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FORM 10-QSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _______
Commission File Number: No. 1-13904
KENTUCKY FIRST BANCORP, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 61-1281483
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(State of other jurisdiction of Identification No.)
306 N. Main Street
Cynthiana, Kentucky 41031
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(606) 234-1440
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Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
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 X No
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As of November 8, 1996, the latest practicable date, 1,388,625
shares of the registrant's common stock, $0.01 par value, were
issued and outstanding.
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KENTUCKY FIRST BANCORP, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Discussion of Financial Condition Changes from June 30, 1996 to
September 30, 1996
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At September 30, 1996, the Corporation's assets totaled $86.0
million, a decrease of $288,000, or .3%, from the $86.3 million
of total assets at June 30, 1996. The decline in assets resulted
from a decline in the deposit portfolio of $2.2 million which was
partially offset by an increase in advances from the Federal Home
Loan Bank of $1.8 million.
Liquid assets (i.e. cash, interest-bearing deposits and
investment securities) decreased by $2.1 million over the three
month period, to a total of $15.0 million at September 30, 1996,
as investment securities totaling $1.1 million matured during the
quarter. Regulatory liquidity amounted to 10.3%, at September
30, 1996.
Loans receivable increased by $2.3 million, or 5.2%, during the
three month period, to a total of $45.3 million at September 30,
1996. Loan disbursements amounted to $5.0 million and were
partially offset by principal repayments of $2.8 million. The
allowance for loan losses totaled $370,000 at September 30, 1996,
as compared to $367,000 at June 30, 1996. Nonperforming loans
totaled $76,000 at September 30, 1996, as compared to $122,000 at
June 30, 1996. The allowance for loan losses represented 486.8%
of nonperforming loans as of September 30, 1996 and 300.8% at
June 30, 1996. Although management believes that its allowance
for loan losses at September 30, 1996 is adequate based upon
facts and circumstances available to it, there can be no
assurances that additions to such allowance will not be necessary
in future periods, which could adversely affect the Corporation's
results of operations.
Deposits totaled $49.6 million at September 30, 1996, a decrease
of $2.2 million, or 4.2%, from June 30, 1996 levels. Management
continued its conservative pricing strategy with respect to
deposit accounts during the current interest rate environment.
The Savings Bank is required to meet each of three minimum
capital standards promulgated by the Office of Thrift Supervision
(OTS), hereinafter described as the tangible capital requirement,
the core capital requirement and the risk-based capital
requirement. The tangible capital requirement mandates
maintenance of shareholders' equity less all intangible assets
equal to 1.5% of adjusted total assets. The core capital
requirement provides for the maintenance of tangible capital plus
certain forms of supervisory goodwill equal to 3% of adjusted
total assets, while the risk-based capital requirement mandates
maintenance of core capital plus general loan loss allowances
equal to 8% of risk-weighted assets as defined by OTS
regulations.
At September 30, 1996, the Savings Bank's tangible and core
capital totaled $15.6 million, or 18.2%, of adjusted total
assets, which exceeded the minimum tangible and core capital
requirements of $1.3 million and $2.6 million by $14.4 million
and $13.1 million, respectively. The Savings Bank's risk-based
capital of $16.0 million, or 34.7% of risk-weighted assets,
exceeded the current 8% requirement by $12.3 million.
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KENTUCKY FIRST BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three Month Periods Ended
September 30, 1996 and 1995
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General
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Net earnings amounted to $15,000 for the three months ended
September 30, 1996, a decrease of $130,000, or 89.7%, from the
$145,000 of net earnings reported for the same period in 1995.
The decline in earnings resulted primarily from a $351,000 charge
recorded in the current quarter reflecting a special assessment
to recapitalize the Savings Association Insurance Fund (SAIF),
coupled with a $115,000 increase in general, administrative and
other expense, which were partially offset by a $255,000 increase
in net interest income, a $3,000 increase in other income and a
$74,000 decrease in the provision for federal income taxes.
Net Interest Income
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Net interest income increased by $255,000, or 47.6%, for the
three months ended September 30, 1996, compared to the 1995
period. Interest income on loans increased by $127,000, or
16.3%, due primarily to a $4.1 million increase in the average
balance of loans outstanding year-to-year coupled with an
increase in yield. Interest income on mortgage-backed securities
increased by $246,000, or 201.6%, due primarily to a $14.9
million increase in the average balance outstanding. Interest
income on investment securities and interest-bearing deposits
decreased by $29,000, or 9.8%, due primarily to a decline in the
average portfolio balance outstanding. The increases in
interest-earning assets and corresponding increase in interest
income reflect management's deployment of proceeds from the
Corporation's common stock offering.
Interest expense on deposits decreased by $112,000, or 17.2%, due
primarily to a $1.2 million decrease in average deposits
outstanding coupled with a decline in the cost of deposits year-
to-year. Interest expense on borrowings increased by $201,000
during the current quarter, due primarily to a $14.2 million
increase in advances from the Federal Home Loan Bank.
As a result of the foregoing changes in interest income and
interest expense, net interest income increased by $255,000, or
47.6%, to a total of $791,000 for the three months ended
September 30, 1996. The interest rate spread increased to
approximately 2.94% from 2.47% during the respective 1996 and
1995 quarters, while the net interest margin increased to
approximately 3.86% in 1996, as compared to 3.34% in 1995.
Provision for Losses on Loans
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A provision for losses on loans is charged to earnings to bring
the total allowance for loan losses to a level considered
appropriate by management based on historical experience, the
volume and type of lending conducted by the Savings Bank, the
status of past due principal and interest payments, general
economic conditions, particularly as such conditions relate to
the Savings Bank's market area, and other factors related to the
collectibility of the Savings Bank's loan portfolio. As a result
of such analysis, management recorded a $4,000 provision for
losses on loans during the three month period ended September 30,
1996. There can be no assurance that the loan loss allowance of
the Savings Bank will be adequate to absorb losses on known
nonperforming assets or that the allowance will be adequate to
cover losses on nonperforming assets in the future.
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KENTUCKY FIRST BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Other Income
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Other income increased by $3,000, or 8.8%, for the three months
ended September 30, 1996, compared to the same period in 1995,
due primarily an increase in service charges and fees on loans
and deposits.
General, Administrative and Other Expense
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General, administrative and other expense increased by $466,000,
or 135.9%, during the three months ended September 30, 1996,
compared to the same period in 1995. This increase resulted
primarily from the $351,000 charge recorded in 1996 attendant to
the aforementioned SAIF recapitalization. The deposit accounts
of the Savings Bank and of other savings associations are insured
by the FDIC in the SAIF. The reserves of the SAIF are below the
level required by law, because a significant portion of the
assessments paid into the fund are used to pay the cost of prior
thrift failures. The deposit accounts of commercial banks are
insured by the FDIC in the Bank Insurance Fund ("BIF"), except to
the extent such banks have acquired SAIF deposits. The reserves
of the BIF met the level required by law in May 1995. As a
result of the respective reserve levels of the funds, deposit
insurance assessments paid by healthy savings associations
exceeded those paid by healthy commercial banks by approximately
$.19 per $100 in deposits in 1995. In 1996, no BIF assessments
are required for healthy commercial banks except for a $2,000
minimum fee. A continuation of this premium disparity could have
a negative competitive impact on the Savings Bank and other
institutions with SAIF deposits.
Congress enacted legislation, the Deposit Insurance Funds Act of
1996, to recapitalize the SAIF and eliminate the significant
premium disparity. The recapitalization plan provides for a
special assessment of $.657 per $100 of SAIF deposits held at
March 31, 1995, in order to increase SAIF reserves to the level
required by law. SAIF assessments would initially be set at the
same level as BIF assessments. Assessments on well-capitalized
institutions with the highest supervisory ratings would be
reduced to zero and institutions in the lowest risk assessment
classification will be assessed at the rate of 0.27% of insured
deposits, and could never be reduced below the level for BIF
assessments. Until December 31, 1999, however, SAIF insured
institutions will be required to pay assessments to the FDIC at
the rate of 6.4 basis points to help fund interest payments on
certain bonds issued by the Financing Corporation ("FICO"), an
agency of the federal government established to finance takeovers
of insolvent thrifts. During this period, BIF members will be
assessed for FICO obligations at the rate of 1.3 basis points.
After December 31, 1999, both BIF and SAIF members will be
assessed at the same rate for FICO payments.
The Savings Bank had $53.6 million in deposits at March 31, 1995.
The special assessment level was finalized at $.657 per $100 in
deposits, resulting in an assessment totaling $351,000, or
$232,000 after-tax.
A component of the recapitalization plan provides for the merger
of the SAIF and BIF on December 31, 1999, but only if there are
no insured savings association on that date. The legislation
directs the Department of Treasury to make recommendations to
Congress by March 31, 1997 for the establishment of a single
charter for banks and thrifts. The Savings Bank cannot predict
what the effect of this legislation will be on the Savings Bank.
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KENTUCKY FIRST BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
General, Administrative and Other Expense (continued)
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Additionally, the increase in general, administrative and other
expense resulted from a $63,000, or 37.1%, increase in employee
compensation and benefits and a $54,000, or 63.5%, increase in
other operating expense. The increase in employee compensation
generally reflects normal merit increases and increased costs
attendant to the Corporation's stock benefit plans implemented in
conjunction with the mutual-to-stock conversion. The increase in
other operating expense resulted primarily from increases in
professional fees, printing and other costs related to increased
reporting requirements of a public stock company. The special
one-time assessment to recapitalize the SAIF is expected to cause
federal deposit insurance premiums to be significantly reduced in
future quarters, beginning January 1, 1997.
Federal Income Taxes
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The provision for federal income taxes declined by $74,000, or
100.0%, for the three months ended September 30, 1996, as
compared to the same period in 1995. This decline resulted
primarily from the decrease in net earnings before taxes of
$192,000, or 87.7%. The effective tax rate was 33.8% for the
three months ended September 30, 1995.
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KENTUCKY FIRST BANCORP, INC.
SIGNATURES
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In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: November 15, 1996 By: /s/Betty J. Long
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Betty J. Long
President and Chief
Executive Officer
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