NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2019
(unaudited)
The
Kentucky First Federal Bancorp (“Kentucky First” or the “Company”) was incorporated under federal law
in March 2005, and is the mid-tier holding company for First Federal Savings and Loan Association of Hazard, Hazard, Kentucky
(“First Federal of Hazard”) and Frankfort First Bancorp, Inc. (“Frankfort First”). Frankfort First is
the holding company for First Federal Savings Bank of Kentucky, Frankfort, Kentucky (“First Federal of Kentucky”).
First Federal of Hazard and First Federal of Kentucky (hereinafter collectively the “Banks”) are Kentucky First’s
primary operations, which consist of operating the Banks as two independent, community-oriented savings institutions.
In
December 2012, the Company acquired CKF Bancorp, Inc., a savings and loan holding company which operated three banking locations
in Boyle and Garrard Counties in Kentucky. In accounting for the transaction the assets and liabilities of CKF Bancorp were recorded
on the books of First Federal of Kentucky in accordance with accounting standard ASC 805, Business Combinations.
1.
Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements, which represent the condensed consolidated balance sheets
and results of operations of the Company, were prepared in accordance with the instructions for Form 10-Q and, therefore, do not
include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows
in conformity with U.S. generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting
of only normal recurring adjustments) which are necessary for a fair presentation of the condensed consolidated financial statements
have been included. The results of operations for the six-month period ended December 31, 2019, are not necessarily indicative
of the results which may be expected for an entire fiscal year. The condensed consolidated balance sheet as of June 30, 2019 has
been derived from the audited consolidated balance sheet as of that date. Certain information and note disclosures normally included
in the Company’s annual financial statements prepared in accordance with U.S. generally accepted accounting principles have
been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company’s Form 10-K annual report for 2019 filed with the Securities
and Exchange Commission.
Principles
of Consolidation - The consolidated financial statements include the accounts of the Company, Frankfort First, and its
wholly-owned banking subsidiaries, First Federal of Hazard and First Federal of Kentucky (collectively hereinafter “the
Banks”). All intercompany transactions and balances have been eliminated in consolidation.
Reclassifications -
Certain amounts presented in prior periods have been reclassified to conform to the current period presentation. Such
reclassifications had no impact on prior years’ net income or shareholders’ equity.
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
1.
Basis of Presentation (continued)
New
Accounting Standards
FASB
ASC 326 - In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments. The final standard will change estimates for credit losses related to financial
assets measured at amortized cost such as loans, held-to-maturity debt securities, and certain other contracts. For estimating
credit losses, the FASB is replacing the incurred loss model with an expected loss model, which is referred to as the current
expected credit loss (CECL) model. The Company will now use forward-looking information to enhance its credit loss estimates.
The amendment requires enhanced disclosures to aid investors and other users of financial statements to better understand significant
estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of our portfolio.
The largest impact to the Company will be on its allowance for loan and lease losses, although the ASU also amends the accounting
for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standard
is effective for public companies for annual periods and interim periods within those annual periods beginning after December
15, 2019. However, the FASB has delayed the implementation of the ASU for smaller reporting companies until years beginning after
December 15, 2022, or in the Company’s case the fiscal year beginning July 1, 2023. ASU 2016-13 will be applied through
a cumulative effect adjustment to retained earnings (modified-retrospective approach), except for debt securities for which an
other-than-temporary impairment had been recognized before the effective date. A prospective transition approach is required for
these debt securities. We have formed a functional committee that is assessing our data and system needs and are evaluating the
impact of adopting the new guidance. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan
losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the
magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.
However, the Company does expect ASU 2016-13 to add complexity and costs to its current credit loss evaluation process.
FASB
ASC 842 – In March 2017, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance changes lease
accounting by introducing the core principle that a lessee should recognize the assets and liabilities that arise from operating
leases under the premise that all leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement
No. 6, Elements of Financial Statements. The Company adopted this ASU effective July 1, 2019, with no recordation of right-to-use
lease assets or operating lease liabilities, because the level of operating leases was determined to be immaterial.
FASB
ASC 350 – In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350) Simplifying
the Test for Goodwill Impairment. This guidance modifies the concept of impairment from the condition that exists when the
carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting
unit exceeds its fair value. For public business entities, the amendments in this update are effective for fiscal years, and the
interim periods within those fiscal years, beginning after December 15, 2019, or July 1, 2020, with respect to the Company.
FASB
ASC 820 – In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes
to the Disclosure Requirements for Fair Value Measurement. This guidance reduces the level of detail surrounding the processes
used by the Company in determining the fair value of some of its assets. For public business entities, the amendments in this
update are effective for fiscal years, and the interim periods within those fiscal years, beginning after December 15, 2019, or
July 1, 2020, with respect to the Company.
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
1.
Basis of Presentation (continued)
New
Accounting Standards (continued)
Other
accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have
a material impact on the Company’s financial position, results of operations or cash flows.
2.
Earnings Per Share
Diluted
earnings per share is computed taking into consideration common shares outstanding and dilutive potential common shares to be
issued or released under the Company’s share-based compensation plans. The factors used in the basic and diluted earnings
per share computations follow:
|
|
Six months ended
December 31,
|
|
|
Three months ended
December 31,
|
|
(in thousands)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net income allocated to common shareholders, basic and diluted
|
|
$
|
482
|
|
|
$
|
305
|
|
|
$
|
248
|
|
|
$
|
167
|
|
|
|
Six months ended
December 31,
|
|
|
Three months ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Weighted average common shares outstanding, basic and diluted
|
|
|
8,266,204
|
|
|
|
8,362,486
|
|
|
|
8,255,255
|
|
|
|
8,348,165
|
|
There
were no stock option shares outstanding for the six- or three-month periods ended December 31, 2019 and 2018.
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
3.
Investment Securities
The
following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity
at December 31, 2019 and June 30, 2019, the corresponding amounts of gross unrealized gains recognized in accumulated other comprehensive
income and gross unrecognized gains and losses:
|
|
December 31, 2019
|
|
(in thousands)
|
|
Amortized
cost
|
|
|
Gross
unrealized/
unrecognized
gains
|
|
|
Gross
unrealized/
unrecognized
losses
|
|
|
Estimated
fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed: residential
|
|
$
|
41
|
|
|
$
|
1
|
|
|
$
|
–
|
|
|
$
|
42
|
|
Agency bonds
|
|
|
500
|
|
|
|
3
|
|
|
|
–
|
|
|
|
503
|
|
|
|
$
|
541
|
|
|
$
|
4
|
|
|
$
|
–
|
|
|
$
|
545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed: residential
|
|
$
|
652
|
|
|
$
|
12
|
|
|
$
|
5
|
|
|
$
|
659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
(in thousands)
|
|
Amortized
cost
|
|
|
Gross
unrealized/
unrecognized
gains
|
|
|
Gross
unrealized/
unrecognized
losses
|
|
|
Estimated
fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
496
|
|
|
$
|
1
|
|
|
$
|
–
|
|
|
$
|
497
|
|
Agency bonds
|
|
|
501
|
|
|
|
4
|
|
|
|
–
|
|
|
|
505
|
|
Agency mortgage-backed: residential
|
|
|
43
|
|
|
|
–
|
|
|
|
–
|
|
|
|
43
|
|
|
|
$
|
1,040
|
|
|
$
|
5
|
|
|
$
|
–
|
|
|
$
|
1,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed: residential
|
|
$
|
775
|
|
|
$
|
14
|
|
|
$
|
14
|
|
|
$
|
775
|
|
The
amortized cost and fair market value of securities as of December 31, 2019, by contractual maturity, are shown below. Actual maturities
may differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. Securities without a single maturity, primarily mortgage-backed securities, are not shown.
(in thousands)
|
|
Amortized Cost
|
|
|
Fair Value
|
|
Available for sale:
|
|
|
|
|
|
|
Within one year
|
|
$
|
500
|
|
|
$
|
503
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
3.
Investment Securities (continued)
Our
pledged securities (including overnight and time deposits in other financial institutions) totaled $1.9 million and $2.1 million
at both December 31 and June 30, 2019, respectively.
We
evaluated securities in unrealized loss positions for evidence of other-than-temporary impairment, considering duration, severity,
financial condition of the issuer, our intention to sell or requirement to sell. Those securities were agency mortgage backed
securities, which carry a very limited amount of risk. Also, we have no intention to sell nor feel that we will be compelled to
sell such securities before maturity. Based on our evaluation, no impairment has been recognized through earnings.
4.
Loans receivable
The
composition of the loan portfolio was as follows:
|
|
December 31,
|
|
|
June 30,
|
|
(in thousands)
|
|
2019
|
|
|
2019
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
220,496
|
|
|
$
|
216,066
|
|
Multi-family
|
|
|
12,626
|
|
|
|
15,928
|
|
Construction
|
|
|
4,193
|
|
|
|
3,757
|
|
Land
|
|
|
1,226
|
|
|
|
852
|
|
Farm
|
|
|
2,087
|
|
|
|
3,157
|
|
Nonresidential real estate
|
|
|
31,111
|
|
|
|
30,419
|
|
Commercial nonmortgage
|
|
|
1,502
|
|
|
|
2,075
|
|
Consumer and other:
|
|
|
|
|
|
|
|
|
Loans on deposits
|
|
|
1,372
|
|
|
|
1,415
|
|
Home equity
|
|
|
7,653
|
|
|
|
8,214
|
|
Automobile
|
|
|
83
|
|
|
|
91
|
|
Unsecured
|
|
|
666
|
|
|
|
451
|
|
|
|
|
283,015
|
|
|
|
282,425
|
|
Allowance for loan losses
|
|
|
(1,447
|
)
|
|
|
(1,456
|
)
|
|
|
$
|
281,568
|
|
|
$
|
280,969
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
4.
Loans receivable (continued)
The
following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended December
31, 2019:
(in thousands)
|
|
Beginning
balance
|
|
|
Provision for
loan losses
|
|
|
Loans
charged off
|
|
|
Recoveries
|
|
|
Ending
balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
685
|
|
|
$
|
64
|
|
|
$
|
(65
|
)
|
|
$
|
–
|
|
|
$
|
684
|
|
Multi-family
|
|
|
200
|
|
|
|
(28
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
172
|
|
Construction
|
|
|
6
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
6
|
|
Land
|
|
|
1
|
|
|
|
1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2
|
|
Farm
|
|
|
6
|
|
|
|
(2
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
4
|
|
Nonresidential real estate
|
|
|
336
|
|
|
|
25
|
|
|
|
–
|
|
|
|
–
|
|
|
|
361
|
|
Commercial nonmortgage
|
|
|
5
|
|
|
|
(1
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
4
|
|
Consumer and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on deposits
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
2
|
|
Home equity
|
|
|
14
|
|
|
|
(3
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
11
|
|
Automobile
|
|
|
–
|
|
|
|
8
|
|
|
|
8
|
|
|
|
–
|
|
|
|
–
|
|
Unsecured
|
|
|
–
|
|
|
|
1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1
|
|
Unallocated
|
|
|
200
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
200
|
|
Totals
|
|
$
|
1,456
|
|
|
$
|
64
|
|
|
$
|
(73
|
)
|
|
$
|
–
|
|
|
$
|
1,447
|
|
The
following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December
31, 2019:
(in thousands)
|
|
Beginning
balance
|
|
|
Provision for
loan losses
|
|
|
Loans
charged off
|
|
|
Recoveries
|
|
|
Ending
balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
686
|
|
|
$
|
(2
|
)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
684
|
|
Multi-family
|
|
|
193
|
|
|
|
(21
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
172
|
|
Construction
|
|
|
6
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
6
|
|
Land
|
|
|
1
|
|
|
|
1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2
|
|
Farm
|
|
|
6
|
|
|
|
(2
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
4
|
|
Nonresidential real estate
|
|
|
339
|
|
|
|
22
|
|
|
|
–
|
|
|
|
–
|
|
|
|
361
|
|
Commercial nonmortgage
|
|
|
5
|
|
|
|
(1
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
4
|
|
Consumer and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on deposits
|
|
|
2
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2
|
|
Home equity
|
|
|
12
|
|
|
|
(1
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
11
|
|
Automobile
|
|
|
–
|
|
|
|
8
|
|
|
|
(8
|
)
|
|
|
–
|
|
|
|
–
|
|
Unsecured
|
|
|
–
|
|
|
|
1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1
|
|
Unallocated
|
|
|
200
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
200
|
|
Totals
|
|
$
|
1,450
|
|
|
$
|
5
|
|
|
$
|
(8
|
)
|
|
$
|
–
|
|
|
$
|
1,447
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
4.
Loans receivable (continued)
The
following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended December
31, 2018:
(in thousands)
|
|
Beginning
balance
|
|
|
Provision for
loan losses
|
|
|
Loans
charged off
|
|
|
Recoveries
|
|
|
Ending
balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
795
|
|
|
$
|
17
|
|
|
$
|
(117
|
)
|
|
$
|
39
|
|
|
$
|
734
|
|
Multi-family
|
|
|
225
|
|
|
|
(5
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
220
|
|
Construction
|
|
|
8
|
|
|
|
(5
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
3
|
|
Land
|
|
|
1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1
|
|
Farm
|
|
|
6
|
|
|
|
(1
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
5
|
|
Nonresidential real estate
|
|
|
321
|
|
|
|
25
|
|
|
|
–
|
|
|
|
–
|
|
|
|
346
|
|
Commercial nonmortgage
|
|
|
3
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3
|
|
Consumer and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on deposits
|
|
|
3
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3
|
|
Home equity
|
|
|
13
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
13
|
|
Automobile
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Unsecured
|
|
|
1
|
|
|
|
(20
|
)
|
|
|
–
|
|
|
|
20
|
|
|
|
1
|
|
Unallocated
|
|
|
200
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
200
|
|
Totals
|
|
$
|
1,576
|
|
|
$
|
11
|
|
|
$
|
(117
|
)
|
|
$
|
59
|
|
|
$
|
1,529
|
|
The
following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December
31, 2018:
(in thousands)
|
|
Beginning
balance
|
|
|
Provision for
loan losses
|
|
|
Loans
charged off
|
|
|
Recoveries
|
|
|
Ending
balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
781
|
|
|
$
|
(5
|
)
|
|
$
|
(58
|
)
|
|
$
|
16
|
|
|
$
|
734
|
|
Multi-family
|
|
|
232
|
|
|
|
(12
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
220
|
|
Construction
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
3
|
|
Land
|
|
|
1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1
|
|
Farm
|
|
|
6
|
|
|
|
(1
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
5
|
|
Nonresidential real estate
|
|
|
323
|
|
|
|
23
|
|
|
|
–
|
|
|
|
–
|
|
|
|
346
|
|
Commercial nonmortgage
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
3
|
|
Consumer and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on deposits
|
|
|
3
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3
|
|
Home equity
|
|
|
16
|
|
|
|
(3
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
13
|
|
Automobile
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Unsecured
|
|
|
1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1
|
|
Unallocated
|
|
|
200
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
200
|
|
Totals
|
|
$
|
1,571
|
|
|
$
|
–
|
|
|
$
|
(58
|
)
|
|
$
|
16
|
|
|
$
|
1,529
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
4.
Loans receivable (continued)
The
following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class
and based on impairment method as of December 31, 2019. The recorded investment in loans excludes accrued interest receivable
due to immateriality.
December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Loans
individually
evaluated
|
|
|
Loans
acquired
with
deteriorated
credit
quality
|
|
|
Unpaid
principal
balance
and
recorded
investment
|
|
|
Ending
allowance
attributed
to loans
|
|
|
Unallocated
allowance
|
|
|
Total
allowance
|
|
Loans individually evaluated for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
4,007
|
|
|
$
|
924
|
|
|
$
|
4,931
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Multi-family
|
|
|
682
|
|
|
|
–
|
|
|
|
682
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Farm
|
|
|
310
|
|
|
|
–
|
|
|
|
310
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Nonresidential real estate
|
|
|
720
|
|
|
|
–
|
|
|
|
720
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
5,719
|
|
|
|
924
|
|
|
|
6,643
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans collectively evaluated for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
|
|
|
|
|
|
|
|
$
|
215,565
|
|
|
$
|
684
|
|
|
$
|
–
|
|
|
$
|
684
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
11,944
|
|
|
|
172
|
|
|
|
–
|
|
|
|
172
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
4,193
|
|
|
|
6
|
|
|
|
–
|
|
|
|
6
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
1,226
|
|
|
|
2
|
|
|
|
–
|
|
|
|
2
|
|
Farm
|
|
|
|
|
|
|
|
|
|
|
1,777
|
|
|
|
4
|
|
|
|
–
|
|
|
|
4
|
|
Nonresidential real estate
|
|
|
|
|
|
|
|
|
|
|
30,391
|
|
|
|
361
|
|
|
|
–
|
|
|
|
361
|
|
Commercial nonmortgage
|
|
|
|
|
|
|
|
|
|
|
1,502
|
|
|
|
4
|
|
|
|
–
|
|
|
|
4
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on deposits
|
|
|
|
|
|
|
|
|
|
|
1,372
|
|
|
|
2
|
|
|
|
–
|
|
|
|
2
|
|
Home equity
|
|
|
|
|
|
|
|
|
|
|
7,653
|
|
|
|
11
|
|
|
|
–
|
|
|
|
11
|
|
Automobile
|
|
|
|
|
|
|
|
|
|
|
83
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Unsecured
|
|
|
|
|
|
|
|
|
|
|
666
|
|
|
|
1
|
|
|
|
–
|
|
|
|
1
|
|
Unallocated
|
|
|
|
|
|
|
|
|
|
|
–
|
|
|
|
–
|
|
|
|
200
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
276,372
|
|
|
|
1,247
|
|
|
|
200
|
|
|
|
1,447
|
|
|
|
|
|
|
|
|
|
|
|
$
|
283,015
|
|
|
$
|
1,247
|
|
|
$
|
200
|
|
|
$
|
1,447
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
4.
Loans receivable (continued)
The
following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio class
and based on impairment method as of June 30, 2019.
June 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Loans
individually
evaluated
|
|
|
Loans
acquired
with
deteriorated
credit
quality
|
|
|
Unpaid
principal
balance
and
recorded
investment
|
|
|
Ending
allowance
attributed
to loans
|
|
|
Unallocated
allowance
|
|
|
Total
allowance
|
|
Loans individually evaluated for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
3,837
|
|
|
$
|
949
|
|
|
$
|
4,786
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Multi-family
|
|
|
685
|
|
|
|
–
|
|
|
|
685
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Farm
|
|
|
309
|
|
|
|
–
|
|
|
|
309
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Nonresidential real estate
|
|
|
683
|
|
|
|
–
|
|
|
|
683
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
5,514
|
|
|
|
949
|
|
|
|
6,463
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans collectively evaluated for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
|
|
|
|
|
|
|
|
$
|
210,595
|
|
|
$
|
685
|
|
|
$
|
–
|
|
|
$
|
685
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
15,928
|
|
|
|
200
|
|
|
|
–
|
|
|
|
200
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
3,757
|
|
|
|
6
|
|
|
|
–
|
|
|
|
6
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
852
|
|
|
|
1
|
|
|
|
–
|
|
|
|
1
|
|
Farm
|
|
|
|
|
|
|
|
|
|
|
2,848
|
|
|
|
6
|
|
|
|
–
|
|
|
|
6
|
|
Nonresidential real estate
|
|
|
|
|
|
|
|
|
|
|
29,736
|
|
|
|
336
|
|
|
|
–
|
|
|
|
336
|
|
Commercial nonmortgage
|
|
|
|
|
|
|
|
|
|
|
2,075
|
|
|
|
5
|
|
|
|
–
|
|
|
|
5
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on deposits
|
|
|
|
|
|
|
|
|
|
|
1,415
|
|
|
|
3
|
|
|
|
–
|
|
|
|
3
|
|
Home equity
|
|
|
|
|
|
|
|
|
|
|
8,214
|
|
|
|
14
|
|
|
|
–
|
|
|
|
14
|
|
Automobile
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Unsecured
|
|
|
|
|
|
|
|
|
|
|
451
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Unallocated
|
|
|
|
|
|
|
|
|
|
|
–
|
|
|
|
–
|
|
|
|
200
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
275,962
|
|
|
|
1,256
|
|
|
|
200
|
|
|
|
1,456
|
|
|
|
|
|
|
|
|
|
|
|
$
|
282,425
|
|
|
$
|
1,256
|
|
|
$
|
200
|
|
|
$
|
1,456
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
4.
Loans receivable (continued)
The
following table presents loans individually evaluated for impairment by class of loans as of and for the six months ended December
31:
(in thousands)
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Cash Basis
Income
Recognized
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Cash Basis
Income
Recognized
|
|
|
|
2019
|
|
|
2018
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
3,922
|
|
|
$
|
62
|
|
|
$
|
62
|
|
|
$
|
3,654
|
|
|
$
|
75
|
|
|
$
|
75
|
|
Multi-family
|
|
|
684
|
|
|
|
17
|
|
|
|
17
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Farm
|
|
|
309
|
|
|
|
5
|
|
|
|
5
|
|
|
|
310
|
|
|
|
–
|
|
|
|
–
|
|
Nonresidential real estate
|
|
|
702
|
|
|
|
14
|
|
|
|
14
|
|
|
|
409
|
|
|
|
14
|
|
|
|
14
|
|
Purchased credit-impaired loans
|
|
|
936
|
|
|
|
35
|
|
|
|
35
|
|
|
|
1,066
|
|
|
|
36
|
|
|
|
36
|
|
|
|
|
6,553
|
|
|
|
133
|
|
|
|
133
|
|
|
|
5,439
|
|
|
|
125
|
|
|
|
125
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
$
|
6,553
|
|
|
$
|
133
|
|
|
$
|
133
|
|
|
$
|
5,439
|
|
|
$
|
125
|
|
|
$
|
125
|
|
The
following table presents interest income on loans individually evaluated for impairment by class of loans for the three months
ended December 31:
(in thousands)
|
|
Average Recorded Investment
|
|
|
Interest
Income Recognized
|
|
|
Cash Basis Income Recognized
|
|
|
Average Recorded Investment
|
|
|
Interest
Income
Recognized
|
|
|
Cash Basis Income Recognized
|
|
|
|
2019
|
|
|
2018
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
3,780
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
$
|
4,432
|
|
|
$
|
59
|
|
|
$
|
59
|
|
Multi-family
|
|
|
682
|
|
|
|
6
|
|
|
|
6
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Farm
|
|
|
309
|
|
|
|
5
|
|
|
|
5
|
|
|
|
310
|
|
|
|
–
|
|
|
|
–
|
|
Nonresidential real estate
|
|
|
724
|
|
|
|
7
|
|
|
|
7
|
|
|
|
698
|
|
|
|
14
|
|
|
|
14
|
|
Purchased credit-impaired loans
|
|
|
913
|
|
|
|
17
|
|
|
|
17
|
|
|
|
982
|
|
|
|
28
|
|
|
|
28
|
|
|
|
|
6,408
|
|
|
|
63
|
|
|
|
63
|
|
|
|
6,422
|
|
|
|
101
|
|
|
|
101
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
$
|
6,408
|
|
|
$
|
63
|
|
|
$
|
63
|
|
|
$
|
6,422
|
|
|
$
|
101
|
|
|
$
|
101
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
4.
Loans receivable (continued)
The
following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans
as of December 31, 2019 and June 30, 2019:
|
|
December 31, 2019
|
|
|
June 30, 2019
|
|
(in thousands)
|
|
Nonaccrual
|
|
|
Loans
Past Due
Over
90 Days Still
Accruing
|
|
|
Nonaccrual
|
|
|
Loans
Past Due Over 90 Days
Still
Accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential real estate
|
|
$
|
4,651
|
|
|
$
|
1,228
|
|
|
$
|
4,545
|
|
|
$
|
1,747
|
|
Multifamily
|
|
|
682
|
|
|
|
–
|
|
|
|
685
|
|
|
|
–
|
|
Construction
|
|
|
–
|
|
|
|
63
|
|
|
|
–
|
|
|
|
–
|
|
Farm
|
|
|
310
|
|
|
|
–
|
|
|
|
309
|
|
|
|
–
|
|
Nonresidential real estate and land
|
|
|
720
|
|
|
|
–
|
|
|
|
683
|
|
|
|
49
|
|
Commercial and industrial
|
|
|
1
|
|
|
|
–
|
|
|
|
1
|
|
|
|
–
|
|
Consumer
|
|
|
5
|
|
|
|
–
|
|
|
|
9
|
|
|
|
–
|
|
|
|
$
|
6,369
|
|
|
$
|
1,291
|
|
|
$
|
6,232
|
|
|
$
|
1,796
|
|
One- to four-family loans in process of
foreclosure totaled $860,000 and $1.2 million at December 31, and June 30, 2019, respectively.
Troubled
Debt Restructurings:
A
Troubled Debt Restructuring (“TDR”) is the situation where the Bank grants a concession to the borrower that the Banks
would not otherwise have considered due to the borrower’s financial difficulties. All TDRs are considered “impaired.”
At
December 31, 2019 and June 30, 2019, the Company had $1.9 million and $1.6 million of loans classified as TDRs, respectively.
Of the TDRs at December 31, 2019, approximately 21.5% were related to the borrower’s completion of Chapter 7 bankruptcy
proceedings with no reaffirmation of the debt to the Banks.
During
the six months ended December 31, 2019, the Company had two loans restructured as TDRs. One borrower refinanced a piece of one-
to four-family, non-owner occupied, residential property to bring to current amounts owed on other loans with the Bank. Because
the borrower’s financial condition had deteriorated, it was unlikely that the borrower could have secured financing elsewhere.
The restructured loan is collateralized and cross-collateralized by real estate. Another single family residential borrower filed
for Chapter 7 bankruptcy protection and did not reaffirm the debt personally, although the Company’s collateral position
remains intact.
During
the six months ended December 31, 2018, the Company had two loans restructured as TDRs. A second mortgage loan of $219,000
was renewed and an additional $30,000 was loaned to a borrower to finish construction of an 8-plex, because construction project
had experienced cost overruns. The Company carries the first mortgage on this project and both the primary and secondary loans
are secured by the 8-plex and additional real estate collateral. The Company also refinanced an existing single-family mortgage
loan and provided additional funds to a borrower attempting to consolidate his debt.
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
4.
Loans receivable (continued)
The
following table summarizes TDR loan modifications that occurred during the six months ended December 31, 2019 and 2018, and their
performance, by modification type:
(in thousands)
|
|
Troubled Debt
Restructurings
Performing to
Modified
Terms
|
|
|
Troubled Debt
Restructurings
Not
Performing to
Modified
Terms
|
|
|
Total
Troubled Debt
Restructurings
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
Terms extended
|
|
$
|
682
|
|
|
$
|
–
|
|
|
$
|
682
|
|
Terms extended and additional funds advanced
|
|
$
|
119
|
|
|
$
|
–
|
|
|
$
|
119
|
|
Chapter 7 bankruptcy
|
|
$
|
21
|
|
|
$
|
–
|
|
|
$
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Terms extended
|
|
$
|
324
|
|
|
$
|
–
|
|
|
$
|
324
|
|
The
following table summarizes TDR loan modifications that occurred during the three months ended December 31, 2019 and 2018, and
their performance, by modification type:
(in thousands)
|
|
Troubled Debt
Restructurings
Performing to
Modified
Terms
|
|
|
Troubled Debt
Restructurings
Not
Performing to
Modified
Terms
|
|
|
Total
Troubled Debt
Restructurings
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
Terms extended
|
|
$
|
682
|
|
|
$
|
–
|
|
|
$
|
682
|
|
Chapter 7 bankruptcy
|
|
$
|
21
|
|
|
$
|
–
|
|
|
$
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Terms extended and additional funds advanced
|
|
$
|
75
|
|
|
$
|
–
|
|
|
$
|
75
|
|
No
TDRs defaulted during the six-month periods ended December 31, 2019 or 2018.
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
4.
Loans receivable (continued)
The
following table presents the aging of the principal balance outstanding in past due loans as of December 31, 2019, by class of
loans:
(in thousands)
|
|
30-89 Days Past Due
|
|
|
90 Days or
Greater
Past Due
|
|
|
Total Past
Due
|
|
|
Loans Not
Past Due
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to four-family
|
|
$
|
2,563
|
|
|
$
|
2,986
|
|
|
$
|
5,549
|
|
|
$
|
214,947
|
|
|
$
|
220,496
|
|
Multi-family
|
|
|
250
|
|
|
|
–
|
|
|
|
250
|
|
|
|
12,376
|
|
|
|
12,626
|
|
Construction
|
|
|
–
|
|
|
|
63
|
|
|
|
63
|
|
|
|
4,130
|
|
|
|
4,193
|
|
Land
|
|
|
76
|
|
|
|
–
|
|
|
|
76
|
|
|
|
1,150
|
|
|
|
1,226
|
|
Farm
|
|
|
109
|
|
|
|
310
|
|
|
|
419
|
|
|
|
1,668
|
|
|
|
2,087
|
|
Nonresidential real estate
|
|
|
333
|
|
|
|
303
|
|
|
|
636
|
|
|
|
30,475
|
|
|
|
31,111
|
|
Commercial non-mortgage
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,502
|
|
|
|
1,502
|
|
Consumer and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on deposits
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,372
|
|
|
|
1,372
|
|
Home equity
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
7,653
|
|
|
|
7,653
|
|
Automobile
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
83
|
|
|
|
83
|
|
Unsecured
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
666
|
|
|
|
666
|
|
Total
|
|
$
|
3,331
|
|
|
$
|
3,662
|
|
|
$
|
6,993
|
|
|
$
|
276,022
|
|
|
$
|
283,015
|
|
The
following tables present the aging of the principal balance outstanding in past due loans as of June 30, 2019, by class of loans:
(in thousands)
|
|
30-89 Days
Past Due
|
|
|
90 Days or
Greater
Past Due
|
|
|
Total Past
Due
|
|
|
Loans Not
Past Due
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to four-family
|
|
$
|
4,021
|
|
|
$
|
3,479
|
|
|
$
|
7,500
|
|
|
$
|
208,566
|
|
|
$
|
216,066
|
|
Multi-family
|
|
|
–
|
|
|
|
248
|
|
|
|
248
|
|
|
|
15,680
|
|
|
|
15,928
|
|
Construction
|
|
|
753
|
|
|
|
–
|
|
|
|
753
|
|
|
|
3,004
|
|
|
|
3,757
|
|
Land
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
852
|
|
|
|
852
|
|
Farm
|
|
|
2
|
|
|
|
–
|
|
|
|
2
|
|
|
|
3,155
|
|
|
|
3,157
|
|
Nonresidential real estate
|
|
|
362
|
|
|
|
49
|
|
|
|
411
|
|
|
|
30,008
|
|
|
|
30,419
|
|
Commercial nonmortgage
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,075
|
|
|
|
2,075
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on deposits
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,415
|
|
|
|
1,415
|
|
Home equity
|
|
|
38
|
|
|
|
–
|
|
|
|
38
|
|
|
|
8,176
|
|
|
|
8,214
|
|
Automobile
|
|
|
8
|
|
|
|
–
|
|
|
|
8
|
|
|
|
83
|
|
|
|
91
|
|
Unsecured
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
451
|
|
|
|
451
|
|
Total
|
|
$
|
5,184
|
|
|
$
|
3,776
|
|
|
$
|
8,960
|
|
|
$
|
273,465
|
|
|
$
|
282,425
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
4.
Loans receivable (continued)
Credit
Quality Indicators:
The
Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt
such as: current financial information, historical payment experience, credit documentation, public information, and current economic
trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis
is performed on an annual basis. The Company uses the following definitions for risk ratings:
Special
Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If
left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s
credit position at some future date.
Substandard.
Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or
of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation
of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies
are not corrected.
Doubtful.
Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic
that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly
questionable and improbable.
Loans
not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass
rated loans. Loans listed that are not rated are included in groups of homogeneous loans and are evaluated for credit quality
based on performing status. See the aging of past due loan table above. As of December 31, 2019, and based on the most recent
analysis performed, the risk category of loans by class of loans is as follows:
(in thousands)
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
212,106
|
|
|
$
|
619
|
|
|
$
|
7,771
|
|
|
$
|
–
|
|
Multi-family
|
|
|
11,944
|
|
|
|
–
|
|
|
|
682
|
|
|
|
–
|
|
Construction
|
|
|
4,193
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Land
|
|
|
1,226
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Farm
|
|
|
1,777
|
|
|
|
–
|
|
|
|
310
|
|
|
|
–
|
|
Nonresidential real estate
|
|
|
29,322
|
|
|
|
736
|
|
|
|
1,053
|
|
|
|
–
|
|
Commercial nonmortgage
|
|
|
1,267
|
|
|
|
–
|
|
|
|
235
|
|
|
|
–
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on deposits
|
|
|
1,372
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Home equity
|
|
|
7,634
|
|
|
|
–
|
|
|
|
19
|
|
|
|
–
|
|
Automobile
|
|
|
83
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Unsecured
|
|
|
661
|
|
|
|
–
|
|
|
|
5
|
|
|
|
–
|
|
|
|
$
|
271,585
|
|
|
$
|
1,355
|
|
|
$
|
10,075
|
|
|
$
|
–
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
4.
Loans receivable (continued)
At
June 30, 2019, the risk category of loans by class of loans was as follows:
(in thousands)
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
206,489
|
|
|
$
|
894
|
|
|
$
|
8,683
|
|
|
$
|
–
|
|
Multi-family
|
|
|
15,243
|
|
|
|
–
|
|
|
|
685
|
|
|
|
–
|
|
Construction
|
|
|
3,757
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Land
|
|
|
852
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Farm
|
|
|
2,848
|
|
|
|
–
|
|
|
|
309
|
|
|
|
–
|
|
Nonresidential real estate
|
|
|
28,990
|
|
|
|
746
|
|
|
|
683
|
|
|
|
–
|
|
Commercial nonmortgage
|
|
|
1,584
|
|
|
|
–
|
|
|
|
491
|
|
|
|
–
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on deposits
|
|
|
1,415
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Home equity
|
|
|
8,053
|
|
|
|
137
|
|
|
|
24
|
|
|
|
–
|
|
Automobile
|
|
|
91
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Unsecured
|
|
|
446
|
|
|
|
–
|
|
|
|
5
|
|
|
|
–
|
|
|
|
$
|
269,768
|
|
|
$
|
1,777
|
|
|
$
|
10,880
|
|
|
$
|
–
|
|
Purchased
Credit Impaired Loans:
The
Company purchased loans during fiscal year 2013 for which there was, at acquisition, evidence of deterioration of credit quality
since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying
amount of those loans, net of a purchase credit discount of $351,000 and $351,000 at December 31, 2019 and June 30, 2019, respectively,
is as follows:
(in
thousands)
|
|
December 31,
2019
|
|
|
June
30,
2019
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential real estate
|
|
$
|
924
|
|
|
$
|
949
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
4.
Loans receivable (continued)
Accretable
yield, or income expected to be collected, is as follows
(in thousands)
|
|
Six months
ended
December 31,
2019
|
|
|
Twelve months
ended
June 30,
2019
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
544
|
|
|
$
|
634
|
|
Accretion of income
|
|
|
(56
|
)
|
|
|
(90
|
)
|
Disposals, net of recoveries
|
|
|
–
|
|
|
|
–
|
|
Balance at end of period
|
|
$
|
488
|
|
|
$
|
544
|
|
For
those purchased loans disclosed above, the Company made no increase in allowance for loan losses for the year ended June 30, 2019,
nor for the six-month period ended December 31, 2019. Neither were any allowance for loan losses reversed during those periods.
5.
Disclosures About Fair Value of Assets and Liabilities
ASC
topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants (exit price) at the measurement date. ASC topic 820 also establishes a fair value hierarchy
which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. The standard describes six levels of inputs that may be used to measure fair value:
Level
1 – Quoted prices in active markets for identical assets or liabilities.
Level
2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted
prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
Level
3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value
of the assets or liabilities.
Following
is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification
of such instruments pursuant to the valuation hierarchy.
Securities
Where
quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If
quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with
similar characteristics. Level 2 securities include agency mortgage-backed securities and agency bonds.
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
5.
Disclosures About Fair Value of Assets and Liabilities (continued)
Impaired
Loans
At
the time a loan is considered impaired, it is evaluated for loss based on the fair value of collateral securing the loan if the
loan is collateral dependent. If a loss is identified, a specific allocation will be established as part of the allowance for
loan losses such that the loan’s net carrying value is at its estimated fair value. Impaired loans carried at fair value
generally receive specific allocations of the allowance for loan losses. For collateral-dependent loans, fair value is commonly
based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches
including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent
appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant
and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued
using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based
on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s
expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired
loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.
Other
Real Estate
Assets
acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing
a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair
value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination
of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the
independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are
usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
Financial
assets measured at fair value on a recurring basis are summarized below:
|
|
Fair Value Measurements Using
|
|
(in thousands)
|
|
Fair Value
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency bonds
|
|
$
|
503
|
|
|
$
|
–
|
|
|
$
|
503
|
|
|
$
|
–
|
|
Agency mortgage-backed: residential
|
|
|
42
|
|
|
|
–
|
|
|
|
42
|
|
|
|
–
|
|
|
|
$
|
545
|
|
|
$
|
–
|
|
|
$
|
545
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury notes
|
|
$
|
497
|
|
|
$
|
–
|
|
|
$
|
497
|
|
|
$
|
–
|
|
Agency bonds
|
|
|
505
|
|
|
|
–
|
|
|
|
505
|
|
|
|
–
|
|
Agency mortgage-backed: residential
|
|
|
43
|
|
|
|
–
|
|
|
|
43
|
|
|
|
–
|
|
|
|
$
|
1,045
|
|
|
$
|
–
|
|
|
$
|
1,045
|
|
|
$
|
–
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
5.
Disclosures About Fair Value of Assets and Liabilities (continued)
Assets
measured at fair value on a non-recurring basis are summarized below:
|
|
Fair Value Measurements Using
|
|
(in thousands)
|
|
Fair Value
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
9
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
577
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
593
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
117
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
117
|
|
There
was one impaired loan, which was measured using the fair value of the collateral for collateral-dependent loans, at December 31,
2019, and seven impaired loans at June 30, 2019. Amounts charged off were $8,000 for the six-month period ended December 31, 2019
and $23,000 off for the six-month period ended December 31, 2018.
Other
real estate owned was written down $24,000 during the six- and three-months ended December 31, 2019. Other real estate owned measured
at fair value less costs to sell, had a carrying amount of $577,000 and $117,000 at December 31, 2019 and June 30, 2019, respectively.
Other real estate owned was written down $54,000 and $36,000 during the six- and three-month periods ended December 31, 2018,
respectively.
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
5.
Disclosures About Fair Value of Assets and Liabilities (continued)
The
following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at
fair value on a non-recurring basis at December 31, 2019 and June 30, 2019:
|
|
|
|
|
|
|
|
|
Range
|
|
|
Fair Value
|
|
|
Valuation
|
|
Unobservable
|
|
(Weighted
|
December 31, 2019
|
|
(in thousands)
|
|
|
Technique(s)
|
|
Input(s)
|
|
Average)
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
9
|
|
|
Sales comparison approach
|
|
Adjustments for differences between comparable sales
|
|
-82.2% to 151.3%
(20.5%)
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed and repossessed assets:
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
577
|
|
|
Sales comparison approach
|
|
Adjustments for differences between comparable sales
|
|
-2.7% to 41.2%
(17.9%)
|
|
|
|
|
|
|
|
|
|
Range
|
|
|
Fair Value
|
|
|
Valuation
|
|
Unobservable
|
|
(Weighted
|
June 30, 2019
|
|
(in thousands)
|
|
|
Technique(s)
|
|
Input(s)
|
|
Average)
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
593
|
|
|
Sales comparison approach
|
|
Adjustment for differences between comparable sales
|
|
25.3% to 50.6%
(-0.6%)
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed and repossessed assets:
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
117
|
|
|
Sales comparison approach
|
|
Adjustments for differences between comparable sales
|
|
8.6% to 31.0%
(29.0%)
|
The
following is a disclosure of the fair value of financial instruments, both assets and liabilities, whether or not recognized in
the consolidated balance sheet, for which it is practicable to estimate that value. For financial instruments where quoted market
prices are not available, fair values are based on estimates using present value and other valuation methods.
The
methods used are greatly affected by the assumptions applied, including the discount rate and estimates of future cash flows.
Therefore, the fair values presented may not represent amounts that could be realized in an exchange for certain financial instruments.
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
5.
Disclosures About Fair Value of Assets and Liabilities (continued)
Based
on the foregoing methods and assumptions, the carrying value and fair value of the Company’s financial instruments at December
31, 2019 and June 30, 2019 are as follows:
|
|
|
|
|
Fair Value Measurements at
|
|
|
|
Carrying
|
|
|
December 31, 2019 Using
|
|
(in thousands)
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
11,884
|
|
|
$
|
11,884
|
|
|
|
|
|
|
|
|
|
|
$
|
11,884
|
|
Time deposits in other financial institutions
|
|
|
2,970
|
|
|
|
2,979
|
|
|
|
|
|
|
|
|
|
|
|
2,979
|
|
Available-for-sale securities
|
|
|
545
|
|
|
|
|
|
|
$
|
545
|
|
|
|
|
|
|
|
545
|
|
Held-to-maturity securities
|
|
|
652
|
|
|
|
|
|
|
|
659
|
|
|
|
|
|
|
|
659
|
|
Loans held for sale
|
|
|
251
|
|
|
|
|
|
|
|
|
|
|
$
|
251
|
|
|
|
251
|
|
Loans receivable - net
|
|
|
281,568
|
|
|
|
|
|
|
|
|
|
|
|
285,831
|
|
|
|
285,831
|
|
Federal Home Loan Bank stock
|
|
|
6,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a
|
|
Accrued interest receivable
|
|
|
690
|
|
|
|
|
|
|
|
690
|
|
|
|
|
|
|
|
690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
199,959
|
|
|
$
|
68,113
|
|
|
$
|
131,853
|
|
|
|
|
|
|
|
199,996
|
|
Federal Home Loan Bank advances
|
|
|
61,615
|
|
|
|
|
|
|
|
61,741
|
|
|
|
|
|
|
|
61,741
|
|
Advances by borrowers for taxes and insurance
|
|
|
231
|
|
|
|
|
|
|
|
231
|
|
|
|
|
|
|
|
231
|
|
Accrued interest payable
|
|
|
30
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
|
|
|
|
Carrying
|
|
|
June 30, 2019 Using
|
|
(in thousands)
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
9,861
|
|
|
$
|
9,861
|
|
|
|
|
|
|
|
|
|
|
$
|
9,861
|
|
Term deposits in other financial institutions
|
|
|
6,962
|
|
|
|
6,963
|
|
|
|
|
|
|
|
|
|
|
|
6,963
|
|
Available-for-sale securities
|
|
|
1,045
|
|
|
|
|
|
|
$
|
1,045
|
|
|
|
|
|
|
|
1,045
|
|
Held-to-maturity securities
|
|
|
775
|
|
|
|
|
|
|
|
775
|
|
|
|
|
|
|
|
775
|
|
Loans receivable – net
|
|
|
280,969
|
|
|
|
|
|
|
|
|
|
|
$
|
285,700
|
|
|
|
285,700
|
|
Federal Home Loan Bank stock
|
|
|
6,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a
|
|
Accrued interest receivable
|
|
|
758
|
|
|
|
|
|
|
|
758
|
|
|
|
|
|
|
|
758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
195,836
|
|
|
$
|
69,944
|
|
|
$
|
123,920
|
|
|
|
|
|
|
$
|
193,864
|
|
Federal Home Loan Bank advances
|
|
|
66,703
|
|
|
|
|
|
|
|
66,719
|
|
|
|
|
|
|
|
66,719
|
|
Advances by borrowers for taxes and insurance
|
|
|
763
|
|
|
|
|
|
|
|
763
|
|
|
|
|
|
|
|
763
|
|
Accrued interest payable
|
|
|
28
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
28
|
|
Kentucky
First Federal Bancorp
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December
31, 2019
(unaudited)
6.
Other Comprehensive Income (Loss)
The
Company’s other comprehensive income is comprised solely of unrealized gains and losses on available-for-sale securities.
The following is a summary of the accumulated other comprehensive income balances, net of tax:
|
|
Six months
ended
December 31,
2019
|
|
|
|
|
|
Beginning balance
|
|
$
|
4
|
|
Current year change
|
|
|
(1
|
)
|
Ending balance
|
|
$
|
3
|
|
Other
comprehensive income (loss) components and related tax effects for the periods indicated were as follows:
|
|
Six months ended
December 31,
|
|
(in thousands)
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available-for-sale securities
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
Tax effect
|
|
|
–
|
|
|
|
–
|
|
Net-of-tax amount
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
|
|
Three months ended
December 31,
|
|
(in thousands)
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available-for-sale securities
|
|
$
|
(1
|
)
|
|
$
|
2
|
|
Tax effect
|
|
|
–
|
|
|
|
1
|
|
Net-of-tax amount
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
Kentucky
First Federal Bancorp