Kentucky First Federal Bancorp Reports Decline in Net Earnings for Q4 and Six-Month Period Ending December 31, 2023
Kentucky First Federal Bancorp has announced a significant decline in net earnings for the quarter and six-month period ending on December 31, 2023. The holding company for First Federal Savings and Loan Association of Hazard and First Federal Savings Bank of Kentucky reported 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 per share for the same period in the previous year. For the six months ending on December 31, 2023, the net loss widened to $536,000 or ($0.07) per share from net earnings of $747,000 or $0.09 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. The increase in interest expenses by $1.6 million or 232.4% outpaced the rise in interest income of $796,000 or 25.4%. According to the bank’s Chief Executive Officer, Don Jennings, this decline is due to rapid increases in the cost of liabilities, including both wholesale and retail funding. While the cost of retail funding is expected to continue rising, Jennings suggests that the cost of wholesale funds may have peaked and could potentially start to decline in the coming months.
Non-interest expenses also rose by $119,000 or 5.9%, primarily 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%, while the average rate paid on interest-bearing liabilities jumped by 212 basis points to 2.99%.
Kentucky First Federal Bancorp also implemented a new accounting standard on July 1, 2023, for calculating its allowance for credit losses (ACL), resulting in an increase in the ACL for loans and a 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, mainly due to an increase in loans and cash equivalents. However, shareholders’ equity decreased by $1.5 million or 3.0% to $49.2 million, primarily 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.
Analyst comment
Negative news: Kentucky First Federal Bancorp announced a significant decline in net earnings for the quarter and six-month period ending on December 31, 2023. The net loss widened and is primarily attributed to a decrease in net interest income. Non-interest expenses also rose. Despite an increase in assets, shareholders’ equity decreased. As an analyst, it is likely that the market will react negatively to this news, leading to a decrease in the company’s stock price.
