<PAGE>
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FORM 10-QSB
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 December 31, 1997
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.
________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 61-1281483
- ------------------------------- -------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
306 N. Main Street
Cynthiana, Kentucky 41031
- ----------------------------------------- -----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code:(606)234-1440
-------------
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
----- -----
As of February 6, 1998, the latest practicable date, 1,297,694
shares of the registrant's common stock, $0.01 par value, were
issued and outstanding.
Transitional small business disclosure format (check one):
Yes No X
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Page 1 of 17 pages<PAGE>
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INDEX
Page
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PART I
ITEM 1 - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
ITEM II MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS 10
PART II - OTHER INFORMATION 16
SIGNATURES 17
2
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KENTUCKY FIRST BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
--------- ----------
ASSETS
<S> <C> <C>
Cash and due from banks $ 472 $ 505
Interest-bearing deposits in other financial
institutions -- 762
------- -------
Total cash and cash equivalents 472 1,267
Investment securities available for sale-at market 3,266 2,202
Investment securities - at amortized cost,
approximate market value of $9,890 and $11,589
as of December 31, 1997 and June 30, 1997 9,828 11,733
Mortgage-backed securities available for sale
- at market 3,272 3,348
Mortgage-backed securities - at cost, approximate
market value of $16,443 and $17,483 as of
December 31, 1997 and June 30, 1997 16,249 17,822
Loans receivable - net 49,636 48,920
Office premises and equipment - at depreciated cost 1,384 1,397
Federal Home Loan Bank stock - at cost 1,091 1,052
Accrued interest receivable 525 574
Prepaid expenses and other assets 429 415
Prepaid federal income taxes 100 32
Deferred federal income tax assets 55 94
------- -------
Total assets $86,307 $88,856
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $54,844 $55,443
Advances from the Federal Home Loan Bank 15,966 17,970
Accrued interest payable 147 148
Other liabilities 660 568
------- -------
Total liabilities 71,617 74,129
Shareholders' equity
Preferred stock - authorized 500,000 shares of
$.01 par value; no shares issued - -
Common stock, authorized 3,000,000 shares of
$.01 par value; 1,388,625 shares issued 14 14
Additional paid-in capital 9,220 9,220
Retained earnings - restricted 7,994 7,825
Less shares acquired by stock benefit plans (1,509) (1,509)
Less 90,931 and 69,431 shares of treasury stock
- at cost (1,089) (818)
Unrealized gains (losses) on securities
designated as available for sale,
net of related tax effects 60 (5)
------- -------
Total shareholders' equity 14,690 14,727
------- -------
Total liabilities and shareholders' equity $86,307 $88,856
======= =======
</TABLE>
3<PAGE>
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KENTUCKY FIRST BANCORP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
December 31, December 31,
--------------------- --------------------
1997 1996 1997 1996
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Interest income
Loans $2,059 $1,865 $1,035 $ 957
Mortgage-backed securities 664 731 325 363
Investment securities 423 486 201 237
Interest-bearing deposits
and other 48 34 23 16
------ ------ ------ -------
Total interest income 3,194 3,116 1,584 1,573
Interest expense
Deposits 1,224 1,096 612 555
Borrowings 503 461 244 250
------ ------ ------ -------
Total interest expense 1,727 1,557 856 805
------ ------ ------ -------
Net interest income 1,467 1,559 728 768
Provision for losses on loans 18 8 10 4
------ ------ ------ -------
Net interest income after
provision for losses on
loans 1,449 1,551 718 764
Other income
Gain on investment securities
transactions 16 - 5 -
Service charges 65 55 31 30
Other operating 19 23 9 11
------ ------ ------ -------
Total other income 100 78 45 41
General, administrative and other expense
Employee compensation and benefits 508 494 279 261
Occupancy and equipment 73 65 37 33
Federal deposit insurance premiums 17 409 8 29
Data processing 63 52 29 27
Other operating 201 271 114 132
------ ------ ------ -------
Total general, administrative
and other expense 862 1,291 467 482
------ ------ ------ -------
Earnings before income taxes 687 338 296 323
Federal income taxes
Current 207 151 50 151
Deferred 6 (56) 39 (56)
------ ------ ------ -------
Total federal income taxes 213 95 89 95
------ ------ ------ -------
NET EARNINGS $ 474 $ 243 $ 207 $ 228
EARNINGS PER SHARE
Basic $ .39 $ .19 $ .17 $ .18
Diluted $ .38 $ .19 $ .16 $ .17
</TABLE>
4
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KENTUCKY FIRST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended December 31,
(In thousands)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 474 $ 243
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of discounts and premiums on loans,
investments and mortgage-backed securities - net (14) (7)
Gain on investment securities transactions (16) -
Amortization of deferred loan origination fees (17) (30)
Depreciation and amortization 27 23
Provision for losses on loans 18 8
Federal Home Loan Bank stock dividends (39) (29)
Increase (decrease) in cash due to changes in:
Accrued interest receivable 49 (36)
Prepaid expenses and other assets (14) (52)
Accrued interest payable (1) 92
Other liabilities 92 120
Federal income taxes
Current (68) (75)
Deferred 6 (56)
------- -------
Net cash provided by operating activities 497 201
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities 1,939 1,623
Purchase of investment securities designated as
available for sale (1,212) -
Proceeds from sale of investment securities 155 -
Principal repayments on mortgage-backed securities 1,736 1,218
Loan principal repayments 5,333 7,018
Loan disbursements (6,050) (11,621)
Purchase of office premises and equipment (14) (10)
Purchase of Federal Home Loan Bank stock - (180)
------- -------
Net cash provided by (used in) investing activities 1,887 (1,952)
Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposits (599) 2,733
Proceeds from Federal Home Loan Bank advances 6,700 7,200
Repayment of Federal Home Loan Bank advances (8,704) (6,304)
Proceeds from notes payable - 2,000
Dividends on common stock (305) (4,478)
Purchase of treasury stock (271) -
------- -------
Net cash provided by (used in) financing activities (3,179) 1,151
------- -------
Net decrease in cash and cash equivalents (795) (600)
Cash and cash equivalents at beginning of period 1,267 1,526
------- -------
Cash and cash equivalents at end of period $ 472 $ 926
======= =======
</TABLE>
5
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KENTUCKY FIRST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the six months ended December 31,
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 276 $ 226
====== ======
Interest on deposits and borrowings $1,728 $1,465
====== ======
Supplemental disclosure of noncash investing activities:
Unrealized gains on securities designated as available
for sale, net of related tax effects $ 65 $ 46
====== ======
</TABLE>
6
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KENTUCKY FIRST BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended December 31, 1997 and 1996
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements
were prepared in accordance with instructions for Form 10-QSB
and, therefore, do not include information or footnotes
necessary for a complete presentation of consolidated financial
position, results of operations and cash flows in conformity
with generally accepted accounting principles. Accordingly,
these financial statements should be read in conjunction with
the consolidated financial statements and notes thereto of
Kentucky First Bancorp, Inc. (the Corporation) included in the
Annual Report on Form 10-KSB for the year ended June 30, 1997.
However, in the opinion of management, all adjustments
(consisting of only normal recurring accruals) which are
necessary for a fair presentation of the financial statements
have been included. The results of operations for the six and
three month periods ended December 31, 1997 are not necessarily
indicative of the results which may be expected for an entire
fiscal year.
2. Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the
accounts of the Corporation and First Federal Savings Bank of
Cynthiana (the Savings Bank). All significant intercompany
items have been eliminated.
3. Earnings Per Share
------------------
Earnings per share is computed in accordance with the provisions
of Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share". Pursuant to SFAS No. 128, basic earnings
per share is computed based upon the weighted-average shares
outstanding during the period, less shares in the ESOP that are
unallocated and not committed to be released. Weighted-average
common shares deemed outstanding, which gives effect to 92,574
unallocated ESOP shares, totaled 1,213,172 and 1,206,750,
respectively, for the six and three month periods ended December
31, 1997. Weighted-average common shares deemed outstanding,
which gives effect to 101,832 unallocated ESOP shares, totaled
1,286,793 for each of the six and three month periods ended
December 31, 1996.
Diluted earnings per share is computed taking into consideration
common shares outstanding and dilutive potential common shares,
i.e. the Corporation's stock option plan. Weighted-average
common shares deemed outstanding for purposes of computing
diluted earnings per share totaled 1,259,762 and 1,260,963 for
the six and three month periods ended December 31, 1997,
respectively, and 1,305,968 and 1,305,713 for the six and three
months ended December 31, 1996, respectively.
4. Effects of Recent Accounting Pronouncements
-------------------------------------------
In June 1996, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities", that
provides accounting guidance on transfers of financial assets,
servicing of financial assets, and extinguishment of
liabilities. SFAS No. 125 introduces an approach to accounting
for transfers of financial assets that
7
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KENTUCKY FIRST BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three and six months ended December 31, 1997 and 1996
4. Effects of Recent Accounting Pronouncements (continued)
-------------------------------------------
provides a means of dealing with more complex transactions in
which the seller disposes of only a partial interest in the
assets, retains rights or obligations, makes use of special
purpose entities in the transaction, or otherwise has continuing
involvement with the transferred assets. The new accounting
method, the financial components approach, provides that the
carrying amount of the financial assets transferred be allocated
to components of the transaction based on their relative fair
values. SFAS No. 125 provides criteria for determining whether
control of assets has been relinquished and whether a sale has
occurred. If the transfer does not qualify as a sale, it is
accounted for as a secured borrowing. Transactions subject to
the provisions of SFAS No. 125 include, among others, transfers
involving repurchase agreements, securitizations of financial
assets, loan participations, factoring arrangements, and
transfers of receivables with recourse.
An entity that undertakes an obligation to service financial
assets recognizes either a servicing asset or liability for the
servicing contract (unless related to a securitization of
assets, and all the securitized assets are retained and
classified as held-to-maturity). A servicing asset or liability
that is purchased or assumed is initially recognized at its fair
value. Servicing assets and liabilities are amortized in
proportion to and over the period of estimated net servicing
income or net servicing loss and are subject to subsequent
assessments for impairment based on fair value.
SFAS No. 125 provides that a liability is removed from the
balance sheet only if the debtor either pays the creditor and is
relieved of its obligation for the liability or is legally
released from being the primary obligor.
SFAS No. 125 is effective for transfers and servicing of
financial assets and extinguishment of liabilities occurring
after December 31, 1997, and is to be applied prospectively.
Earlier or retroactive application is not permitted. Management
adopted SFAS No. 125 effective January 1, 1998, as required,
without material effect on the Corporation's consolidated
financial position or results of operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS No. 130 requires
that all items that are required to be recognized under
accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the
same prominence as other financial statements. It does not
require a specific format for that financial statement but
requires that an enterprise display an amount representing total
comprehensive income for the period in that financial statement.
SFAS No. 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement
of financial position. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. Reclassification of
financial statements for earlier periods provided for
comparative purposes is required. SFAS No. 130 is not expected
to have a material impact on the Corporation's financial
statements.
8<PAGE>
<PAGE>
KENTUCKY FIRST BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three and six months ended December 31, 1997 and 1996
4. Effects of Recent Accounting Pronouncements (continued)
-------------------------------------------
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No.
131 significantly changes the way that public business
enterprises report information about operating segments in
annual financial statements and requires that those enterprises
report selected information about reportable segments in interim
financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services,
geographic areas and major customers. SFAS No. 131 uses a
"management approach" to disclose financial and descriptive
information about the way that management organizes the segments
within the enterprise for making operating decisions and
assessing performance. For many enterprises, the management
approach will likely result in more segments being reported. In
addition, SFAS No. 131 requires significantly more information
to be disclosed for each reportable segment than is presently
being reported in annual financial statements and also requires
that selected information be reported in interim financial
statements. SFAS No. 131 is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 is not expected
to have a material impact on the Corporation's financial
statements.
9<PAGE>
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KENTUCKY FIRST BANCORP, INC.
ITEM II MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Forward-Looking Statements
- --------------------------
In addition to historical information contained herein, the
following discussion contains forward-looking statements that
involve risks and uncertainties. Economic circumstances, the
Corporation's operations and the Corporation's actual results
could differ significantly from those discussed in the
forward-looking statements. Some of the factors that could
cause or contribute to such differences are discussed herein but
also include changes in the economy and interest rates in the
nation and the Corporation's market area generally.
Some of the forward-looking statements included herein are the
statements regarding management's determination of the amount of
allowance for losses on loans, the effect of certain accounting
pronouncements and the Corporation's projected effects related
to the year 2000 compliance issue.
Discussion of Financial Condition Changes from June 30, 1997 to
December 31, 1997
- ---------------------------------------------------------------
At December 31, 1997, the Corporation's consolidated total
assets amounted to $86.3 million, a decrease of $2.5 million, or
2.9%, from the total at June 30, 1997. The decrease in assets
resulted primarily from a decrease in the deposit portfolio of
$599,000, a decrease of $2.0 million in advances from the
Federal Home Loan Bank and a decline in shareholders' equity of
$37,000.
Liquid assets (i.e. cash, interest-bearing deposits and
investment securities) decreased by $1.6 million over the six
month period, to a total of $13.6 million at December 31, 1997.
Investment securities totaling $1.9 million matured during the
period and were partially offset by purchases of $1.2 million.
Mortgage-backed securities totaled $19.5 million at December 31,
1997, a decrease of $1.6 million, or 7.8%, from June 30, 1997
levels. The decrease resulted primarily from principal
repayments of $1.6 million during the period. Excess liquid
assets and proceeds from maturities of investment and
mortgage-backed securities were partially used to fund net
withdrawals of deposits and repayments of Federal Home Loan Bank
advances. Regulatory liquidity amounted to 7.5%, at December
31, 1997.
Loans receivable increased by $716,000, or 1.5%, during the six
month period, to a total of $49.6 million at December 31, 1997.
Loan disbursements amounted to $6.1 million and were partially
offset by principal repayments of $5.3 million. Loan
disbursements decreased by $5.6 million, or 47.9%, during the
1997 six month period as compared to the comparable period in
1996. The growth in the loan portfolio consisted primarily of
one- to four-family residential fixed-rate loans. The allowance
for loan losses totaled $387,000 at December 31, 1997, as
compared to $372,000 at June 30, 1997. Nonperforming loans
totaled $111,000 at December 31, 1997, as compared to $59,000 at
June 30, 1997. The allowance for loan losses represented 349%
of nonperforming loans as of December 31, 1997 and 631% at June
30, 1997. Although management believes that its allowance for
loan losses at December 31, 1997 is adequate based upon the
available facts and circumstances, there can be no assurance
that additions to such allowance will not be necessary in future
periods, which could adversely affect the Corporation's results
of operations.
Deposits totaled $54.8 million at December 31, 1997, a decrease
of $599,000, or 1.1%, from June 30, 1997 levels. During the
current period, management has not attempted to match premium
deposit rates offered by certain competitors and has instead
continued its conservative pricing strategy with respect to
deposit accounts during the current interest rate environment.
10
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KENTUCKY FIRST BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION (CONTINUED)
Discussion of Financial Condition Changes from June 30, 1997 to
December 31, 1997 (continued)
- ---------------------------------------------------------------
Advances from the Federal Home Loan Bank totaled $16.0 million
at December 31, 1997, a decrease of $2.0 million, or 11.2%, from
the total at June 30, 1997, as proceeds from maturities of
investment and mortgage-backed securities were utilized to repay
such advances.
The Corporation's shareholders' equity amounted to $14.7 million
at December 31, 1997, a decrease of $37,000, or .3%, from June
30, 1997 levels. The decrease resulted primarily from dividends
paid on common stock totaling $305,000 and purchases of treasury
stock totaling $271,000, which were partially offset by 1997
period net earnings of $474,000 and a $65,000 increase in
unrealized gains on securities designated as available for sale.
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 December 31, 1997, the Savings Bank's tangible and core
capital totaled $12.5 million, or 14.5%, of adjusted total
assets, which exceeded the minimum tangible and core capital
requirements of $1.3 million and $2.6 million by $11.2 million
and $9.9 million, respectively. The Savings Bank's risk-based
capital of $12.9 million, or 27.1% of risk-weighted assets,
exceeded the current 8% requirement by $9.1 million.
Comparison of Operating Results for the Six Month Periods Ended
December 31, 1997 and 1996
- ---------------------------------------------------------------
General
- -------
Net earnings amounted to $474,000 for the six months ended
December 31, 1997, an increase of $231,000, or 95.1%, over the
$243,000 of net earnings reported for the same period in 1996.
Net earnings during the fiscal 1997 period reflected a $351,000
one-time special assessment recorded in the first quarter of
fiscal 1997 to recapitalize the Savings Association Insurance
Fund (SAIF). The increase in net earnings in the current period
was also due to a $78,000 decrease in general, administrative
and other expense and a $22,000 increase in other income, which
were partially offset by a $92,000 decrease in net interest
income and a $118,000 increase in the provision for federal
income taxes.
11<PAGE>
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KENTUCKY FIRST BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION (CONTINUED)
Comparison of Operating Results for the Six Month Periods Ended
December 31, 1997 and 1996 (continued)
- ---------------------------------------------------------------
Net Interest Income
- -------------------
Net interest income decreased by $92,000, or 5.9%, for the six
months ended December 31, 1997, compared to the 1996 period.
Interest income on loans increased by $194,000, or 10.4%, due
primarily to a $4.0 million, or 8.8%, increase in the
weighted-average balance of loans outstanding year to year,
coupled with an increase in yield. Interest income on
mortgage-backed securities decreased by $67,000, or 9.2%, due
primarily to a $2.3 million, or 11.3%, decrease in the
weighted-average balance outstanding. Interest income on
investment securities and interest-bearing deposits decreased by
$49,000, or 9.4%, due primarily to a decline in the average
yields available on short-term deposits.
Interest expense on deposits increased by $128,000, or 11.7%,
due primarily to a $3.0 million increase in the weighted-average
balance of deposits outstanding, coupled with an increase in the
cost of deposits year to year. Interest expense on borrowings
increased by $42,000 during the current period, due primarily to
a $1.8 million increase in the weighted-average balance of
advances outstanding from the Federal Home Loan Bank.
As a result of the foregoing changes in interest income and
interest expense, net interest income decreased by $92,000, or
5.9%, to a total of $1.5 million for the six months ended
December 31, 1997, as compared to the comparable period in 1996.
The interest rate spread amounted to approximately 2.75% and
2.86% during the respective fiscal 1998 and fiscal 1997 periods,
while the net interest margin amounted to approximately 3.46% in
fiscal 1998 and 3.73% in fiscal 1997.
Provision for Losses on Loans
- -----------------------------
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 an $18,000
provision for losses on loans during the six month period ended
December 31, 1997. There can be no assurance that the loan loss
allowance of the Savings Bank will be adequate to cover losses
on nonperforming assets in the future.
Other Income
- ------------
Other income increased by $22,000, or 28.2%, for the six months
ended December 31, 1997, compared to the same period in 1996,
due primarily to a $16,000 gain on investment securities
transactions, coupled with an increase in service charges and
fees on loans and deposits.
<PAGE>
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense decreased by $429,000,
or 33.2%, during the six month period ended December 31, 1997,
compared to the same period in 1996. This decrease resulted
primarily from the $351,000 charge recorded in the first quarter
of fiscal 1997 attendant to the aforementioned SAIF
recapitalization.
12<PAGE>
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KENTUCKY FIRST BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION (CONTINUED)
Comparison of Operating Results for the Six Month Periods Ended
December 31, 1997 and 1996 (continued)
=--------------------------------------------------------------
General, Administrative and Other Expense (continued)
- -----------------------------------------
Additionally, the decrease in general, administrative and other
expense resulted from a $41,000, or 70.7%, decrease in federal
deposit insurance premiums and a $70,000, or 25.8%, decrease in
other expense, which were partially offset by a $14,000, or
2.8%, increase in employee compensation and benefits, an $8,000,
or 12.3%, increase in occupancy and equipment and an $11,000, or
21.2%, increase in data processing.
The decrease in federal deposit insurance premiums resulted from
the decline in premium rates following the recapitalization of
the SAIF. The decline in other operating expense reflects the
absence of professional fees incurred in the 1996 period related
to the Corporation's return of capital distribution in November
1996.
Federal Income Taxes
- --------------------
The provision for federal income taxes increased by $118,000, or
124.2%, for the six month period ended December 31, 1997, as
compared to the same period in 1996. This increase resulted
primarily from the increase in net earnings before taxes of
$349,000, or 103.3%. The effective tax rates were 31.0% and
28.1% for the six month periods ended December 31, 1997 and
1996, respectively.
Comparison of Operating Results for the Three Month Periods
Ended December 31, 1997 and 1996
- -----------------------------------------------------------
General
- -------
Net earnings amounted to $207,000 for the three months ended
December 31, 1997, a decrease of $21,000, or 9.2%, from the
$228,000 of net earnings reported for the same period in 1996.
The decrease in earnings resulted primarily from a $40,000
decline in net interest income, which was partially offset by a
$4,000 increase in other income, a $15,000 decrease in general,
administrative and other expense and a $6,000 decrease in the
provision for federal income taxes.
Net Interest Income
- -------------------
Net interest income totaled $728,000 for the three months ended
December 31, 1997, a decrease of $40,000, or 5.2%, compared to
the 1996 period. Interest income on loans increased by $78,000,
or 8.2%, due primarily to a $3.0 million increase in the
weighted-average balance of loans outstanding year to year,
coupled with an increase in yield. Interest income on
mortgage-backed securities decreased by $38,000, or 10.5%, due
primarily to a $2.5 million decrease in the weighted-average
balance outstanding. Interest income on investment securities
and interest-bearing deposits decreased by $29,000, or 11.5%,
due primarily to a decrease in the weighted-average balances
outstanding.
13<PAGE>
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KENTUCKY FIRST BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION (CONTINUED)
Comparison of Operating Results for the Three Month Periods
Ended December 31, 1997 and 1996 (continued)
- -----------------------------------------------------------
Net Interest Income (continued)
- -------------------
Interest expense on deposits increased by $57,000, or 10.3%, due
primarily to a $2.7 million increase in the weighted-average
balance of deposits outstanding year to year. Interest expense
on borrowings decreased by $6,000 during the current period, due
primarily to a $1.0 million decrease in the weighted-average
balance of advances from the Federal Home Loan Bank.
As a result of the foregoing changes in interest income and
interest expense, net interest income decreased by $40,000, or
5.2%, to a total of $728,000 for the three months ended December
31, 1997. The interest rate spread decreased to approximately
2.74% from 2.81% during the respective 1997 and 1996 quarters,
while the net interest margin amounted to approximately 3.45% in
1997, as compared to 3.65% in 1996.
Provision for Losses on Loans
- -----------------------------
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 $10,000 provision
for losses on loans during the three month period ended December
31, 1997, as compared to a $4,000 provision recorded during the
three months ended December 31, 1996. There can be no assurance
that the loan loss allowance of the Savings Bank will be
adequate to cover losses on nonperforming assets in the future.
Other Income
- ------------
Other income increased by $4,000, or 9.8%, for the three months
ended December 31, 1997, compared to the same period in 1996,
due primarily to a $5,000 gain on investment securities
transactions.
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense decreased by $15,000,
or 3.1%, for the three months ended December 31, 1997, as
compared to the same period in 1996. The decrease resulted
primarily from a $21,000, or 72.4%, decrease in federal deposit
insurance premiums.
<PAGE>
Federal Income Taxes
- --------------------
The provision for federal income taxes decreased by $6,000, or
6.3%, for the three month period ended December 31, 1997, as
compared to the same period in 1996. This decrease resulted
primarily from a $27,000, or 8.4%, decrease in net earnings
before taxes. The effective tax rates were 30.1% and 29.4% for
the three month periods ended December 31, 1997 and 1996,
respectively.
14<PAGE>
<PAGE>
KENTUCKY FIRST BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION (CONTINUED)
Comparison of Operating Results for the Three Month Periods
Ended December 31, 1997 and 1996 (continued)
- -----------------------------------------------------------
Other Matters
- -------------
As with all providers of financial services, the Savings Bank's
operations are heavily dependent on information technology
systems. The Savings Bank is addressing the potential problems
associated with the possibility that the computers that control
or operate the Savings Bank's information technology system and
infrastructure may not be programmed to read four-digit date
codes and, upon arrival of the year 2000, may recognize the
two-digit code "00" as the year 1900, causing systems to fail to
function or to generate erroneous data. The Savings Bank is
working with the companies that supply or service its
information technology systems to identify and remedy any year
2000 related problems.
As of the date of this Form 10-QSB, the Savings Bank has not
identified any specific expenses that are reasonably likely to
be incurred by the Savings Bank in connection with this issue
and does not expect to incur significant expense to implement
the necessary corrective measures. No assurance can be given,
however, that significant expense will not be incurred in future
periods. In the event that the Savings Bank is ultimately
required to purchase replacement computer systems, programs and
equipment, or incur substantial expense to make the Savings
Bank's current systems, programs and equipment year 2000
compliant, the Savings Bank's net earnings and financial
condition could be adversely affected.
In addition to possible expense related to its own systems, the
Savings Bank could incur losses if loan payments are delayed due
to year 2000 problems affecting any major borrowers in the
Savings Bank's primary market area. Because the Savings Bank's
loan portfolio is highly diversified with regard to individual
borrowers and types of businesses and the Savings Bank's primary
market area is not significantly dependent upon one employer or
industry, the Savings Bank does not expect any significant or
prolonged difficulties that will affect net earnings or cash
flow.
15<PAGE>
PAGE>
KENTUCKY FIRST BANCORP, INC.
PART II
ITEM 1. Legal Proceedings
-----------------
Not applicable
ITEM 2. Changes in Securities
---------------------
Not applicable
ITEM 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On November 5, 1997, the Annual Meeting of the
Corporation's Shareholders was held. Three directors
nominated were elected to terms expiring in 2000 by
the following votes:
Luther O. Beckett
For: 1,148,850 Withheld: 3,722
Diane Ritchie
For: 1,147,972 Withheld: 4,600
John Swinford
For: 1,149,612 Withheld: 2,960
ITEM 5. Other Information
-----------------
None
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibit 27: Financial Data Schedule for the six
month ended December 31, 1997.
(EDGAR Only)
Reports on Form 8-K: None
16
<PAGE>
<PAGE>
KENTUCKY FIRST BANCORP, INC.
SIGNATURES
----------
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: February 11, 1998 By: /s/Betty J. Long
-------------------------
Betty J. Long
President and Chief
Executive Officer
Date: February 11, 1998 By: /s/Robbie Cox
-------------------------
Robbie Cox
Chief Financial Officer
17
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