Kentucky First Federal Bancorp — FY2015 Form 10-K
Reporting period: Fiscal year ended June 30, 2015; filed September 28, 2015. The filing is an annual report, not a standalone fourth-quarter report. The company operates First Federal of Hazard and First Federal of Frankfort, community-oriented savings institutions in Kentucky.
Financial position and performance
- At June 30, 2015, consolidated assets were $296.3 million, deposits $199.7 million, and stockholders’ equity $67.3 million.
- Return on average equity for FY2015 was 3.1%. Management cautions that returns may remain low relative to other companies because of the company’s high capital level.
- The loan portfolio was primarily residential real estate: residential mortgages totaled $212.1 million (85.5% of loans). Real-estate-secured loans represented 95.9% of the portfolio.
- First Federal of Hazard reported assets of $77.2 million, net loans of $57.2 million and deposits of $56.6 million. First Federal of Frankfort reported assets of $229.2 million, net loans of $186.6 million and deposits of $156.6 million.
- The supplied filing text incorporates the annual report’s financial statements and MD&A by reference but does not provide clear values for revenue, net income, net interest margin, cash flows, nonperforming loans, allowance for loan losses, borrowings or liquidity ratios. A year-over-year comparison for these measures is therefore not available from the supplied text.
Changes, outlook and risks
- Hazard’s eastern Kentucky market remained economically distressed, with coal-industry weakness and limited local loan demand. The company said it would use excess funds to purchase loans from Frankfort, but expected redeployment from securities into loans to take several years.
- The company reported that both banks met their capital requirements and qualified thrift lender tests at year-end. Basel III capital rules became effective January 1, 2015; the capital conservation buffer is scheduled to phase in starting in 2016.
- Key risks include rising interest rates, real-estate collateral values and credit quality, competition, regulatory and compliance costs, employee benefit costs, cybersecurity and service-provider disruptions. The filing also highlights the potential effect of declining economic conditions in Hazard’s market.
- First Federal MHC’s dividend waiver was approved by members in July 2015. The filing says waivers of up to $0.10 per share quarterly were permitted through the third quarter of 2016, subject to regulatory and member approvals; inability to continue waiving dividends could reduce the company’s ability to pay public shareholders.
- No shares were repurchased during the fourth quarter of FY2015 under the announced program; 60,323 shares remained authorized for repurchase. The company reported no pending legal proceedings it believed could materially adversely affect its financial condition, results or cash flows.
- No specific earnings or operating guidance is provided in the supplied text.
Important facts for investors to verify
- Review the incorporated FY2015 annual report and audited statements for year-over-year revenue, earnings, net interest margin, cash flows, credit quality, allowance, borrowings and liquidity details.
- Check subsequent filings for trends in delinquency, nonperforming assets, charge-offs and real-estate collateral values, especially in Hazard’s market.
- Confirm current bank capital levels and any restrictions on distributions, and monitor approvals for future First Federal MHC dividend waivers.
- Assess sensitivity to interest-rate changes, the pace of shifting excess funds from securities to loans, and the company’s low return on equity.