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Kentucky First Federal Bancorp reports sharp profit decline



© Reuters.

FRANKFORT, Ky. – Kentucky First Federal Bancorp (NASDAQ:KFFB), the holding company for First Federal Savings and Loan Association of Hazard and First Federal Savings Bank of Kentucky, has reported a significant decrease in net earnings for the quarter and six-month period ended December 31, 2023.

The company announced a net loss of $361,000 or ($0.05) diluted earnings per share for the quarter, compared to net earnings of $374,000 or $0.04 diluted earnings per share for the same period in the previous year. For the six months ended December 31, 2023, the net loss widened to $536,000 or ($0.07) diluted earnings per share from net earnings of $747,000 or $0.09 diluted earnings per share for the same period in 2022.

The decline in net earnings is primarily attributed to a decrease in net interest income, which fell by $791,000 or 32.3% to $1.7 million for the quarter. This was due to interest expenses increasing by $1.6 million or 232.4%, outpacing the rise in interest income of $796,000 or 25.4%. The bank’s Chief Executive Officer, Don Jennings, pointed to rapid increases in the cost of liabilities, including both wholesale and retail funding, as a significant factor. He noted that while the cost of retail funding is expected to continue rising, the cost of wholesale funds may have peaked and could start to decline in the coming months.

Additionally, non-interest expenses rose by $119,000 or 5.9%, driven by higher FDIC insurance premiums and other expenses. The average rate earned on interest-earning assets increased by 66 basis points to 4.43%, whereas the average rate paid on interest-bearing liabilities jumped by 212 basis points to 2.99%.

Kentucky First Federal Bancorp also adopted a new accounting standard on July 1, 2023, for calculating its allowance for credit losses (ACL), which led to an increase in the ACL for loans and an associated decrease in retained earnings and deferred income tax liability.

Despite the net loss, the company’s assets grew by $17.2 million or 4.9% to $366.2 million as of December 31, 2023, primarily due to an increase in loans and cash equivalents. Shareholders’ equity, however, decreased by $1.5 million or 3.0% to $49.2 million, mainly due to the adoption of the new accounting standard and the net loss for the period.

This financial update is based on a press release statement issued by Kentucky First Federal Bancorp.

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