UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2022

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

For the transition period from ____________ to _______________

Commission File Number: 0-51176

KENTUCKY FIRST FEDERAL BANCORP

(Exact name of registrant as specified in its charter)

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

655 Main Street, Hazard, Kentucky 41702

(Address of principal executive offices)(Zip Code)

(502) 223-1638

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

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

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

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

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

Indicate by check mark whether the registrant is a 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 May 9, 2022, the latest practicable date, the Corporation had 8,218,215 shares of $.01 par value common stock outstanding.

INDEX

			Page
PART I FINANCIAL INFORMATION			1

	ITEM 1 FINANCIAL STATEMENTS		1

		Condensed Consolidated Balance Sheets	1

		Condensed Consolidated Statements of Operations	2

		Condensed Consolidated Statements of Comprehensive Income	3

		Consolidated Statements of Changes in Shareholders’ Equity	4

		Condensed Consolidated Statements of Cash Flows	6

		Notes to Condensed Consolidated Financial Statements	8

	ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		26

	ITEM 3 Quantitative and Qualitative Disclosures About Market Risk		37

	ITEM 4 Controls and Procedures		37

PART II OTHER INFORMATION			38

SIGNATURES			40

PART I

ITEM 1: Financial Statements

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	March 31,			June 30,
	2022			2021
	Unaudited
ASSETS

Cash and due from financial institutions	$	2,214		$	1,834
Fed funds sold		34,016			5,001
Interest-bearing demand deposits		9,831			14,813
Cash and cash equivalents		46,061			21,648

Time deposits in other financial institutions		–			247
Securities available-for-sale		29			33
Securities held-to-maturity, at amortized cost- approximate fair value of $353 and $476 at March 31, 2022 and June 30, 2021, respectively		358			462
Loans held for sale		1,342			1,307
Loans, net of allowance of $1,484 and $1,622 at March 31, 2022 and June 30, 2021, respectively		269,396			297,902
Real estate owned, net		61			82
Premises and equipment, net		4,630			4,697
Federal Home Loan Bank stock, at cost		6,498			6,498
Accrued interest receivable		631			694
Bank-owned life insurance		2,731			2,672
Goodwill		947			947
Prepaid federal income taxes		262			40
Prepaid expenses and other assets		952			834

Total assets	$	333,898		$	338,063

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits	$	238,642		$	226,843
Federal Home Loan Bank advances		40,782			56,873
Advances by borrowers for taxes and insurance		529			838
Accrued interest payable		16			20
Deferred income taxes		767			614
Other liabilities		516			579
Total liabilities		281,252			285,767

Commitments and contingencies		–			–

Shareholders’ equity
Preferred stock, 500,000 shares authorized, $.01 par value; no shares issued and outstanding		–			–
Common stock, 20,000,000 shares authorized, $.01 par value; 8,596,064 shares issued		86			86
Additional paid-in capital		34,893			34,916
Retained earnings		20,703			20,364
Unearned employee stock ownership plan (ESOP), 688 shares and 10,255 shares at March 31, 2022 and June 30, 2021, respectively		(7	)		(102	)
Treasury shares at cost, 377,849 and 369,349 common shares at March 31, 2022 and June 30, 2021, respectively		(3,029	)		(2,968	)
Accumulated other comprehensive income		–			–
Total shareholders’ equity		52,646			52,296

Total liabilities and shareholders’ equity	$	333,898		$	338,063

See accompanying notes to condensed consolidated financial statements.

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share data)

	Nine months ended March 31,						Three months ended March 31,
	2022			2021			2022			2021
Interest income
Loans, including fees	$	8,190		$	8,835		$	2,513		$	2,899
Mortgage-backed securities		8			11			2			3
Other securities		–			3			–			–
Interest-bearing deposits and other		118			122			46			38
Total interest income		8,316			8,971			2,561			2,940

Interest expense
Interest-bearing demand deposits		29			23			10			8
Savings		203			194			68			69
Certificates of Deposit		823			1,110			258			310
Deposits		1,055			1,327			336			387
Borrowings		285			333			87			105
Total interest expense		1,340			1,660			423			492
Net interest income		6,976			7,311			2,138			2,448
Provision (credit) for loan losses		(106	)		192			(106	)		–
Net interest income after provision for loan losses		7,082			7,119			2,244			2,448

Non-interest income
Earnings on bank-owned life insurance		59			58			19			19
Net gain on sales of loans		231			280			23			125
Net loss on sales of real estate owned		(8	)		(18	)		–			–
Valuation adjustment for real estate owned		–			(19	)		–			–
Other		140			132			52			38
Total non-interest income		422			433			94			182
Non-interest expense
Employee compensation and benefits		3,675			3,964			1,237			1,362
Occupancy and equipment		460			488			159			166
FDIC insurance premiums		49			129			23			41
Voice and data communications		93			80			31			23
Advertising		106			114			20			38
Outside service fees		133			139			31			43
Data processing		416			430			109			138
Auditing and accounting		128			119			48			40
Franchise and other taxes		114			130			23			–
Regulatory Assessments		77			77			25			25
Foreclosure and real estate owned expenses (net)		67			66			23			19
Other		428			395			142			124
Total non-interest expense		5,746			6,131			1,871			2,019

Income before income taxes		1,758			1,421			467			611

Income tax expense		374			293			133			138

NET INCOME	$	1,384		$	1,128		$	334		$	473

EARNINGS PER SHARE
Basic and diluted	$	0.17		$	0.14		$	0.04		$	0.06
DIVIDENDS PER SHARE	$	0.30		$	0.30		$	0.10		$	0.10

See accompanying notes to condensed consolidated financial statements.

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Nine months ended March 31,					Three months ended March 31,
	2022		2021			2022		2021
Net income	$	1,384	$	1,128		$	334	$	473

Other comprehensive gains (losses), net of tax:
Unrealized holding Gains (losses) on securities designated as available-for-sale, net of taxes of $0, $0, $(1) and $0 during the respective periods		–		(2	)		–		–
Comprehensive income	$	1,384	$	1,126		$	334	$	473

See accompanying notes to condensed consolidated financial statements.

Kentucky First Federal Bancorp

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the nine months ended

(Unaudited)

(Dollar amounts in thousands, except per share data)

March 31, 2022

	Common stock		Additional paid-in capital			Retained earnings			Unearned employee stock ownership plan (ESOP)			Treasury shares			Accumulated other comprehensive income (loss)		Total
Balance at June 30, 2021	$	86	$	34,916		$	20,364		$	(102	)	$	(2,968	)	$	–	$	52,296

Net income		–		–			1,384			–			–			–		1,384
Allocation of ESOP shares		–		(23	)		–			95			–			–		72
Acquisition of shares for Treasury		–		–			–			–			(61	)		–		(61	)
Cash dividends of $0.30 per common share		–		–			(1,045	)		–			–			–		(1,045	)
Balance at March 31, 2022	$	86	$	34,893		$	20,703		$	(7	)	$	(3,029	)	$	–	$	52,646

March 31, 2021

	Common stock		Additional paid-in capital			Retained earnings			Unearned employee stock ownership plan (ESOP)			Treasury shares			Accumulated other comprehensive income (loss)			Total
Balance at June 30, 2020	$	86	$	34,981		$	19,932		$	(289	)	$	(2,801	)	$	2		$	51,911

Net income		–		–			1,128			–			–			–			1,128
Allocation of ESOP shares		–		(80	)		–			140			–			–			60
Acquisition of shares for treasury		–		–			–			–			(167	)		–			(167	)
Other comprehensive loss		–		–			–			–			–			(2	)		(2	)
Cash dividends of $0.30 per common share		–		–			(1,040	)		–			–			–			(1,040	)

Balance at March 31, 2021	$	86	$	34,901		$	20,020		$	(149	)	$	(2,968	)	$	–		$	51,890

See accompanying notes to condensed consolidated financial statements.

Kentucky First Federal Bancorp

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the three months ended

(Unaudited)

(Dollar amounts in thousands, except per share data)

March 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 December 31, 2021	$	86	$	34,893	$	20,718		$	(9	)	$	(3,029	)	$	–	$	52,659

Net income		–		–		334			–			–			–		334
Allocation of ESOP shares		–		–		–			2			–			–		2
Cash dividends of $0.10 per common share		–		–		(349	)		–			–			–		(349	)

Balance at March 31, 2022	$	86	$	34,893	$	20,703		$	(7	)	$	(3,029	)	$	–	$	52,646

March 31, 2021

	Common stock		Additional paid-in capital			Retained earnings			Unearned employee stock ownership plan (ESOP)			Treasury shares			Accumulated other comprehensive income		Total
Balance at December 31, 2020	$	86	$	34,948		$	19,896		$	(196	)	$	(2,902	)	$	–	$	51,832

Net income		–		–			473			–			–			–		473
Allocation of ESOP shares		–		(47	)		–			47			–			–		–
Acquisition of shares for treasury		–		–			–			–			(66	)		–		(66	)
Cash dividends of $0.10 per common share							(349	)										(349	)

Balance at March 31, 2021	$	86	$	34,901		$	20,020		$	(149	)	$	(2,968	)	$	–	$	51,890

See accompanying notes to condensed consolidated financial statements.

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine months ended March 31,
	2022			2021
Cash flows from operating activities:
Net income	$	1,384		$	1,128
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		194			218
Accretion of purchased loan credit discount		(38	)		(43	)
Amortization of purchased loan premium		–			26
Amortization of deferred loan origination costs (fees)		(88	)		(1	)
Amortization of premiums on investment securities		2			7
Net gain on sale of loans		(231	)		(280	)
Net loss on sale of real estate owned		8			18
Valuation adjustments of real estate owned		–			19
ESOP compensation expense		72			60
Earnings on bank-owned life insurance		(59	)		(58	)
Provision (credit) for loan losses		(106	)		192
Origination of loans held for sale		(6,283	)		(6,468	)
Proceeds from loans held for sale		6,479			6,154
Increase (decrease) in cash, due to changes in:
Accrued interest receivable		63			103
Prepaid expenses and other assets		(118	)		104
Accrued interest payable		(4	)		(2	)
Other liabilities		(63	)		123
Income taxes		(68	)		(41	)
Net cash provided by operating activities		1,144			1,259

Cash flows from investing activities:
Maturities of time deposits in other financial institutions		247			1,982
Securities maturities, prepayments and calls:
Held to maturity		102			100
Available for sale		4			506
Loans originated for investment, net of principal collected		28,724			(13,767	)
Proceeds from sale of real estate owned		26			753
Additions to real estate owned		–			(1	)
Additions to premises and equipment, net		(127	)		(68	)
Net cash provided by (used in) investing activities		28,976			(10,495	)

Cash flows from financing activities:
Net increase in deposits		11,799			13,270
Payments by borrowers for taxes and insurance, net		(309	)		(240	)
Proceeds from Federal Home Loan Bank advances		8,000			38,600
Repayments on Federal Home Loan Bank advances		(24,091	)		(40,122	)
Treasury stock purchased		(61	)		(167	)
Dividends paid on common stock		(1,045	)		(1,040	)
Net cash provided by (used in) financing activities		(5,707	)		10,301

Net increase in cash and cash equivalents		24,413			1,065

Beginning cash and cash equivalents		21,648			13,702

Ending cash and cash equivalents	$	46,061		$	14,767

See accompanying notes to condensed consolidated financial statements.

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

(In thousands)

	Nine months ended March 31,
	2022		2021
Supplemental disclosure of cash flow information:

Cash paid during the period for:

Federal income taxes	$	500	$	191

Interest on deposits and borrowings	$	1,344	$	1,662

Transfers of loans to real estate owned, net	$	45	$	327

Loans made on sale of real estate owned	$	32	$	37

See accompanying notes to condensed consolidated financial statements.

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(unaudited)

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

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

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, which represent the condensed consolidated balance sheets and results of operations of the Company, were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) which are necessary for a fair presentation of the condensed consolidated financial statements have been included. The results of operations for the nine-month period ended March 31, 2022, 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, 2021, 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 2021 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.

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2022

(unaudited)

1. Basis of Presentation (continued)

New Accounting Standards

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

FASB ASC 740– In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. The amendments in this ASU removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes during interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. For public business entities, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, or July 1, 2021, with respect to the Company. Early adoption is permitted. We did not have a significant impact to our consolidated financial statements.

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.

SEC Form 10-Q filed by Kentucky First Federal Bancorp