Item 1A. Risk Factors
ITEM 1A. Risk Factors
Please see “Item 1A. Risk Factors”
of the Company’s Annual Report on Form 10-K for the year ended June 30, 2024 and in the Company’s Quarterly Report on Form
10-Q for the period ended September 30, 2024 and for the period ended December 31, 2024 for information regarding risk factors that could
materially affect the Company’s business, financial condition, or future results of operations. Other than as set forth below, there
have been changes with regard to the risk factors disclosed in “Item 1A. Risk Factors” of the Company’s Annual Report
on Form 10-K for the year ended June 30, 2024.
On January 16, 2024, we announced that
the Board had determined to suspend the payment of dividends indefinitely. Our ability to pay future dividends, and the amount that may
be paid, is subject to a number of factors, including our ability to fully and timely address the deficiencies that resulted in the formal
Agreement that First Federal Savings Bank of Kentucky has entered into with the OCC and the satisfaction of individual minimum capital
ratio requirements imposed by the OCC. Our ability to pay future dividends is also subject to our ability to receive any required regulatory
approval or non-objection to pay dividends to our shareholders, the ability of First Federal of Hazard and First Federal of Kentucky
to make capital distributions to Kentucky First Federal in order for Kentucky First Federal to declare and pay dividends to its shareholders.
On January 16, 2024, the Company announced the suspension of quarterly
dividends indefinitely. Holders of our common stock are only entitled to receive such dividends as our Board of Directors may declare
out of funds available for such payments under applicable law and regulatory guidance. We cannot predict when or whether the Company will
be able to pay future common stock dividends and if so, the amount of any such common stock dividends. Our ability to pay future dividends
and if so at what level will also be dependent on numerous factors, including: our ability to receive any required regulatory approval
or non-objection to pay dividends to our shareholders; our ability to receive regulatory approval or non-objection to pay dividends from
First Federal Savings and Loan Association of Hazard and First Federal Savings Bank of Kentucky to the Company in order for the Company
to pay dividends to shareholders; our ability to fully and timely address the deficiencies that resulted in the formal Agreement that
First Federal Savings Bank of Kentucky entered into with the OCC on August 13, 2024, or any other deficiencies identified by the OCC or
the Federal Reserve Bank of Cleveland; our ability to successfully execute our strategy to increase earnings and core deposits, reduce
reliance on higher cost funding sources and shift more of our loan portfolio towards higher-earning loans; and First Federal Savings Bank
of Kentucky’s ability to satisfy the IMCR’s imposed by the OCC, which require First Federal Savings Bank of Kentucky
to maintain a common equity tier 1 capital ratio of at least 9.0%, a tier 1 capital ratio of at least 11.0%, a total capital ratio of
at least 12.0%, and a leverage ratio of at least 9.0%. As of March 31, 2025, the Bank’s common equity tier 1 capital ratio was 16.72%,
its tier 1 capital ratio was 16.72%, its total capital ratio was 16.72%, and its leverage ratio was 10.13%. For additional information
on the formal Agreement that First Federal Savings Bank of Kentucky has entered into with the OCC and the IMCR’s imposed on First
Federal Savings Bank of Kentucky by the OCC, please see “Management’s Discussion and Analysis—Regulatory Developments
Regarding First Federal of Kentucky.”
As the mutual holding company and majority
shareholder of Kentucky First Federal Bancorp, First Federal MHC must receive the approval of the Federal Reserve Board and the members
of First Federal MHC in order to waive the receipt of any dividends declared and paid by Kentucky First Federal Bancorp to its shareholders.
While Kentucky First Federal has previously received such approvals, those approvals have expired. The inability to receive those approvals
in the future would adversely impact Kentucky First Federal’s ability to pay dividends to its shareholders in the future.
In previous years, First Federal MHC has received
Federal Reserve Board approval to waive quarterly dividends otherwise payable by the Company 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. However, First
Federal MHC did not seek to obtain regulatory approval to waive dividends for periods after the third quarter of 2024, and the prior
Federal Reserve Boad approval to waive the payment of quarterly dividends that would otherwise be payable to First Federal MHC has expired.
To the extent the Company resumes the payment of dividends in future periods, it is expected that First Federal MHC will again 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. 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. If First
Federal MHC is unable to waive the receipt of dividends, the Company’s ability to pay dividends to our stockholders may be substantially
impaired and the amounts of any such dividends may be significantly reduced.
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Kentucky First Federal Bancorp
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