Business Context and Reporting Period
Kentucky First Federal Bancorp filed a Form 8-K on September 29, 2010, announcing a restatement of financial statements. The restatement covers the fiscal year ended June 30, 2009, and the subsequent quarters ended September 30, 2009, December 31, 2009, and March 31, 2010. The adjustment was necessitated by errors in the calculation of accrued and deferred income tax liabilities.
Key Financial Metrics and Adjustments
The filing details specific adjustments to tax liabilities and earnings rather than reporting new operational revenue or cash flow figures for the current period. Key restated metrics for the fiscal year ended June 30, 2009, include:
- Net Earnings: Reduced from $808,000 to $728,000.
- Earnings Per Share (EPS): Reduced from $0.11 to $0.10 (both basic and diluted).
- Deferred Federal Income Taxes: Reduced by $224,000 across all affected periods.
- Accrued/Prepaid Federal Income Taxes: Adjusted by $80,000 (increased accrued or decreased prepaid depending on the period).
- Retained Earnings: Increased by $144,000 in the balance sheet presentation due to the net effect of the tax adjustments.
The filing does not provide updated revenue, total debt, or liquidity ratios for the current reporting period; it focuses exclusively on the correction of historical tax and equity figures.
Material Changes Versus Prior Periods
The material change is the downward revision of net income and EPS for the fiscal year 2009 and the subsequent three quarters. The primary driver was the recognition of additional income tax due on a dividend distribution from a bank subsidiary. This distribution exceeded the subsidiary's accumulated earnings and profits, resulting in a taxable distribution of the bank's thrift reserve. Consequently, total liabilities were reduced by $144,000 to $224,000 depending on the specific balance sheet date, while shareholders' equity increased by $144,000 to reflect the corrected retained earnings.
Management Commentary, Risks, and Unusual Items
Management and the Audit Committee determined that previously issued financial statements could no longer be relied upon. The company consulted with its current independent auditor, Crowe Horwath, LLP, and its predecessor, BKD, LLP, regarding the restatement. The company has filed amended Form 10-K and Form 10-Q reports containing the corrected statements. No new forward-looking guidance or outlook was provided in this filing; the document is strictly a disclosure of the accounting correction.
Investor Verification Checklist
- Verify the amended Form 10-K for the year ended June 30, 2009, and the amended Form 10-Qs for the quarters ended September 30, 2009, December 31, 2009, and March 31, 2010.
- Confirm the impact of the $80,000 reduction in net earnings on the company's capital adequacy ratios.
- Review the specific tax treatment of the dividend distribution from the bank subsidiary to ensure no further tax liabilities exist.
- Check for any regulatory correspondence regarding the restatement of financial statements.