ||||||||||||||||||||
| Home equity | ||||||||||||||||||||
| Automobile | ||||||||||||||||||||
| Unsecured | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
The following tables present the aging of the principal balance outstanding in past due loans as of June 30, 2023, by class of loans:
June 30, 2023:
| (in thousands) | 30-89 Days Past Due | Greater than 90 Days Past Due | Total Past Due | Loans Not Past Due | Total | |||||||||||||||
| Residential real estate | ||||||||||||||||||||
| One- to four-family | $ | $ | $ | $ | $ | |||||||||||||||
| Multi-family | ||||||||||||||||||||
| Construction | ||||||||||||||||||||
| Land | ||||||||||||||||||||
| Farm | ||||||||||||||||||||
| Nonresidential real estate | ||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||
| Consumer and other | ||||||||||||||||||||
| Loans on deposits | ||||||||||||||||||||
| Home equity | ||||||||||||||||||||
| Automobile | ||||||||||||||||||||
| Unsecured | ||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
23
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
December 31, 2023
(unaudited)
Note 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.
24
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
December 31, 2023
(unaudited)
Note 4. Loans receivable (continued)
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.
| Revolving | ||||||||||||||||||||||||||||||||
| (in thousands) | Term Loans Amortized Cost by Origination Fiscal Year | Loans Amortized | ||||||||||||||||||||||||||||||
| As of September 30, 2023 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Cost Basis | Total | ||||||||||||||||||||||||
| Residential real estate: | ||||||||||||||||||||||||||||||||
| One- to four-family | ||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | - | $ | |||||||||||||||||||||||
| Special mention | - | - | ||||||||||||||||||||||||||||||
| Substandard | - | |||||||||||||||||||||||||||||||
| Doubtful | - | - | - | - | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | - | $ | |||||||||||||||||||||||
| Current period gross charge offs | $ | $ | $ | $ | $ | - | $ | $ | - | $ | ||||||||||||||||||||||
| Multi-family | ||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||
| Pass | $ | - | $ | $ | $ | $ | $ | $ | - | $ | ||||||||||||||||||||||
| Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Total | $ | - | $ | $ | $ | $ | $ | $ | - | $ | ||||||||||||||||||||||
| Current period gross charge offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Construction | ||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | - | $ | $ | - | $ | ||||||||||||||||||||||
| Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | - | $ | $ | - | $ | ||||||||||||||||||||||
| Current period gross charge offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Land | ||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | - | $ | - | $ | ||||||||||||||||||||||
| Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | - | $ | - | $ | ||||||||||||||||||||||
| Current period gross charge offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Farm | ||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||
| Pass | $ | - | $ | - | $ | $ | $ | $ | $ | - | $ | |||||||||||||||||||||
| Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Total | $ | - | $ | - | $ | $ | $ | $ | $ | - | $ | |||||||||||||||||||||
| Current period gross charge offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Nonresidential real estate | ||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | - | $ | |||||||||||||||||||||||
| Special mention | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Substandard | - | - | ||||||||||||||||||||||||||||||
| Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | - | $ | |||||||||||||||||||||||
| Current period gross charge offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | - | $ | $ | $ | - | $ | - | $ | - | $ | ||||||||||||||||||||
| Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Total | $ | $ | - | $ | $ | $ | - | $ | - | $ | - | $ | ||||||||||||||||||||
| Current period gross charge offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Share Loans | ||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | - | $ | $ | $ | $ | - | $ | ||||||||||||||||||||||
| Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Total | $ | $ | $ | - | $ | $ | $ | $ | - | $ | ||||||||||||||||||||||
| Current period gross charge offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Home Equity | ||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||
| Pass | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | $ | ||||||||||||||||||
| Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Substandard | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Total | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | $ | ||||||||||||||||||
| Current period gross charge offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Auto | ||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | - | $ | - | $ | - | $ | |||||||||||||||||||||
| Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | - | $ | - | $ | - | $ | |||||||||||||||||||||
| Current period gross charge offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Unsecured | ||||||||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | - | $ | $ | - | $ | ||||||||||||||||||||||
| Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | - | $ | $ | - | $ | ||||||||||||||||||||||
| Current period gross charge offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
25
Kentucky First Federal Bancorp
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
December 31, 2023
(unaudited)
Note 4. Loans receivable (continued)
At December 31, 2023, 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 | $ | $ | $ | $ | ||||||||||||
| Multi-family | ||||||||||||||||
| Construction | ||||||||||||||||
| Land | ||||||||||||||||
| Farm | ||||||||||||||||
| Nonresidential real estate | ||||||||||||||||
| Commercial nonmortgage | ||||||||||||||||
| Consumer: | ||||||||||||||||
| Loans on deposits | ||||||||||||||||
| Home equity | ||||||||||||||||
| Automobile | ||||||||||||||||
| Unsecured | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
At June 30, 2023, 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 | $ | $ | $ | $ | ||||||||||||
| Multi-family | ||||||||||||||||
| Construction | ||||||||||||||||
| Land | ||||||||||||||||
| Farm | ||||||||||||||||
| Nonresidential real estate | ||||||||||||||||
| Commercial and industrial | ||||||||||||||||
| Consumer and other | ||||||||||||||||
| Loans on deposits | ||||||||||||||||
| Home equity | ||||||||||||||||
| Automobile | ||||||||||||||||
| Unsecured | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
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.
| (in thousands) | December 31, 2023 | June 30, 2023 | ||||||
| One- to four-family residential real estate | $ | |||||||