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What changed in Kentucky First Federal Bancorp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Kentucky First Federal Bancorp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+130 added−106 removedSource: 10-K (2023-09-28) vs 10-K (2022-09-28)

Top changes in Kentucky First Federal Bancorp's 2023 10-K

130 paragraphs added · 106 removed · 75 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

41 edited+9 added−2 removed233 unchanged
Biggest changeRisks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions, inflation and its impacts, prices for real estate in the Company’s market areas, interest rate environment, competitive conditions in the financial services industry, changes in law, governmental policies and regulations, rapidly changing technology affecting financial services, the potential effects of the COVID-19 pandemic on the local and national economic environment, on our customers and on our operations (as well as any changes to federal, state and local government laws, regulations and orders in connection with the pandemic), the impacts related to or resulting from Russia’s military action in Ukraine, including the broader impacts to financial markets, and the other matters mentioned in Item 1A of this Annual Report on Form 10-K.
Biggest changeRisks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions, prices for real estate in the Company’s market areas, interest rate environment, competitive conditions in the financial services industry; changes in level of inflation; changes in the demand for loans, deposits and other financial services that we provide; the possibility that future credit losses may be higher than currently expected; the impact of the interest rate environment on our business, financial condition and results of operations; competitive pressures among financial services companies; the ability to attract, develop and retain qualified employees; the ability to pay future dividends at currently expected rates; our ability to maintain the security of our data processing and information technology systems; the outcome of pending or threatened litigation, or of matters before regulatory agencies; changes in law, governmental policies and regulations, rapidly changing technology affecting financial services, the potential effects of the COVID-19 pandemic on the local and national economic environment, on our customers and on our operations (as well as any changes to federal, state and local government laws, regulations and orders in connection with the pandemic), the impacts related to or resulting from Russia’s military action in Ukraine, including the broader impacts to financial markets, and the other matters mentioned in Item 1A of this Annual Report on Form 10-K.
Under the regulations, an application to and the prior approval of the OCC is required before any capital distribution if, among other circumstances the association will not remain an “eligible” savings association ( i.e. , generally, well capitalized and with examination and Community Reinvestment Act ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, Federal savings association is directly or indirectly controlled by a mutual savings and loan holding company or the distribution would otherwise be contrary to a statute, regulation or agreement with the.
Under the regulations, an application to and the prior approval of the OCC is required before any capital distribution if, among other circumstances the association will not remain an “eligible” savings association ( i.e. , generally, well capitalized and with examination and Community Reinvestment Act ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the federal savings association is directly or indirectly controlled by a mutual savings and loan holding company or the distribution would otherwise be contrary to a statute, regulation or agreement with the.
We also are required to maintain an investment in FHLB-Cincinnati stock, the level of which is largely dependent on our level of borrowings from the FHLB. At June 30, 2022, our investment portfolio consisted of mortgage-backed securities issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae with stated final maturities of 30 years or less.
We also are required to maintain an investment in FHLB-Cincinnati stock, the level of which is largely dependent on our level of borrowings from the FHLB. At June 30, 2023, our investment portfolio consisted of mortgage-backed securities issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae with stated final maturities of 30 years or less.
Beginning with the dividend paid in September 2012, First Federal MHC has annually sought member approval to obtain Federal Reserve Board approval to waive the MHC’s dividends from the Company. This effort has been successful each year, including an approval in 2022, which will cover quarterly dividends of $0.10 per common share through May 2023.
Beginning with the dividend paid in September 2012, First Federal MHC has annually sought member approval to obtain Federal Reserve Board approval to waive the MHC’s dividends from the Company. This effort has been successful each year, including an approval in 2023, which will cover quarterly dividends of $0.10 per common share through May 2024.
Failure to correct the violation within 12 months will cause the association’s savings and loan holding company to register as and be deemed a bank holding company. At June 30, 2022, First Federal of Hazard and First Federal of Kentucky were in compliance with the qualified thrift lender test in each of the prior 12 months. Transactions with Related Parties.
Failure to correct the violation within 12 months will cause the association’s savings and loan holding company to register as and be deemed a bank holding company. At June 30, 2023, First Federal of Hazard and First Federal of Kentucky were in compliance with the qualified thrift lender test in each of the prior 12 months. Transactions with Related Parties.
The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to us. Our federal income tax returns are subject to examination for years 2017 and later. The federal statutory tax rate was 21% for the fiscal years ended June 30, 2022 and 2021.
The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to us. Our federal income tax returns are subject to examination for years 2017 and later. The federal statutory tax rate was 21% for the fiscal years ended June 30, 2023 and 2022.
The Banks’ Board of Directors has the overall responsibility for each institution’s investment portfolio, including approval of investment policies . The management of each Bank may authorize investments as prescribed in each of the Bank’s investment policies. Bank Owned Life Insurance First Federal of Kentucky owns several Bank Owned Life Insurance policies totaling $2.8 million at June 30, 2022.
The Banks’ Board of Directors has the overall responsibility for each institution’s investment portfolio, including approval of investment policies . The management of each Bank may authorize investments as prescribed in each of the Bank’s investment policies. Bank Owned Life Insurance First Federal of Kentucky owns several Bank Owned Life Insurance policies totaling $2.8 million at June 30, 2023.
As residential loans are approved in the normal course of business, and those loans are underwritten to the standards of the Banks, management does not believe alteration of the allowance for loan losses is warranted. At June 30, 2022, no commitment losses were reflected in a separate liability.
As residential loans are approved in the normal course of business, and those loans are underwritten to the standards of the Banks, management does not believe alteration of the allowance for loan losses is warranted. At June 30, 2023, no commitment losses were reflected in a separate liability.
The interest rate is varying percentage points above the rate paid on the savings account, and the account must be pledged as collateral to secure the loan. At June 30, 2022, loans on savings accounts totaled 0.3% of the Company’s total loan portfolio.
The interest rate is varying percentage points above the rate paid on the savings account, and the account must be pledged as collateral to secure the loan. At June 30, 2023, loans on savings accounts totaled 0.3% of the Company’s total loan portfolio.
As of June 30, 2022, the capital levels of First Federal of Hazard and First Federal of Kentucky exceed the minimum required capital amounts for capital adequacy. See Note K-Stockholders’ Equity and Regulatory Capital in notes to financial statements. Prompt Corrective Regulatory Action .
As of June 30, 2023, the capital levels of First Federal of Hazard and First Federal of Kentucky exceed the minimum required capital amounts for capital adequacy. See Note K-Stockholders’ Equity and Regulatory Capital in notes to financial statements. Prompt Corrective Regulatory Action .
In reaching a decision on whether to make a multi-family or nonresidential real estate loan, we consider the net cash flow of the project, the borrower’s expertise, credit history and the value of the underlying property. Commercial Non-mortgage Loans . At June 30, 2022, commercial non-mortgage loans totaled $1.0 million, or 0.4%, of our total loan portfolio.
In reaching a decision on whether to make a multi-family or nonresidential real estate loan, we consider the net cash flow of the project, the borrower’s expertise, credit history and the value of the underlying property. Commercial Non-mortgage Loans . At June 30, 2023, commercial non-mortgage loans totaled $1.2 million, or 0.4%, of our total loan portfolio.
In addition, First Federal of Kentucky believes it has developed strong relationships with the businesses, real estate agents, builders and general public in its market area. Personnel At June 30, 2022, we had 62 full-time employees and two part-time employees, none of whom was represented by a collective bargaining unit. We believe our relationship with our employees is good.
In addition, First Federal of Kentucky believes it has developed strong relationships with the businesses, real estate agents, builders and general public in its market area. Personnel At June 30, 2023, we had 60 full-time employees and two part-time employees, none of whom was represented by a collective bargaining unit. We believe our relationship with our employees is good.
Consumer loans generally entail greater risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured or secured by rapidly depreciable assets. Automobile and unsecured loans at June 30, 2022, totaled 0.3% of the Company’s total loan portfolio. Loan Originations, Purchases and Sales . Loan originations come from a number of sources.
Consumer loans generally entail greater risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured or secured by rapidly depreciable assets. Automobile and unsecured loans at June 30, 2023, totaled 0.2% of the Company’s total loan portfolio. Loan Originations, Purchases and Sales . Loan originations come from a number of sources.
At June 30, 2022, the regulatory limit on loans to one borrower was $2.8 million for First Federal of Hazard and $4.7 million for First Federal of Kentucky. Neither of the banks had lending relationships in excess of their respective lending limits.
At June 30, 2023, the regulatory limit on loans to one borrower was $2.8 million for First Federal of Hazard and $4.6 million for First Federal of Kentucky. Neither of the Banks had lending relationships in excess of their respective lending limits.
Under such limitations, as of June 30, 2022, First Federal of Hazard and First Federal of Kentucky were authorized to invest up to $2.5 million and $7.3 million, respectively, in the stock of or loans to subsidiaries, including the additional 1% investment for community, inner-city and community development purposes.
Under such limitations, as of June 30, 2023, First Federal of Hazard and First Federal of Kentucky were authorized to invest up to $1.8 million and $5.2 million, respectively, in the stock of or loans to subsidiaries, including the additional 1% investment for community, inner-city and community development purposes.
We earn income on the loans sold through fees we charge on the origination, interest spread premiums earned when we sell the loans, and loan servicing fees on an on-going basis, because servicing rights are retained on such loans. At June 30, 2022, $23.2 million in loans were being serviced by First Federal of Kentucky for the FHLB-Cincinnati.
We earn income on the loans sold through fees we charge on the origination, interest spread premiums earned when we sell the loans, and loan servicing fees on an on-going basis, because servicing rights are retained on such loans. At June 30, 2023, $21.7 million in loans were being serviced by First Federal of Kentucky for the FHLB-Cincinnati.
The vast majority of our depositors are residents of the Banks’ respective market areas. Deposits are attracted from within our market areas through the offering of passbook savings and certificate accounts, and, at First Federal of Kentucky, checking accounts and individual retirement accounts (“IRAs”). We do not utilize brokered funds.
The vast majority of our depositors are residents of the Banks’ respective market areas. Deposits are attracted from within our market areas through the offering of passbook savings and certificate accounts, and, at First Federal of Kentucky, checking accounts and individual retirement accounts (“IRAs”).
Wesbanco Bank, Inc., Boyle Bancorp, Inc., and Community Trust Bancorp, Inc. had assets at June 30, 2022, of $16.8 billion, $791.2 million and $5.4 billion, respectively. The Bank also faces considerable competition from credit unions including the Commonwealth Credit Union ($1.8 billion in assets) and the Expree Credit Union ($92.0 million in assets).
Wesbanco Bank, Inc., Boyle Bancorp, Inc., and Community Trust Bancorp, Inc. had assets at June 30, 2023, of $17.4 billion, $921.0 million and $5.5 billion, respectively. The Bank also faces considerable competition from credit unions including the Commonwealth Credit Union ($1.8 billion in assets) and the Expree Credit Union ($92.0 million in assets).
At June 30, 2022, nonresidential real estate loans totaled $31.4 million, or 11.4% of our total loan portfolio. We originate nonresidential real estate loans for terms of generally 25 years or less and loan amounts generally do not exceed 80% of the appraised value and tend to range much lower.
At June 30, 2023, nonresidential real estate loans totaled $30.2 million, or 9.6% of our total loan portfolio. We originate nonresidential real estate loans for terms of generally 25 years or less and loan amounts generally do not exceed 80% of the appraised value and tend to range much lower.
On a case-by-case basis we consider construction loans on other than owner-occupied, residential property. At June 30, 2022, construction loans totaled $1.4 million, or 0.5%, of our total loan portfolio. Our construction loans generally provide for the payment of interest only during the construction phase, which is usually less than one year.
On a case-by-case basis we consider construction loans on other than owner-occupied, residential property. At June 30, 2023, construction loans totaled $12.3 million, or 3.9%, of our total loan portfolio. Our construction loans generally provide for the payment of interest only during the construction phase, which is usually less than one year.
During the last five years, the unemployment rate (not seasonally adjusted) has been higher than most regions, and in July 2022, was 5.4%, compared to 3.8% in Kentucky and 3.7% in the United States.
During the last five years, the unemployment rate (not seasonally adjusted) has been higher than most regions, and in July 2023, was 6.6%, compared to 3.8% in Kentucky and 3.8% in the United States.
At June 30, 2022, the total outstanding home equity loans amounted to 3.0% of the Company’s total loan portfolio. 4 Loans secured by savings are originated for up to 90% of the depositor’s savings account balance.
At June 30, 2023, the total outstanding home equity loans amounted to 2.9% of the Company’s total loan portfolio. 4 Loans secured by savings are originated for up to 90% of the depositor’s savings account balance.
The unemployment rate was 3.9% in July 2022, while the median household income in Boyle County is $51,765. 2 Lending Activities General . Our loan portfolio consists primarily of one- to four-family residential mortgage loans. As opportunities arise, we also offer loans secured by churches, commercial real estate, and multi-family real estate.
The unemployment rate was 5.1% in July 2023, while the median household income in Boyle County is $59,250. 2 Lending Activities General . Our loan portfolio consists primarily of one- to four-family residential mortgage loans. As opportunities arise, we also offer loans secured by churches, commercial real estate, and multi-family real estate.
At June 30, 2022, residential mortgage loans including construction loans and multi-family totaled $232.0 million, or 84.0%, of our total loan portfolio. We offer a mix of adjustable-rate and fixed-rate mortgage loans with terms up to 30 years. Adjustable-rate loans have an initial fixed term of one, three, five or seven years.
At June 30, 2023, residential mortgage loans including construction loans and multi-family totaled $271.4 million, or 85.9%, of our total loan portfolio. We offer a mix of adjustable-rate and fixed-rate mortgage loans with terms up to 30 years. Adjustable-rate loans have an initial fixed term of one, three, five or seven years.
If the OCC determines that a federal savings association fails to meet any standard prescribed by the guidelines, the OCC may require the institution to submit an acceptable plan to achieve compliance with the standard. Limitation on Capital Distributions.
If the OCC determines that a federal savings association fails to meet any standard prescribed by the guidelines, the OCC may require the institution to submit an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the OCC may require the institution to implement an acceptable compliance plan.
First Federal of Hazard and First Federal of Kentucky were in compliance with this requirement with investments in Federal Home Loan Bank of Cincinnati stock at June 30, 2022, of $2.0 million and $4.5 million, respectively. Reserve Requirements.
First Federal of Hazard and First Federal of Kentucky were in compliance with this requirement with investments in Federal Home Loan Bank of Cincinnati stock at June 30, 2023, of $1.3 million and $3.4 million, respectively. Reserve Requirements.
At June 30, 2022, the Company’s loan portfolio included $205.1 million in adjustable-rate residential mortgage loans, or 88.4%, of the Company’s residential mortgage loan portfolio. The retention of adjustable-rate loans in the portfolio helps reduce our exposure to increases in prevailing market interest rates.
At June 30, 2023, the Company’s loan portfolio included $237.4 million in adjustable-rate residential mortgage loans, or 87.5% of the Company’s residential mortgage loan portfolio. The retention of adjustable-rate loans in the portfolio helps reduce our exposure to increases in prevailing market interest rates.
We offer mortgage loans secured by multi-family property (residential real estate comprised of five or more units.) At June 30, 2022, multi-family loans totaled $14.3 million, or 5.2%, of our total loan portfolio. We originate multi-family real estate loans for terms of generally 25 years or less.
We offer mortgage loans secured by multi-family property (residential real estate comprised of five or more units.) At June 30, 2023, multi-family loans totaled $19.1 million, or 6.0%, of our total loan portfolio. We originate multi-family real estate loans for terms of generally 25 years or less.
We review our deposit mix and pricing on an ongoing basis as needed . Borrowings . First Federal of Hazard and First Federal of Kentucky borrow from the FHLB-Cincinnati to supplement their supplies of investable funds and to meet deposit withdrawal requirements. The Federal Home Loan Bank functions as a central reserve bank providing credit for member financial institutions.
First Federal of Hazard and First Federal of Kentucky borrow from the FHLB-Cincinnati to supplement their supplies of investable funds and to meet deposit withdrawal requirements. The Federal Home Loan Bank functions as a central reserve bank providing credit for member financial institutions.
In the most recent available data, using information from the Commonwealth of Kentucky Economic Development and the United States Bureau of Labor Statistics, median household income in Perry County is $28,287 compared to personal income of $48,182 in Kentucky and $67,862 in the United States. Total population in Perry County is approximately 28,000.
In the most recent available data, using information from the Commonwealth of Kentucky Economic Development and the United States Bureau of Labor Statistics, median household income in Perry County is $43,931 compared to personal income of $52,326 in Kentucky and $74,580 in the United States. Total population in Perry County is approximately 28,000.
Kentucky First’s and First Federal of Hazard’s executive offices are located at 655 Main Street, Hazard, Kentucky, 41702 and the telephone number for investor relations is (888) 818-3372. At June 30, 2022, Kentucky First had total assets of $328.1 million, deposits of $239.9 million and stockholders’ equity of $52.0 million.
Kentucky First’s and First Federal of Hazard’s executive offices are located at 655 Main Street, Hazard, Kentucky, 41702 and the telephone number for investor relations is (888) 818-3372. At June 30, 2023, Kentucky First had total assets of $349.0 million, deposits of $226.3 million and stockholders’ equity of $50.7 million.
At June 30, 2022, our consumer loan balance totaled $9.2 million, or 3.3%, of our total loan portfolio. Of the consumer loan balance at June 30, 2022, $7.7 million were home equity loans, $891,000 were loans secured by savings deposits and $657,000 were automobile or unsecured loans.
At June 30, 2023, our consumer loan balance totaled $10.8 million, or 3.5%, of our total loan portfolio. Of the consumer loan balance at June 30, 2023, $9.2 million were home equity loans, $855,000 were loans secured by savings deposits and $715,000 were automobile or unsecured loans.
As required by statute, the federal banking agencies have adopted Interagency Guidelines prescribing Standards for Safety and Soundness. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired.
The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired.
At June 30, 2022, First Federal of Hazard had total assets of $84.2 million, net loans of $72.2 million, total mortgage-backed and other securities of $5.5 million, deposits of $48.2 million and total capital of $18.4 million. First Federal Savings Bank of Kentucky.
At June 30, 2023, First Federal of Hazard had total assets of $89.1 million, net loans of $81.0 million, total mortgage-backed and other securities of $4.3 million, deposits of $45.5 million and total capital of $18.0 million. First Federal Savings Bank of Kentucky.
At June 30, 2022, First Federal of Kentucky had total assets of $243.8 million, net loans of $202.3 million, total mortgage-backed and other securities of $5.3 million, deposits of $193.8 million and total capital of $31.0 million. First Federal of Kentucky’s main office is located at 216 W.
At June 30, 2023, First Federal of Kentucky had total assets of $260.4 million, net loans of $232.7 million, total mortgage-backed and other securities of $8.1 million, deposits of $182.8 million and total capital of $30.5 million. First Federal of Kentucky’s main office is located at 216 W.
The primary employer in the area is public administration, which employs about 40.7% of the workforce followed by the education and health services sector (9.1%), followed by the retail (7.4%), and other services (6.1%.). The unemployment rate was 3.7% for July 2022. The median household income in Franklin County is $60,789. Boyle County has a population of approximately 31,000.
The services sector employs about 33.4% of the workforce followed by public administration (31.0%), followed by the retail (11.4%), and construction (7.8%.). The unemployment rate was 4.1% for July 2023. The median household income in Franklin County is $64,016. Boyle County has a population of approximately 31,000.
The sales sector, which employs about 12.7% of the work force, while office and administrative support and production workers represent the next largest job counts with approximately 12.6% and 8.3% of the workforce, respectively. Centre College is one of the larger employers in the community.
The services sector employs about 43.6% of the work force, while retail trade represents the next largest job counts with approximately 18.6% of the workforce. The transportation and communications sector and the manufacturing sector represent approximately 10.8% and 10.6% of the workforces, respectively. Centre College is one of the larger employers in the community.
In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized association, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion. The OCC could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors.
The OCC is required to take certain supervisory actions against undercapitalized federal savings associations, the severity of which depends upon the association’s degree of undercapitalization. In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized association, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion.
However, as a regional economic center, Hazard tends to draw consumers and workers who commute from surrounding counties. Employment in the market area, particularly in Perry County, consists primarily of education and health services (26.0%), the trade, transportation and utilities industry (20.3%), professional and business services (7.8%), and financial activities (2.8%).
However, as a regional economic center, Hazard tends to draw consumers and workers who commute from surrounding counties. Employment in the market area, particularly in Perry County, consists service sector (50.4%), retail trade (23.6%), public administration (7.0%), and finance, insurance and real estate (6.8%).
Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the rates offered by our competition, profitability to us, asset liability management and customer preferences and concerns.
In determining the terms of our deposit accounts, we consider the rates offered by our competition, profitability to us, asset liability management and customer preferences and concerns. We review our deposit mix and pricing on an ongoing basis as needed . Borrowings .
Subject to certain exceptions, a federal savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral. Standards for Safety and Soundness.
Federal law provides that federal savings associations are generally subject to the limits on loans to one borrower applicable to national banks. Subject to certain exceptions, a federal savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus.
Removed
If adequately capitalized, regulatory approval is required to accept broker deposits. The OCC is required to take certain supervisory actions against undercapitalized federal savings associations, the severity of which depends upon the association’s degree of undercapitalization.
Added
We began utilizing brokered funds in June 2023 and had $21.0 million in such deposits at June 30, 2023. Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors.
Removed
Significantly and undercapitalized associations are subject to additional mandatory and discretionary measures. Loans to One Borrower. Federal law provides that federal savings associations are generally subject to the limits on loans to one borrower applicable to national banks.
Added
Under the regulations, an institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater.
Added
An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater.
Added
An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%.
Added
An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%.
Added
An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%. If less than adequately capitalized, regulatory approval is required to accept broker deposits.
Added
The OCC could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors. Significantly and undercapitalized associations are subject to additional mandatory and discretionary measures. Loans to One Borrower.
Added
An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral, which generally does not include real estate. Standards for Safety and Soundness. As required by statute, the federal banking agencies have adopted Interagency Guidelines prescribing Standards for Safety and Soundness.
Added
Failure to implement such a plan can result in further enforcement action, including the issuance of a cease-and-desist order or the imposition of civil money penalties. Limitation on Capital Distributions.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

28 edited+46 added−29 removed60 unchanged
Biggest changeHowever, in light of elevated inflation and a strong labor market, the FOMC commenced increasing the target range for the federal funds rate by implementing a 25 basis point increase to a range of 0.25% to 0.50% in March 2022, a 50 basis point increase to a range of 0.75% to 1.00% in May 2022, a 75 basis point increase to a range of 1.50% to 1.75% in June 2022 and in July 2022, the FOMC implemented another 75 basis point increase to a range of 2.25% to 2.50%.
Biggest changeHowever, in light of elevated inflation and a strong labor market, the FOMC commenced increasing the target range for the federal funds rate.
The new minimum capital requirements are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4%.
The minimum capital requirements are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4%.
Any increase in our allowance for loan losses or loan charge-offs as required by regulatory authorities may have a material adverse effect on our results of operations and financial condition. 18 A large percentage of our loans are collateralized by real estate and disruptions in the real estate market may result in losses and hurt our earnings.
Any increase in our allowance for loan losses or loan charge-offs as required by regulatory authorities may have a material adverse effect on our results of operations and financial condition. A large percentage of our loans are collateralized by real estate and disruptions in the real estate market may result in losses and hurt our earnings.
It is expected that First Federal MHC will continue to waive future dividends, except to the extent dividends are needed to fund First Federal MHC’s continuing operations, subject to the ability of First Federal MHC to obtain regulatory approval of its requests to waive dividends and to its ability to obtain member approval of dividend waivers. 23 We cannot predict whether members will continue to approve annual dividend waiver requests or whether the Federal Reserve Board will grant future dividend waiver requests and, if granted, there can be no assurance as to the conditions, if any, the Federal Reserve Board will place on future dividend waiver requests by grandfathered mutual holding companies such as First Federal MHC.
It is expected that First Federal MHC will continue to waive future dividends, except to the extent dividends are needed to fund First Federal MHC’s continuing operations, subject to the ability of First Federal MHC to obtain regulatory approval of its requests to waive dividends and to its ability to obtain member approval of dividend waivers. 24 We cannot predict whether members will continue to approve annual dividend waiver requests or whether the Federal Reserve Board will grant future dividend waiver requests and, if granted, there can be no assurance as to the conditions, if any, the Federal Reserve Board will place on future dividend waiver requests by grandfathered mutual holding companies such as First Federal MHC.
As of June 30, 2022, the capital levels of First Federal of Hazard and First Federal of Kentucky exceed the required capital amounts according to the Community Bank Leverage Ratio regulations and we believe they also meet the fully-phased in minimum capital requirements. See Note K-Stockholders’ Equity and Regulatory Capital of Notes to Consolidated Financial Statements.
As of June 30, 2023, the capital levels of First Federal of Hazard and First Federal of Kentucky exceed the required capital amounts according to the Community Bank Leverage Ratio regulations and we believe they also meet the fully-phased in minimum capital requirements. See Note K-Stockholders’ Equity and Regulatory Capital of Notes to Consolidated Financial Statements.
First Federal MHC has received Federal Reserve Board approval to waive quarterly dividends totaling $0.40 per share annually beginning with the dividend paid on September 28, 2012 and continuing through the dividend payable in the third quarter of 2023.
First Federal MHC has received Federal Reserve Board approval to waive quarterly dividends totaling $0.40 per share annually beginning with the dividend paid on September 28, 2012 and continuing through the dividend payable in the third quarter of 2024.
Approximately 96.3% of our loan portfolio at June 30, 2022 was comprised of loans collateralized by real estate. Disruptions in the real estate market could significantly impair the value of our collateral and our ability to sell the collateral upon foreclosure.
Approximately 96.3% of our loan portfolio at June 30, 2023 was comprised of loans collateralized by real estate. Disruptions in the real estate market could significantly impair the value of our collateral and our ability to sell the collateral upon foreclosure.
The final rule also establishes a “capital conservation” buffer of 2.5%, and will result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7%; (ii) a Tier 1 to risk-based assets capital ratio of 8.5%; and (iii) a total capital ratio of 10.5%.
The regulations also establish a “capital conservation” buffer of 2.5%, and will result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7%; (ii) a Tier 1 to risk-based assets capital ratio of 8.5%; and (iii) a total capital ratio of 10.5%.
Our access to funding sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally.
Our access to funding sources in amounts adequate to finance our activities or on acceptable terms could be impaired by factors that affect our organization specifically or the financial services industry or economy in general.
At June 30, 2022, $216.4 million, or 78.4%, of our loan portfolio was secured by one-to-four family real estate, all of which is located in the Commonwealth of Kentucky, and we intend to continue this type of lending in the foreseeable future.
At June 30, 2023, $240.1 million, or 76.1%, of our loan portfolio was secured by one-to-four family real estate, all of which is located in the Commonwealth of Kentucky, and we intend to continue this type of lending in the foreseeable future.
Inflation rose sharply at the end of 2021 and has continued rising in 2022 at levels not seen for over 40 years. Inflationary pressures are currently expected to remain elevated throughout 2022. Inflation could lead to increased costs to our customers, making it more difficult for them to repay their loans or other obligations.
Inflation has risen sharply since the end of 2021 to levels not seen for over 40 years. Inflationary pressures are currently expected to remain elevated throughout 2023. Inflation could lead to increased costs to our customers, making it more difficult for them to repay their loans or other obligations.
See “Regulation and Supervision—Regulation of Federal Savings Associations—Capital Requirements” for a discussion of regulatory capital requirements. We may be subject to more stringent capital requirements which could result in lower returns on equity, require the raising of additional capital, and limit our ability to pay dividends or repurchase shares of our common stock.
We may be subject to more stringent capital requirements which could result in lower returns on equity, require the raising of additional capital, and limit our ability to pay dividends or repurchase shares of our common stock.
Future write-downs of intangibles and other long lived assets could affect certain of the financial covenants under our debt agreements, could restrict our financial flexibility, and would impact our results of operations.
Future write-downs of intangibles and other long-lived assets could affect certain of the financial covenants under our debt agreements, could restrict our financial flexibility, and would impact our results of operations. 22 Risks Related to Operational Matters We are subject to certain risks in connection with our use of technology.
Risks Related to Our Holding Company Structure First Federal MHC owns a majority of our common stock and is able to exercise voting control over most matters put to a vote of stockholders, including preventing sale or merger transactions you may like or a second-step conversion by First Federal MHC.
The ability to keep pace with technological change is important, and the failure to do so, due to cost, proficiency or otherwise, could have a material adverse impact on our business and therefore on our financial condition and results of operations. 23 Risks Related to Our Holding Company Structure First Federal MHC owns a majority of our common stock and is able to exercise voting control over most matters put to a vote of stockholders, including preventing sale or merger transactions you may like or a second-step conversion by First Federal MHC.
Any increase in our allowance for loan losses, or expenses incurred to determine the appropriate level of the allowance for loan losses, may have a material adverse effect on our financial condition and results of operations. Ineffective liquidity management could adversely affect our financial results and condition. Effective liquidity management is essential for the operation of our business.
Any increase in our allowance for loan losses, or expenses incurred to determine the appropriate level of the allowance for loan losses, may have a material adverse effect on our financial condition and results of operations. Our FDIC deposit insurance premiums and assessments may increase, which would reduce our profitability.
We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry.
Some of the institutions with which we compete have substantially greater resources than we have and may offer services that we do not provide. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry.
A failure to maintain adequate liquidity could materially and adversely affect our business, results of operations or financial condition. We may be adversely affected by recent changes in U.S. tax laws and regulations.
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. We may be adversely affected by recent changes in U.S. tax laws and regulations.
Decreases in the fair value of securities available for sale resulting from increases in interest rates therefore could have an adverse effect on stockholders’ equity. We offer fixed-rate and adjustable-rate mortgage loans with terms of up to 30 years; however, across our loan portfolio, interest rates and payments adjust annually after a one-, three-, five- or seven-year initial fixed period.
We offer fixed-rate and adjustable-rate mortgage loans with terms of up to 30 years; however, across our loan portfolio, interest rates and payments adjust annually after a one-, three-, five- or seven-year initial fixed period. At June 30, 2023, 87.5% of our residential real estate loan portfolio were adjustable-rate loans.
At June 30, 2022, 88.4% of our residential real estate loan portfolio were adjustable-rate loans. Changes in interest rates could have a negative impact on our results of operations by reducing the ability of borrowers to repay their current loan obligations as interest rates rise, the borrower’s payments rise, increasing the potential for delinquencies and defaults.
Rising interest rates could have a negative impact on our results of operations by reducing the ability of borrowers to repay their current loan obligations as interest rates rise, the borrower’s payments rise, increasing the potential for delinquencies and defaults. 17 Risks Related to Our Lending Activities Inflationary pressures and rising prices may affect our results of operations and financial condition.
Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger and virtually all other aspects of our business. Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks.
Our security measures may not be sufficient to mitigate the risk of a cyber attack. Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger and virtually all other aspects of our business.
Our profitability will depend upon our continued ability to compete successfully in our market areas. 19 Risks Related to Our Business and Industry Generally We expect that the implementation of a new accounting standard could require us to increase our allowance for loan losses and may have a material adverse effect on our financial condition and results of operations.
Any substantial, unexpected, and/or prolonged change in the level or cost of liquidity, or any liquidity related requirements imposed by our regulators, could impair our ability to fund operations, pay dividends on outstanding shares of stock, enact stock repurchases, and meet our obligations as they become due and could have a material adverse effect on our business, financial condition and results of operations. 19 Risks Related to Our Business and Industry Generally We expect that the implementation of a new accounting standard could require us to increase our allowance for loan losses and may have a material adverse effect on our financial condition and results of operations.
The ability to keep pace with technological change is important, and the failure to do so, due to cost, proficiency or otherwise, could have a material adverse impact on our business and therefore on our financial condition and results of operations. 22 If we are required to impair our goodwill, intangibles, or other long-lived assets, our financial condition and results of operations would be adversely affected.
If we are required to impair our goodwill, intangibles, or other long-lived assets, our financial condition and results of operations would be adversely affected.
We require sufficient liquidity to meet customer loan requests, customer deposit maturities/withdrawals, payments on our debt obligations as they come due and other cash commitments under both normal operating conditions and other unpredictable circumstances causing industry or general financial market stress.
We require sufficient liquidity to fund loan commitments, satisfy depositor withdrawal requests, make payments on our debt obligations as they become due, and meet other cash commitments.
Price competition for loans and deposits might result in our earning less on our loans and paying more on our deposits, which reduces net interest income. Some of the institutions with which we compete have substantially greater resources than we have and may offer services that we do not provide.
Although we consider ourselves competitive in our market areas, we face intense competition both in making loans and attracting deposits. Price competition for loans and deposits might result in our earning less on our loans and paying more on our deposits, which reduces net interest income.
Any one or a combination of the above events could have a material, adverse effect on our business, financial condition, and results of operations. Risks Related to Our Lending Activities Inflationary pressures and rising prices may affect our results of operations and financial condition.
Thus, any borrowing or funds needed to raise capital required to make a capital injection may be more expensive or difficult to obtain and could have an adverse effect on our business, financial condition and results of operations.
Moreover, the slow economy in First Federal of Hazard’s market area will limit our ability to grow our asset base in that market. Strong competition within our market areas could hurt our profits and slow growth. Although we consider ourselves competitive in our market areas, we face intense competition both in making loans and attracting deposits.
Moreover, the slow economy in First Federal of Hazard’s market area will limit our ability to grow our asset base in that market. 18 Our mortgage banking revenue and the value of our mortgage servicing rights can be volatile. We plan to continue to sell our longer-term, conforming and non-conforming fixed-rate loans that we originate to generate noninterest income.
In March 2020, the Federal Open Market Committee of the Federal Reserve reduced the target range for the federal funds rate to between 0.0% and 0.25%, compared to the previous target of between 1.00% and 1.25%.
Since maintaining a federal funds rate target in the range of 0% to 0.25% from March 2020 through 2021, the Federal Reserve Board made multiple rate increases during 2022 and 2023 increasing the target federal funds rate to a range of 5.00% to 5.25% as of June 2023, and subsequently to a range of 5.25% to 5.50% as of August 2023.
Such regulation, supervision and examination governs the activities in which we may engage, and is intended primarily for the protection of the deposit insurance fund and our depositors. 20 In 2010 and 2011, in response to the financial crisis and recession that began in 2008, significant regulatory and legislative changes resulted in broad reform and increased regulation affecting financial institutions.
Such regulation and supervision govern the activities in which an institution and its holding company may engage and is intended primarily for the protection of the federal deposit insurance fund and the depositors of the Banks rather than the protection of the Company’s stockholders.
Removed
At its September 2022 meeting the FOMC raised the overnight rate 75 basis points totaling an increase of 3.0% since March 2022 and announced that it would continue to battle inflation with additional increases in interest rates in 2022 and 2023.
Added
The future direction and levels of interest rates remain uncertain. The increase in interest rates has caused our net interest income to decline.
Removed
Risks Related to the COVID-19 Pandemic and Associated Economic Slowdown The ongoing COVID-19 pandemic and measures taken to limit its spread could adversely our business, financial condition, and results of operations. The COVID-19 pandemic has negatively impacted economic and commercial activity and financial markets, both globally and within the United States.
Added
Net income decreased $657,000 or 41.3% compared to the fiscal year ended June 30, 2022 primarily due to decreased net interest income, decreased non-interest income, increased provision for loan losses, and increased non-interest expenses, which were somewhat offset by decreased income taxes.
Removed
Measures to contain the virus, such as stay-at-home orders, travel restrictions, closure of non-essential businesses, occupancy limitations and social distancing requirements, resulted in significant business and operational disruptions, including business closures, and mass layoffs and furloughs.
Added
Net interest income decreased $304,000 or 3.3% and totaled $8.9 million for the year just ended, as interest income increased $1.8 million or 16.9% to $12.8 million and interest expense increased $2.1 million or 122.5% to $3.9 million. Our funding sources repriced more quickly during the interest rate increases than our assets.
Removed
Though most restrictions have generally been lifted or eased and consumer and business spending and unemployment levels have improved significantly, the economic recovery has been uneven, with industries such as travel, entertainment, hospitality and food service lagging, and, as of June 30, 2022, many companies have not returned workers to their offices.
Added
Consequently, the increase in our interest expense was attributed primarily to higher average rates paid on both deposits and FHLB advances, while the increase in our interest income was a combination of both higher average balances and higher rates earned on those assets.
Removed
Supply chain disruptions precipitated by the abrupt economic slowdown have contributed to increased costs, lost revenue, and inflationary pressures for many segments of the economy.
Added
Decreases in the fair value of securities available for sale resulting from increases in interest rates therefore could have an adverse effect on stockholders’ equity. Rising interest rates may adversely affect the ability of borrowers to repay loans.
Removed
Further, a significant number of workers left their jobs during the COVID-19 pandemic, leading to wage inflation in many industries as businesses attempt to fill vacant positions. 17 The United States government has taken significant steps to attempt to mitigate the economic effects of the pandemic.
Added
We also earn revenue from fees we receive for servicing mortgage loans. Changes in interest rates may impact our mortgage banking revenues, which could negatively impact our noninterest income. When rates rise, the demand for mortgage loans usually tends to fall, reducing loan origination volume and the related amount of gains on the sales of loans.
Removed
Congress appropriated approximately $4.7 trillion of fiscal stimulus in response to the COVID-19 pandemic pursuant to the Coronavirus Aid, Relief, and Economic Security Act, the American Rescue Plan Act and other supplemental legislation.
Added
Under the same conditions, net revenue from our mortgage servicing activities can increase due to slower prepayments, which reduces our amortization expense for mortgage servicing rights. When rates fall, mortgage originations usually tend to increase and the value of our mortgage servicing rights usually tends to decline, also with some offsetting revenue effect.
Removed
The Federal Reserve also took several actions to support financial markets, enable banks to continue to lend through the pandemic, and support businesses of all sizes. Whether the economic stimulus will have a lasting positive effect or whether it will contribute to higher inflation or other economic ill effects is unknown.
Added
During the fiscal year ended June 30, 2023, non-interest income decreased $213,000 or 41.4% and totaled $302,000, primarily due to decreased gains on loan sales.
Removed
Several vaccines for COVID-19 have been developed and widely distributed in the United States. However, it is unknown how effective they will be long-term or whether variants of the virus will develop against which the vaccines are less effective.
Added
In addition, our results of operations are affected by the amount of noninterest expenses associated with mortgage banking activities, such as salaries and employee benefits (including commissions), occupancy, equipment and data processing expense, and other operating costs.
Removed
The extent to which the COVID-19 pandemic will ultimately affect our business is unknown and will depend, among other things, on the duration of the pandemic, the actions undertaken by national, state and local governments and health officials to contain the virus or mitigate its effects, the safety and effectiveness of the vaccines that have been developed and the extent to which they are accepted by the public, the development of effective therapies, the permanence of operating conditions that developed during the pandemic, and how quickly and to what extent economic conditions improve and normal business and operating conditions resume.
Added
During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity. Liquidity Risk Financial challenges at other banking institutions could lead to depositor concerns that spread within the banking industry causing disruptive and destabilizing deposit outflows.
Removed
The longer the pandemic persists, the more pronounced the ultimate effects are likely to be.
Added
In March 2023, Silicon Valley Bank and Signature Bank experienced large deposit outflows coupled with insufficient liquidity to meet withdrawal demands, resulting in the institutions being placed into FDIC receivership. In May 2023, First Republic Bank was also placed into FDIC receivership.
Removed
The continuation of the COVID-19 pandemic and the efforts to contain the virus, including effects of economic stimulus, and the exhaustion or expiration of stimulus benefits, could: ● reduce the demand for loans and other financial services; ● result in increases in loan delinquencies, problem assets, and foreclosures; ● cause the value of collateral for loans, especially real estate, to decline in value; ● reduce the availability and productivity of our employees; ● cause our vendors and counterparties to be unable to meet existing obligations to us; ● negatively impact the business and operations of third-party service providers that perform critical services for our business; ● cause the value of our securities portfolio to decline; and ● cause the net worth and liquidity of loan guarantors to decline, impairing their ability to honor commitments to us.
Added
In the aftermath of these events, there has been substantial market disruption and concerns that diminished depositor confidence could spread across the banking industry, leading to deposit outflows that could destabilize other institutions.
Removed
Factors that could detrimentally impact our access to liquidity sources include a downturn in the geographic markets in which our loans and operations are concentrated or difficult credit markets. Our access to deposits may also be affected by the liquidity needs of our depositors.
Added
To strengthen public confidence in the banking system, the FDIC took action to protect funds held in uninsured deposit accounts at Silicon Valley Bank, Signature Bank and First Republic Bank. However, the FDIC has not committed to protecting uninsured deposits in other institutions that experience outsized withdrawal demands.
Removed
In particular, a majority of our liabilities are checking accounts and other liquid deposits, which are payable on demand or upon several days’ notice, while by comparison, a substantial majority of our assets are loans, which cannot be called or sold in the same time frame.
Added
To further bolster the banking system, the Federal Reserve Board created a new Bank Term Funding Program to provide an additional source of liquidity. At June 30, 2023, we had $20.2 million in available liquidity, including $8.2 million in cash and cash equivalents. Our uninsured deposits are estimated to be approximately $13.8 million or 6.10% of total deposits.
Removed
Although we have historically been able to replace maturing deposits and advances as necessary, we might not be able to replace such funds in the future, especially if a large number of our depositors seek to withdraw their accounts, regardless of the reason.
Added
At June 30, 2023, we had off-balance sheet liquidity sources totaling $89.3 million, including $87.3 million in additional borrowing capacity at the Federal Home Loan Bank of Cincinnati. Notwithstanding our significant liquidity, large deposit outflows could adversely affect our financial condition and results of operations and could result in the closure of the Banks.
Removed
Regulation of the financial services industry is undergoing major changes, and we may be adversely affected by changes in laws and regulations. We are subject to extensive government regulation, supervision and examination.
Added
Furthermore, the recent bank failures may result in strengthening of capital and liquidity rules which, if the revised rules apply to us, could adversely affect our financial condition and results of operations. Insufficient liquidity or liquidity related concerns could impair our ability to fund operations, pay dividends on outstanding shares of stock, and jeopardize our financial condition, growth and prospects.
Removed
The Dodd-Frank Act has created a significant shift in the way financial institutions operate and has restructured the regulation of depository institutions by merging the Office of Thrift Supervision, which previously regulated the Banks, into the OCC, and assigning the regulation of savings and loan holding companies, including the Company and the MHC, to the Federal Reserve Board.
Added
Liquidity risk is the potential that we will be unable to meet our obligations as they become due because of an inability to liquidate assets or obtain adequate funding at a reasonable cost, in a timely manner and without adverse conditions or consequences.
Removed
The Dodd-Frank Act also created the Consumer Financial Protection Bureau to administer consumer protection and fair lending laws, a function that was formerly performed by the depository institution regulators.
Added
Our sources of liquidity consist primarily of cash, assets readily convertible to cash (such as investment securities), increases in deposits, advances, as needed, from the FHLB, borrowings, as needed, from the Federal Reserve Bank of Cleveland and other borrowings.
Removed
As required by the Dodd-Frank Act, the federal banking regulators have proposed new consolidated capital requirements that will limit our ability to borrow at the holding company level and invest the proceeds from such borrowings as capital in the Banks that could be leveraged to support additional growth.
Added
On March 12, 2023, the Department of the Treasury, the Federal Reserve and the FDIC issued a joint statement relating to the resolution of Silicon Valley Bank and Signature Bank that stated that losses to support uninsured deposits of those banks would be recovered via a special assessment on banks.
Removed
The Dodd-Frank Act contains various other provisions designed to enhance the regulation of depository institutions and prevent the recurrence of a financial crisis such as that which occurred in 2008 and 2009. The full impact of the Dodd-Frank Act on our business and operations may not be known for years until final regulations implementing the legislation are adopted.
Added
On May 11, 2023 the FDIC Board of Directors approved a notice of proposed rulemaking, which would implement a special assessment to recover the cost associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. In general, large banks with large amounts of uninsured deposits benefitted most from the protection of uninsured depositors.
Removed
The Dodd-Frank Act may have a material impact on our operations, particularly through increased regulatory burden and compliance costs. Any future legislative changes could have a material impact on our profitability, the value of assets held for investment or the value of collateral for loans.
Added
Banking organizations with total assets over $50 billion would pay more than 95 percent of the special assessment and banking organizations with total assets under $5 billion would not be subject to the special assessment.
Removed
Future legislative changes could also require changes to business practices and potentially expose us to additional costs, liabilities, enforcement action and reputational risk.
Added
Under the current provisions of this notice of proposed rulemaking, we believe that we would not be impacted by the special assessment associated with the most recent banking organization closures. Strong competition within our market areas could hurt our profits and slow growth.
Removed
In addition to the enactment of the Dodd-Frank Act, the federal regulatory agencies recently have begun to take stronger supervisory actions against financial institutions that have experienced increased loan losses and other weaknesses as a result of the recent economic crisis.
Added
Our profitability will depend upon our continued ability to compete successfully in our market areas. Risks Related to Laws and Regulations Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.
Removed
These actions include the entering into of written agreements and cease and desist orders that place certain limitations on their operations.
Added
The Banks are subject to extensive regulation, supervision and examination by the OCC. The Company is subject to extensive regulation, supervision and examination by the Federal Reserve Board.
Removed
Federal banking regulators recently have also been using with more frequency their ability to impose individual minimal capital requirements on banks, which requirements may be higher than those imposed under the Dodd-Frank Act or which would otherwise qualify the bank as being “well capitalized” under the OCC’s prompt corrective action regulations.
Added
Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the adequacy of the level of our allowance for loan losses.
Removed
If we were to become subject to a supervisory agreement or higher individual capital requirements, such action may have a negative impact on our ability to execute our business plans, as well as our ability to grow, pay dividends, repurchase stock or engage in mergers and acquisitions and may result in restrictions in our operations.
Added
These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeYear Opened/ Acquired Owned or Leased Net Book Value at June 30, 2022 Approximate Square Footage (Dollars in thousands) First Federal of Hazard Main Office: 655 Main Street Hazard, Kentucky 41701 2016 Owned $ 688 5,600 First Federal of Kentucky Main Office: 216 West Main Street Frankfort, Kentucky 40601 2005 Owned 912 14,000 194 Versailles Road Frankfort, Kentucky 40601 2015 Owned 814 2,700 1220 US 127 South Frankfort, Kentucky 40601 2005 Owned 440 2,480 340 West Main Street Danville, Kentucky 40422 2012 Owned 427 8,700 120 Skywatch Drive Danville, Kentucky 40422 2012 Owned 687 2,300 208 Lexington Street Lancaster, Kentucky 40444 2012 Owned 404 4,300 The net book value of our investment in premises and equipment was $4.6 million at June 30, 2022.
Biggest changeYear Opened/ Acquired Owned or Leased Net Book Value at June 30, 2023 Approximate Square Footage (Dollars in thousands) First Federal of Hazard Main Office: 655 Main Street Hazard, Kentucky 41701 2016 Owned $ 667 5,600 First Federal of Kentucky Main Office: 216 West Main Street Frankfort, Kentucky 40601 2005 Owned 875 14,000 194 Versailles Road Frankfort, Kentucky 40601 2015 Owned 804 2,700 1220 US 127 South Frankfort, Kentucky 40601 2005 Owned 428 2,480 340 West Main Street Danville, Kentucky 40422 2012 Owned 483 8,700 120 Skywatch Drive Danville, Kentucky 40422 2012 Owned 669 2,300 208 Lexington Street Lancaster, Kentucky 40444 2012 Owned 388 4,300 The net book value of our investment in premises and equipment was $4.4 million at June 30, 2023.
Item 2. Properties . We conduct our business through seven offices. The following table sets forth certain information relating to our offices at June 30, 2022.
Item 2. Properties . We conduct our business through seven offices. The following table sets forth certain information relating to our offices at June 30, 2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeWe are not a party to any pending legal proceedings that we believe could have a material adverse effect on our financial condition, results of operations or cash flows. Item 4. Mine Safety Disclosures . Not applicable. 24 PART II
Biggest changeWe are not a party to any pending legal proceedings that we believe could have a material adverse effect on our financial condition, results of operations or cash flows. Item 4. Mine Safety Disclosures . Not applicable. 25 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed0 unchanged
Biggest changePeriod (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (1) April 2022 Beginning date: April 1 Ending date: April 30 — — — 131,500 May 2022 Beginning date: May 1 Ending date: May 31 — — — 131,500 June 2022 Beginning date: June 1 Ending date: June 30 63,520 $ 7.55 63,520 67,980 Total 63,520 $ 7.55 63,520 67,980 (1) On February 3, 2021, the Company announced a program (its tenth) to repurchase up to 150,000 shares of its Common Stock. 25 Item 6. [Reserved] .
Biggest changePeriod (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (1) April 2023 Beginning date: April 1 Ending date: April 30 — — — 10,980 May 2023 Beginning date: May 1 Ending date: May 31 10,980 $ 6.05 10,980 — June 2023 Beginning date: June 1 Ending date: June 30 — — — — Total 10,980 $ 6.05 10,980 10,980 (1) On May 18, 2023, the Company announced that it had substantially completed its program to repurchase up to 150,000 shares of its Common Stock, which was initiated on February 3, 2021. 26 Item 6. [Reserved] .
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . (a) The information contained under the sections captioned “ Market Information ” in the Company’s Annual Report to Stockholders for the Fiscal Year Ended June 30, 2022 (the “Annual Report”) filed as Exhibit 13 hereto is incorporated herein by reference.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . (a) The information contained under the sections captioned “ Market Information ” in the Company’s Annual Report to Stockholders for the Fiscal Year Ended June 30, 2023 (the “Annual Report”) filed as Exhibit 13 hereto is incorporated herein by reference.
(b) Not applicable. (c) The Company repurchased the following equity securities registered under the Securities Exchange Act of 1934, as amended, during the fourth quarter of the fiscal year ended June 30, 2022.
(b) Not applicable. (c) The Company repurchased the following equity securities registered under the Securities Exchange Act of 1934, as amended, during the fourth quarter of the fiscal year ended June 30, 2023.

Other KFFB 10-K year-over-year comparisons