10-Q 1 f10q0321_kentuckyfirst.htm QUARTERLY REPORT

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, 2021

☐ 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 7, 2021, the latest practicable date, the Corporation had 8,226,715 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	27

	ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	38

	ITEM 4	Controls and Procedures	38

PART II	OTHER INFORMATION		39

SIGNATURES			41

PART I

ITEM 1: Financial Statements

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	March 31,			June 30,
	2021			2020
	Unaudited
ASSETS

Cash and due from financial institutions	$	1,724		$	1,662
Fed funds sold		5,001			--
Interest-bearing demand deposits		8,042			12,040
Cash and cash equivalents		14,767			13,702

Time deposits in other financial institutions		247			2,229
Securities available-for-sale		33			541
Securities held-to-maturity, at amortized cost- approximate fair value of $508 and $611 at March 31, 2021 and June 30, 2020, respectively		491			598
Loans held for sale		1,261			667
Loans, net of allowance of $1,622 and $1,488 at March 31, 2021 and June 30, 2020, respectively		299,190			285,887
Real estate owned, net		141			640
Premises and equipment, net		4,766			4,916
Federal Home Loan Bank stock, at cost		6,498			6,498
Accrued interest receivable		727			830
Bank-owned life insurance		2,652			2,594
Goodwill		947			947
Prepaid federal income taxes		64			135
Prepaid expenses and other assets		848			952

Total assets	$	332,632		$	321,136

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits	$	225,543		$	212,273
Federal Home Loan Bank advances		53,193			54,715
Advances by borrowers for taxes and insurance		560			800
Accrued interest payable		25			27
Deferred income taxes		725			837
Other liabilities		696			573
Total liabilities		280,742			269,225

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		34,901			34,981
Retained earnings		20,020			19,932
Unearned employee stock ownership plan (ESOP), 14,924 shares and 28,931 shares at March 31, 2021 and June 30, 2020, respectively		(149	)		(289	)
Treasury shares at cost, 369,349 and 342,849 common shares at March 31, 2021 and June 30, 2020, respectively		(2,968	)		(2,801	)
Accumulated other comprehensive income		–			2
Total shareholders’ equity		51,890			51,911

Total liabilities and shareholders’ equity	$	332,632		$	321,136

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,
	2021			2020			2021		2020
Interest income
Loans, including fees	$	8,835		$	9,401		$	2,899	$	3,104
Mortgage-backed securities		11			17			3		6
Other securities		3			14			--		3
Interest-bearing deposits and other		122			364			38		92
Total interest income		8,971			9,796			2,940		3,205

Interest expense
Interest-bearing demand deposits		23			16			8		5
Savings		194			154			69		51
Certificates of Deposit		1,110			1,654			310		572
Deposits		1,327			1,824			387		628
Borrowings		333			927			105		254
Total interest expense		1,660			2,751			492		882
Net interest income		7,311			7,045			2,448		2,323
Provision for loan losses		192			64			--		--
Net interest income after provision for loan losses		7,119			6,981			2,448		2,323

Non-interest income
Earnings on bank-owned life insurance		58			58			19		20
Net gain on sales of loans		280			75			125		35
Net gain (loss) on sales of real estate owned		(18	)		6			--		(1	)
Valuation adjustment for real estate owned		(19	)		(36	)		--		(12	)
Other		132			130			38		39
Total non-interest income		433			233			182		81
Non-interest expense
Employee compensation and benefits		4,027			4,168			1,383		1,400
Occupancy and equipment		425			420			145		141
FDIC insurance premiums		129			--			41		--
Voice and data communications		80			128			23		28
Advertising		114			133			38		41
Outside service fees		139			137			43		43
Data processing		430			388			138		149
Auditing and accounting		119			151			40		52
Franchise and other taxes		130			194			--		65
Foreclosure and real estate owned expenses (net)		66			57			19		17
Other		472			540			149		170
Total non-interest expense		6,131			6,316			2,019		2,106

Income before income taxes		1,421			898			611		298

Federal income tax expense		293			176			138		58

NET INCOME	$	1,128		$	722		$	473	$	240

EARNINGS PER SHARE
Basic and diluted	$	0.14		$	0.09		$	0.06	$	0.03
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,
	2021			2020		2021		2020
Net income	$	1,128		$	722	$	473	$	240

Other comprehensive gains (losses), net of tax:
Unrealized holding Gains (losses) on securities designated as available-for-sale, net of taxes of $(1), $0, $0 and $0 during the respective periods		(2	)		--		--		1
Comprehensive income	$	1,126		$	722	$	473	$	241

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, 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

March 31, 2020

	Common stock		Additional paid-in capital			Retained earnings			Unearned employee stock ownership plan (ESOP)			Treasury shares			Accumulated other comprehensive income		Total
Balance at June 30, 2019	$	86	$	35,056		$	33,867		$	(476	)	$	(2,259	)	$	4	$	66,278

Net income		–		–			722			–			–			–		722
Allocation of ESOP shares		–		(58	)		–			140			–			–		82
Acquisition of shares for treasury		–		–			–			–			(475	)		–		(475	)
Other comprehensive loss		–		–			–			–			–			–		–
Cash dividends of $0.30 per common share		–		–			(1,038	)		–			–			–		(1,038	)

Balance at March 31, 2020	$	86	$	34,998		$	33,551		$	(336	)	$	(2,734	)	$	4	$	65,569

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, 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

March 31, 2020

	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, 2019	$	86	$	35,011		$	33,663		$	(383	)	$	(2,571	)	$	3	$	65,809

Net income		–		–			240			–			–			–		240
Allocation of ESOP shares		–		(13	)		–			47			–			–		34
Acquisition of shares for treasury		–		–			–			–			(163	)		–		(163	)
Other comprehensive income		–		–			–			–			–			1		1
Cash dividends of $0.10 per common share		–		–			(352	)		–			–			–		(352	)

Balance at March 31, 2020	$	86	$	34,998		$	33,551		$	(336	)	$	(2,734	)	$	4	$	65,569

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,
	2021			2020
Cash flows from operating activities:
Net income	$	1,128		$	722
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		218			205
Accretion of purchased loan credit discount		(43	)		(83	)
Amortization of purchased loan premium		26			8
Amortization of deferred loan origination costs (fees)		(1	)		70
Amortization of premiums on investment securities		7			6
Net gain on sale of loans		(280	)		(75	)
Net (gain) loss on sale of real estate owned		18			(6	)
Valuation adjustments of real estate owned		19			36
ESOP compensation expense		60			82
Earnings on bank-owned life insurance		(58	)		(58	)
Provision for loan losses		192			64
Origination of loans held for sale		(6,468	)		(2,655	)
Proceeds from loans held for sale		6,154			2,170
Increase (decrease) in cash, due to changes in:
Accrued interest receivable		103			46
Prepaid expenses and other assets		104			135
Accrued interest payable		(2	)		5
Other liabilities		123			99
Income taxes		(41	)		180
Net cash provided by operating activities		1,259			951

Cash flows from investing activities:
Purchase of time deposits in other financial institutions		--			(2,500	)
Maturities of time deposits in other financial institutions		1,982			6,739
Securities maturities, prepayments and calls:
Held to maturity		100			144
Available for sale		506			500
Purchase of FHLB stock		--			(16	)
Loans originated for investment, net of principal collected		(13,767	)		2,062
Proceeds from sale of real estate owned		753			180
Additions to real estate owned		(1	)		(39	)
Additions to premises and equipment, net		(68	)		(156	)
Net cash provided by (used in) investing activities		(10,495	)		6,914

Cash flows from financing activities:
Net increase in deposits		13,270			12,719
Payments by borrowers for taxes and insurance, net		(240	)		(246	)
Proceeds from Federal Home Loan Bank advances		38,600			13,800
Repayments on Federal Home Loan Bank advances		(40,122	)		(25,461	)
Treasury stock purchased		(167	)		(475	)
Dividends paid on common stock		(1,040	)		(1,038	)
Net cash provided by (used in) financing activities		10,301			(701	)

Net increase in cash and cash equivalents		1,065			7,164

Beginning cash and cash equivalents		13,702			9,861

Ending cash and cash equivalents	$	14,767		$	17,025

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,
	2021		2020
Supplemental disclosure of cash flow information:

Cash paid during the period for:

Federal income taxes	$	191	$	–

Interest on deposits and borrowings	$	1,662	$	2,746

Transfers of loans to real estate owned, net	$	327	$	304

Loans made on sale of real estate owned	$	37	$	95

See accompanying notes to condensed consolidated financial statements.

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(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, 2021, 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, 2020 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 2020 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, 2021

(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 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. The Company adopted this ASU effective July 1, 2020, with no material impact to the financial statements.

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 do not anticipate 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.

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2021

(unaudited)

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:

	Nine months ended March 31,				Three months ended March 31,
(in thousands)	2021		2020		2021		2020
Net income allocated to common shareholders, basic and diluted	$	1,128	$	722	$	473	$	240

	Nine months ended March 31,				Three months ended March 31,
	2021		2020		2021		2020
Weighted average common shares outstanding, basic and diluted		8,217,654		8,259,807		8,211,789		8,246,574

There were no stock option shares outstanding for the nine- or three-month periods ended March 31, 2021 and 2020.

3. Investment Securities

The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at March 31, 2021 and June 30, 2020, the corresponding amounts of gross unrealized gains recognized in accumulated other comprehensive income and gross unrecognized gains and losses:

	March 31, 2021
(in thousands)	Amortized cost		Gross unrealized/ unrecognized gains		Gross unrealized/ unrecognized losses		Estimated fair value
Available-for-sale Securities
Agency mortgage-backed: residential	$	33	$	–	$	–	$	33

Held-to-maturity Securities
Agency mortgage-backed: residential	$	491	$	20	$	3	$	508

	June 30, 2020
(in thousands)	Amortized cost		Gross unrealized/ unrecognized gains		Gross unrealized/ unrecognized losses		Estimated fair value
Available-for-sale Securities
Agency bonds	$	500	$	3	$	–	$	503
Agency mortgage-backed: residential		38		–		–		38
	$	538	$	3	$	–	$	541

Held-to-maturity Securities
Agency mortgage-backed: residential	$	598	$	16	$	3	$	611

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2021

(unaudited)

3. Investment Securities (continued)

Our pledged securities (including overnight and time deposits in other financial institutions) totaled $1.8 million and $1.9 million at March 31, 2021 and June 30, 2020, 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:

	March 31,			June 30,
(in thousands)	2021			2020
Residential real estate
One- to four-family	$	222,878		$	222,489
Multi-family		19,773			12,373
Construction		5,959			4,045
Land		1,286			765
Farm		2,217			2,354
Nonresidential real estate		37,884			33,503
Commercial nonmortgage		2,082			2,214
Consumer and other:
Loans on deposits		1,126			1,245
Home equity		7,004			7,645
Automobile		75			67
Unsecured		528			675
		300,812			287,375
Allowance for loan losses		(1,622	)		(1,488	)
	$	299,190		$	285,887

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2021

(unaudited)

4. Loans receivable (continued)

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2021:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off			Recoveries		Ending balance
Residential real estate:
One- to four-family	$	671	$	(3	)	$	(23	)	$	–	$	645
Multi-family		184		96			–			–		280
Construction		6		3			–			–		9
Land		1		1			–			–		2
Farm		4		--			–			–		4
Nonresidential real estate		405		61			–			–		466
Commercial nonmortgage		3		--			–			–		3
Consumer and other:
Loans on deposits		2		–			–			–		2
Home equity		11		37			(45	)		7		10
Automobile		–		–			–			–		–
Unsecured		1		(3	)		–			3		1
Unallocated		200		–			–			–		200
Totals	$	1,488	$	192		$	(68	)	$	10	$	1,622

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2021:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off		Recoveries		Ending balance
Residential real estate:
One- to four-family	$	647	$	(2	)	$	--	$	–	$	645
Multi-family		277		3			–		–		280
Construction		6		3			–		–		9
Land		2		--			–		–		2
Farm		5		(1	)		–		–		4
Nonresidential real estate		469		(3	)		–		–		466
Commercial nonmortgage		2		1			–		–		3
Consumer and other:
Loans on deposits		2		--			–		–		2
Home equity		11		(1	)		–		–		10
Automobile		–		–			–		–		–
Unsecured		1		--			–		--		1
Unallocated		200		–			–		–		200
Totals	$	1,622	$	--		$	--	$	--	$	1,622

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2021

(unaudited)

4. Loans receivable (continued)

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2020:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off			Recoveries		Ending balance
Residential real estate:
One- to four-family	$	685	$	59		$	(65	)	$	1	$	680
Multi-family		200		(31	)		–			–		169
Construction		6		1			–			–		7
Land		1		1			–			–		2
Farm		6		(2	)		–			–		4
Nonresidential real estate		336		32			–			–		368
Commercial nonmortgage		5		(2	)		–			–		3
Consumer and other:
Loans on deposits		3		(1	)		–			–		2
Home equity		14		(2	)		–			–		12
Automobile		–		8			(8	)		–		–
Unsecured		–		1			–			–		1
Unallocated		200		–			–			–		200
Totals	$	1,456	$	64		$	(73	)	$	1	$	1,448

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2020:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off		Recoveries		Ending balance
Residential real estate:
One- to four-family	$	684	$	(5	)	$	–	$	1	$	680
Multi-family		172		(3	)		–		–		169
Construction		6		1			–		–		7
Land		2		--			–		–		2
Farm		4		--			–		–		4
Nonresidential real estate		361		7			–		–		368
Commercial nonmortgage		4		(1	)		–		–		3
Consumer and other:
Loans on deposits		2		–			–		–		2
Home equity		11		1			–		–		12
Automobile		–		--			--		–		–
Unsecured		1		--			–		–		1
Unallocated		200		–			–		–		200
Totals	$	1,447	$	--		$	--	$	1	$	1,448

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2021

(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 March 31, 2021. The recorded investment in loans excludes accrued interest receivable due to immateriality.

March 31, 2021:

(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	$	3,903	$	667	$	4,570	$	–	$	–	$	–
Multi-family		652		–		652		–		–		–
Farm		290		–		290		–		–		–
Nonresidential real estate		636		–		636		–		–		–
Consumer:
Unsecured		17		--		17		--		--		--
		5,498		667		6,165		–		–		–

Loans collectively evaluated for impairment:
Residential real estate:
One- to four-family					$	218,308	$	645	$	–	$	645
Multi-family						19,121		280		–		280
Construction						5,959		9		–		9
Land						1,286		2		–		2
Farm						1,927		4		–		4
Nonresidential real estate						37,248		466		–		466
Commercial nonmortgage						2,082		3		–		3
Consumer:
Loans on deposits						1,126		2		–		2
Home equity						7,004		10		–		10
Automobile						75		–		–		–
Unsecured						511		1		–		1
Unallocated						–		–		200		200
						294,647		1,422		200		1,622
					$	300,812	$	1,422	$	200	$	1,622

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2021

(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, 2020.

June 30, 2020:

(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	$	3,983	$	751	$	4,734	$	–	$	–	$	–
Multi-family		671		–		671		–		–		–
Construction		63		–		63		–		–		–
Farm		309		–		309		–		–		–
Nonresidential real estate		660		–		660		–		–		–
		5,686		751		6,437		–		–		–

Loans collectively evaluated for impairment:
Residential real estate:
One- to four-family					$	217,755	$	671	$	–	$	671
Multi-family						11,702		184		–		184
Construction						3,982		6		–		6
Land						765		1		–		1
Farm						2,045		4		–		4
Nonresidential real estate						32,843		405		–		405
Commercial nonmortgage						2,214		3		–		3
Consumer:
Loans on deposits						1,245		2		–		2
Home equity						7,645		11		–		11
Automobile						67		–		–		–
Unsecured						675		1		–		1
Unallocated						–		–		200		200
						280,938		1,288		200		1,488
					$	287,375	$	1,288	$	200	$	1,488

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2021

(unaudited)

4. Loans receivable (continued)

The following table presents interest income on loans individually evaluated for impairment by class of loans for the nine months ended March 31:

(in thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	2021						2020
With no related allowance recorded:
One- to four-family	$	3,941	$	120	$	120	$	3,866	$	74	$	74
Multi-family		662		18		18		681		25		25
Construction		32		–		–		–		–		–
Farm		300		23		23		310		11		11
Nonresidential real estate		648		24		24		698		23		23
Consumer and other		9		--		--		--		--		--
Purchased credit-impaired loans		709		40		40		859		60		60
		6,301		225		225		6,413		193		193
With an allowance recorded:
One- to four-family		–		–		–		–		–		–
	$	6,301	$	225	$	225	$	6,413	$	193	$	193

The following table presents interest income on loans individually evaluated for impairment by class of loans for the three months ended March 31:

(in thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	2021						2020
With no related allowance recorded:
Residential real estate:
One- to four-family	$	3,971	$	36	$	36	$	3,951	$	12	$	12
Multi-family		655		6		6		680		8		8
Farm		291		--		--		310		6		6
Nonresidential real estate		641		17		17		717		9		9
Consumer and other		9		--		--		--		--		--
Purchased credit-impaired loans		676		16		16		846		25		25
		6,243		75		75		6,503		60		60
With an allowance recorded:
One- to four-family		–		–		–		–		–		–
	$	6,243	$	75	$	75	$	6,503	$	60	$	60

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2021

(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 March 31, 2021 and June 30, 2020:

	March 31, 2021				June 30, 2020
(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	$	4,339	$	248	$	4,458	$	1,135
Multifamily		652		–		671		–
Construction		--		–		63		–
Farm		290		–		309		–
Nonresidential real estate and land		636		–		660		–
Commercial and industrial		–		–		4		–
Consumer		22		19		95		–
	$	5,939	$	267	$	6,260	$	1,135

One- to four-family loans in process of foreclosure totaled $649,000 and $694,000 at March 31, 2021 and June 30, 2020, 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.”

The provisions of the CARES Act included an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) March 31, 2021 or (ii) 60 days after the end of the COVID-19 national emergency. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. In December 2020, Congress amended the CARES Act through the Consolidated Appropriation Act of 2021, which provided additional COVID-19 relief to American families and businesses, including extending TDR relief under the CARES Act until the earlier of December 31, 2021 or 60 days following the termination of the national emergency. The Company elected to adopt these provisions of the CARES Act. As of March 31, 2021, the Banks had granted deferrals to 101 loans totaling $18.4 million. One borrower who owed $859,000 at March 31, 2021, had been granted an additional extension and returned to normal payment status in April 2021. All other borrowers granted a deferral, composed of 100 loans totaling $17.5 million in principal had resumed regular payments at March 31, 2021.

At March 31, 2021 and June 30, 2020, the Company had $1.9 million and $1.9 million of loans classified as TDRs, respectively. Of the TDRs at March 31, 2021, approximately 29.4% were related to the borrower’s completion of Chapter 7 bankruptcy proceedings with no reaffirmation of the debt to the Banks.

During the nine months ended March 31, 2021, the Company had two loans, which were associated with a single borrower and were both secured by a single-family residence, restructured as TDRs. The loans were classified as TDRs pursuant to court action under Chapter 7 bankruptcy proceedings without the borrower reaffirming the debt personally, and totaled $143,000 at March 31, 2021, and were current on payments as of that date.

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2021

(unaudited)

4. Loans receivable (continued)

During the nine months ended March 31, 2020, the Company had three 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. Finally, a first and second mortgage on an 8-plex were refinanced into a single loan with a slightly extended maturity term and a lower interest rate, which was consistent with similarly-priced comparable loans at the time of refinance.

The following table summarizes TDR loan modifications that occurred during the nine months ended March 31, 2021 and 2020, 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
Nine months ended March 31, 2021
Residential real estate:
Chapter 7 bankruptcy	$	143	$	–	$	143

Nine months ended March 31, 2020
Residential real estate:
Terms extended	$	677	$	–	$	677
Terms extended and additional funds advanced	$	119	$	–	$	119
Chapter 7 bankruptcy	$	21	$	–	$	21

No TDRs defaulted during the nine-month periods ended March 31, 2021 or 2020.

There were no TDR loan modifications that occurred during the three months ended March 31, 2021 and 2020.

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2021

(unaudited)

4. Loans receivable (continued)

The following table presents the aging of the principal balance outstanding in past due loans as of March 31, 2021, 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	$	2,162	$	1,582	$	3,744	$	219,134	$	222,878
Multi-family		–		–		–		19,773		19,773
Construction		--		--		--		5,959		5,959
Land		–		–		–		1,286		1,286
Farm		102		–		102		2,115		2,217
Nonresidential real estate		99		245		344		37,540		37,884
Commercial non-mortgage		–		–		–		2,082		2,082
Consumer and other:
Loans on deposits		–		–		–		1,126		1,126
Home equity		176		19		195		6,809		7,004
Automobile		--		–		--		75		75
Unsecured		76		–		76		452		528
Total	$	2,615	$	1,846	$	4,461	$	296,351	$	300,812

The following tables present the aging of the principal balance outstanding in past due loans as of June 30, 2020, 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	$	2,546	$	2,670	$	5,216	$	217,273	$	222,489
Multi-family		–		–		–		12,373		12,373
Construction		192		63		255		3,790		4,045
Land		–		–		–		765		765
Farm		107		309		416		1,938		2,354
Nonresidential real estate		57		253		310		33,193		33,503
Commercial nonmortgage		–		–		–		2,214		2,214
Consumer:
Loans on deposits		–		–		–		1,245		1,245
Home equity		255		90		345		7,300		7,645
Automobile		–		–		–		67		67
Unsecured		–		–		–		675		675
Total	$	3,157	$	3,385	$	6,542	$	280,833	$	287,375

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 2021
(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.

SEC Form 10-Q filed by Kentucky First Federal Bancorp