Breaking Down Kentucky First Federal Bancorp (KFFB) Financial Health: Key Insights for Investors

You've seen the headlines about regional bank volatility, so let's cut straight to the numbers for Kentucky First Federal Bancorp (KFFB): the company has executed a significant earnings turnaround, reporting a full fiscal year 2025 (FY2025) net income of $181,000, a swing of nearly $1.9 million from the prior year's loss. This isn't just luck; the core driver is a strong net interest income, which jumped 33.9% to $2.5 million in the most recent quarter, largely because the average yield on their interest-earning assets is now at 5.59% while the rate paid on liabilities is easing to 3.33%. Still, a realist maps the near-term risks: total assets are down to $366.5 million, a 1.3% quarterly drop, and deposits decreased by 2.2%, meaning they're fighting a headwind to maintain funding stability and asset growth. The book value per share is sitting at $6.03, which is a good anchor, but the continued pressure from rising non-interest expenses and the ongoing regulatory agreement with the OCC are defintely factors you need to weigh against the profitability inflection.

Revenue Analysis

You need to know where the money is coming from, and for Kentucky First Federal Bancorp (KFFB), the story is one of a strong rebound in core banking activity, specifically Net Interest Income. The company's annual revenue for the fiscal year ending June 30, 2025, hit $8.80 million, marking a solid 21.89% growth year-over-year. That's a defintely positive trend after a tough period.

The primary revenue streams for Kentucky First Federal Bancorp (KFFB) are typical for a bank holding company: Net Interest Income (NII) and Non-interest Income. NII represents the difference between interest earned on assets (like loans) and interest paid on liabilities (like deposits). For the three months ended September 30, 2025, Net Interest Income was the clear driver, making up the vast majority of the top line.

• Net Interest Income (NII): The core engine, accounting for approximately 94.2% of total revenue in the most recent quarter.
• Non-interest Income: A smaller, but growing, segment at about 5.8% of total revenue.

Here's the quick math on the segment contribution for the quarter ended September 30, 2025 (Fiscal Q1 2026), which gives you the clearest near-term picture. Total revenue (NII plus Non-interest Income) for the period was approximately $2.653 million.

The year-over-year revenue growth rate has been strong, driven by a few key factors. The total revenue over the last twelve months ending September 30, 2025, was $9.47 million, representing a 26.65% increase. This is a significant acceleration.

The most important change in the revenue streams is the massive jump in Net Interest Income, which rose by $634,000, or 33.9%, in the quarter ended September 30, 2025. This happened because the average yield on their interest-earning assets, like loans, increased by 53 basis points to 5.59%, while the average rate they paid on interest-bearing liabilities actually fell. Essentially, they're earning more on their loans and paying less for their funding. Also, Non-interest Income is seeing a boost, largely due to net gains on sales of loans, as demand for fixed-rate secondary market loans has increased. This shows management is actively shifting its loan portfolio toward higher-earning assets, which is a smart move in this rate environment. For more on the company's long-term strategy, you can check out their Mission Statement, Vision, & Core Values of Kentucky First Federal Bancorp (KFFB).

Profitability Metrics

You need to know if Kentucky First Federal Bancorp (KFFB) is truly turning the corner on profitability, and the short answer is yes, but it's still a small operation. The bank has successfully moved from a net loss in the prior year to a positive net income in the 2025 fiscal year, driven by better management of interest rate risk.

For a bank, the most important profitability measure is the Net Interest Income (NII), which is the difference between the interest earned on loans and the interest paid on deposits. Think of NII as the banking equivalent of a company's Gross Profit. For the first quarter of fiscal year 2026 (ended September 30, 2025), KFFB reported NII of $2.5 million, a significant 33.9% increase from the same period in the prior year. This is the core engine finally starting to fire.

Margin Analysis: Gross, Operating, and Net

To get a clearer picture, we need to look at the margins. Since a bank's primary revenue is interest, we use Net Interest Income (NII) as our proxy for Gross Profit. We can then calculate the other key margins based on the most recent quarter (Q1 FY 2026) where Total Revenue (NII + Non-Interest Income) was approximately $2.65 million.

• Gross Profit Margin (Proxy): The Net Interest Margin (NIM) is the best proxy here. KFFB's NIM for the 2025 fiscal year was 2.28%. This is notably low compared to the community bank average of 3.46% in Q1 2025.
• Operating Profit Margin: We look at pre-tax profit as a stand-in for operating profit, as there was no provision for credit losses this quarter. KFFB's pre-tax profit was $453,000. Here's the quick math: $453,000 / $2,653,000 = 17.07%.
• Net Profit Margin: The net income for Q1 FY 2026 was $344,000. This gives a Net Profit Margin of about 12.96% ($344,000 / $2,653,000).

The trend is the critical takeaway here. The company's net income for the full fiscal year 2025 was only $181,000, a massive swing from a $1.7 million net loss in the prior year, but still a small number. The Q1 2026 net income of $344,000 alone is almost double the entire prior fiscal year's profit, showing a positive trajectory.

Operational Efficiency and Industry Comparison

Operational efficiency is where KFFB needs continued focus. Non-interest expenses rose 4% in the third quarter of 2025, largely due to higher professional fees related to compliance and regulatory oversight. This is a drag on the bottom line. For example, data processing expense alone was up 37.8% to $226,000 in Q1 2026. You have to pay for compliance, but that cost has to be managed or offset by revenue growth.

The key profitability ratios illustrate the gap between KFFB and its peers. The low Net Interest Margin of 2.28% is the most defintely concerning metric compared to the community bank average of 3.46%. This means KFFB is earning less on its assets relative to what it pays for funding than most of its peers. The Return on Assets (ROA) for the full fiscal year 2025 was a meager 0.0485% (calculated from $181,000 net income on approximately $373.1 million in average assets), which is far below the Q1 2025 industry aggregate of 1.16%.

Here is a snapshot of how KFFB stacks up against its industry, showing the path ahead is still long:

The pivot to profitability is real, but the company's margins show it is still an underperformer compared to the average US community bank. You need to see sustained NII growth and a clear strategy to manage non-interest expense to close that margin gap. You can review their strategic objectives here: Mission Statement, Vision, & Core Values of Kentucky First Federal Bancorp (KFFB).

Finance: Track NIM improvement quarter-over-quarter, targeting an increase of at least 20 basis points in the next two quarters.

Debt vs. Equity Structure

You're looking to understand how Kentucky First Federal Bancorp (KFFB) funds its operations, and for a bank, the debt-to-equity picture is always a bit different than for a standard manufacturing company. The direct takeaway is that KFFB is actively reducing its reliance on wholesale funding (debt) and strengthening its core capital base, a positive move given the current regulatory climate.

As of September 30, 2025, Kentucky First Federal Bancorp reported total shareholders' equity of $48.8 million. This equity is the core capital that acts as a buffer against losses. When you look at the balance sheet, the total liabilities stood at $317.7 million at the same date.

Here's the quick math: if you calculate the Liabilities-to-Equity ratio (L/E) using those figures, you get approximately 6.51:1 ($317.7M / $48.8M). Now, don't panic. This high ratio is normal for a bank because customer deposits-which are the primary funding source-are counted as liabilities. A bank's business model is inherently leveraged.

What matters more is the composition of the debt and the trend.

• Total Equity: $48.8 million (Sep 30, 2025).
• Total Liabilities: $317.7 million (Sep 30, 2025).
• Regional Bank Industry Average D/E: 0.5:1 (Nov 2025).

The industry average Debt-to-Equity (D/E) ratio for US Regional Banks is around 0.5:1, which is a much lower figure because it typically strips out deposits, focusing only on traditional borrowings like bonds or Federal Home Loan Bank (FHLB) advances. To be fair, KFFB's true D/E ratio is much closer to that industry benchmark if you exclude the $271.4 million in customer deposits.

Debt Reduction and Financing Strategy

Kentucky First Federal Bancorp is defintely focused on shifting its funding mix from higher-cost, volatile debt to stable, lower-cost customer deposits. This is a clear, actionable strategy. The most concrete example of this is the reduction in their Federal Home Loan Bank (FHLB) advances.

In the period leading up to June 30, 2025, the bank reduced its FHLB advances-a key form of secured short-term debt-by $26.2 million, a massive 38.0% decrease. This reduction was directly linked to an increase in deposits of $21.4 million, showing a deliberate, successful effort to swap wholesale funding for retail funding. This move reduces interest expense and lowers funding risk.

The bank is not issuing new long-term debt or seeking credit ratings right now; instead, the focus is on internal capital management. This is critical because the bank is currently under a formal written agreement with the Office of the Comptroller of the Currency (OCC) that requires it to maintain specific capital ratios. This regulatory oversight limits the bank's flexibility, forcing a conservative approach to leverage.

The balance is clear: use net earnings and deposit growth (equity and core liabilities) to pay down expensive debt (FHLB advances). This is a prudent, though slow, path to long-term stability. You can read more about their strategic direction here: Mission Statement, Vision, & Core Values of Kentucky First Federal Bancorp (KFFB).

Liquidity and Solvency

You need to know if Kentucky First Federal Bancorp (KFFB) can meet its short-term obligations, and for a bank, that means looking beyond the standard corporate liquidity ratios. The short answer is that KFFB's liquidity position improved in fiscal year 2025, primarily by shedding expensive debt and accumulating cash, but you still need to watch the negative operating cash flow.

For a financial institution like KFFB, the current ratio (current assets divided by current liabilities) and quick ratio are less informative than for a manufacturer, as a bank's main current asset is typically loans and its main current liability is deposits. Instead, we look at cash reserves and regulatory capital. KFFB's cash and cash equivalents, a key measure of immediate liquidity, jumped by 51.8%, or $9.5 million, to $27.8 million at March 31, 2025. That's a strong, defintely positive trend.

Here's the quick math on their capital strength: as of March 31, 2025, the bank was in a solid position against regulatory demands, reporting a Common Equity Tier 1 Capital Ratio of 16.72% and a Leverage Ratio of 10.13%. Both figures comfortably exceed the required minimums set by the OCC (Office of the Comptroller of the Currency), which is a major strength. You can dive deeper into who's betting on this stability in Exploring Kentucky First Federal Bancorp (KFFB) Investor Profile: Who's Buying and Why?

Working Capital and Funding Trends

The trend in working capital-or more accurately, the core funding mix for a bank-shows a clear strategic shift away from wholesale funding. KFFB significantly reduced its reliance on Federal Home Loan Bank (FHLB) advances, which are essentially borrowings. For the fiscal year ended June 30, 2025, FHLB advances decreased by $26.2 million, a drop of 38.0%. This reduction in high-cost liabilities is a direct and positive impact on liquidity risk, even as total assets slightly decreased to $371.2 million at the end of the fiscal year.

The goal is to replace expensive borrowings with stable, lower-cost customer deposits, and KFFB is moving in that direction. Still, the indefinite suspension of dividend payments, announced in the fiscal year, is a clear signal of a conservative, capital-preservation mindset, likely influenced by ongoing regulatory oversight.

Cash Flow Statement Overview (FY 2025)

Analyzing the cash flow statement for the 2025 fiscal year reveals a typical but concerning pattern for a bank focused on asset growth and balance sheet restructuring. The company had negative cash flow from operations, meaning the core business activities did not generate net cash. They are still burning cash on the operating side.

• Operating Cash Flow: A net outflow of $-1.45 million. This is the most critical number to watch; it shows a struggle to generate cash from day-to-day banking activities.
• Investing Cash Flow: A net outflow of $-16.60 million. This is normal for a bank that is actively lending and purchasing investment securities, which KFFB did to deploy its excess liquidity.
• Financing Cash Flow: A net inflow of $28.18 million. This inflow was necessary to fund the operating and investing deficits, mainly through an increase in deposits and other funding sources, offsetting the reduction in FHLB advances.

Near-Term Liquidity Concerns and Strengths

The primary strength is the bank's regulatory capital cushion. Exceeding the OCC's Individual Minimum Capital Requirements (IMCRs) provides a significant buffer against unexpected losses. The reduction in FHLB advances by $26.2 million is a huge de-risking move.

However, the key liquidity concern remains the negative operating cash flow of $-1.45 million for the year. While the bank can easily manage this with its capital and financing activities, a sustained negative trend here means the bank is relying too much on external funding to support its operations and growth. The next step is to see if the recent increase in net interest income, which rose 21.1% to $2.3 million in Q4 2025, can flip that operating cash flow to a positive number.

Valuation Analysis

You're looking at Kentucky First Federal Bancorp (KFFB) and asking the right question: Is the market pricing this small bank accurately? The quick takeaway is that, based on traditional metrics for the banking sector, KFFB looks overvalued on an earnings basis but undervalued on a book value basis. This split signals a complex risk/reward profile.

Here's the quick math on why the valuation is tricky. As of November 2025, the stock trades around $4.390 per share. This price reflects a massive run-up, with the stock appreciating by 33.76% over the last 12 months, which is a defintely strong performance for a regional bank.

The core valuation ratios tell a story of two extremes:

• Price-to-Earnings (P/E) Ratio: KFFB's P/E ratio stands at about 65.7x. To be fair, this is extremely high. For context, the average P/E for its peers is closer to 9.6x, and the broader Financials sector average is around 9.3x. This suggests investors are either pricing in massive future earnings growth that hasn't materialized yet or the low trailing earnings are distorting the multiple.
• Price-to-Book (P/B) Ratio: This is where the value argument sits. The P/B is approximately 0.7x. Since the book value per share was $6.03 as of September 30, 2025, you're buying the company for less than the reported value of its net assets. The US Banks industry average P/B is about 1x, so KFFB trades at a discount here.
• Enterprise Value-to-EBITDA (EV/EBITDA): This metric is often not applicable (n/a) for banks like KFFB because their capital structure and primary source of value (loans/deposits) make earnings before interest, taxes, depreciation, and amortization (EBITDA) less relevant than net interest income.

The P/B ratio is your anchor here. A P/B below 1.0x often flags a potentially undervalued bank, but it also signals market skepticism about the quality of those assets. The high P/E, however, is a clear warning sign of a premium price on very thin current earnings. For the quarter ended September 30, 2025, the company reported net income of $344,000, or $0.04 diluted earnings per share, which is an improvement over the prior year's loss, but still small.

When it comes to income, the story is simple: Kentucky First Federal Bancorp is not currently a dividend play. The trailing twelve months (TTM) Dividend Yield as of October 2025 is 0%. This means the payout ratio is also 0%. Don't expect cash flow from this one right now; all potential returns are tied to capital appreciation.

Finally, you should know that there is no formal Wall Street analyst consensus-no 'Buy,' 'Hold,' or 'Sell' rating-as the company is covered by 0 analysts. You are essentially on your own for the valuation call. The technical signal is a 'Strong Buy,' but that is based on short-term price action, not fundamental value. This lack of coverage means fewer eyes are watching, which can lead to larger price swings. For a deeper dive into the balance sheet health, check out Breaking Down Kentucky First Federal Bancorp (KFFB) Financial Health: Key Insights for Investors.

Your action here is to decide if the 0.7x P/B discount is worth the risk of the 65.7x P/E multiple. The discount suggests a deep value play, but the high multiple warns of a stock that could be very sensitive to any misstep in earnings growth.

Risk Factors

You're looking at Kentucky First Federal Bancorp (KFFB) because the recent earnings reports show a significant turnaround-Net Income hit $344,000 for the quarter ending September 30, 2025, up from a loss a year ago. That's a great sign, but as a seasoned analyst, I have to map out the near-term risks that still cloud their horizon. Every investor needs to see the full picture, not just the profit line.

The biggest and most material risk for Kentucky First Federal Bancorp right now is regulatory. The bank is operating under a formal written agreement with the Office of the Comptroller of the Currency (OCC). This isn't just a slap on the wrist; it requires the bank to maintain specific capital ratios and implement detailed strategic and risk management plans. This regulatory oversight drives up their non-interest expenses, which rose partly due to higher professional fees for compliance. That's a direct hit to the bottom line, and it's not going away soon.

The other major internal risks center on their loan book and funding. While the trend is positive, you still need to watch the following:

• Credit Risk: Non-performing loans (NPLs)-loans where the borrower is behind on payments-stood at approximately $3.2 million, or 1.0% of total loans, as of September 30, 2025. That percentage is manageable, but their Allowance for Credit Losses (ACL) only covered 67.1% of those NPLs. That coverage ratio is a bit thin; they're betting on a healthy economic outlook.
• Interest Rate Risk: The majority of their residential mortgage portfolio, 93.8% at fiscal year-end June 30, 2025, consists of adjustable-rate loans. This protects the bank when rates rise, but it shifts the risk to the borrower. If rates reprice upward, it could cause unquantifiable credit risks and increase future delinquencies. The good news is management is actively using asset/liability management to counter this, anticipating a positive impact on their Economic Value of Equity (EVE) if rates continue to decline.

Here's the quick math on their funding: Total deposits decreased by $6.1 million, or 2.2%, to $271.4 million in the most recent quarter. A shrinking deposit base means they have to find more expensive funding sources elsewhere. That's a liquidity risk that needs to be watched defintely.

From a strategic perspective, the indefinite suspension of dividend payments, announced earlier in 2025, is a major headwind for shareholders. It's a clear signal that capital preservation and regulatory compliance are the absolute top priorities, even over immediate shareholder returns. Plus, the recent management transition, with a new CEO appointed pending regulatory approval, adds a layer of execution risk until the new leadership is fully settled in and their strategy is proven.

These are the core challenges the new CEO, Clay Hulette, is inheriting. They are focused on increasing core deposits and shifting their loan portfolio toward higher-earning assets, which is the right action plan to mitigate these financial and operational risks. For a deeper dive into who is buying into this turnaround story, you should check out Exploring Kentucky First Federal Bancorp (KFFB) Investor Profile: Who's Buying and Why?

Growth Opportunities

You're looking for a clear path forward for Kentucky First Federal Bancorp (KFFB), and the key takeaway is this: the bank is executing a deliberate strategy to shift its balance sheet toward higher profitability, a move that is defintely starting to pay off in recent earnings. They are focused on core banking fundamentals, which is a smart, low-risk play in a volatile rate environment.

The company posted net earnings of only $181,000 for the full fiscal year ended June 30, 2025, translating to a diluted earnings per share (EPS) of just $0.02. But look at the trajectory: the most recent quarter (Q1 FY2026, ended September 30, 2025) saw a net income of $344,000, or $0.04 diluted EPS. That's a significant turnaround from a net loss in the prior year and shows the new strategy gaining traction. Here's the quick math: the quarterly net income alone is nearly double the entire prior fiscal year's net earnings.

This near-term earnings inflection is driven by a few clear strategic initiatives:

• Asset Repricing: The average yield on interest-earning assets rose 53 basis points to 5.59% in the most recent quarter, showing loans are being originated at higher, more profitable rates.
• Funding Mix Shift: Management is actively reducing reliance on costly wholesale funding, decreasing Federal Home Loan Bank (FHLB) advances by a substantial $26.2 million, or 38.0%, in FY2025 while increasing deposits by $21.4 million, or 8.4%.
• High-Quality Originations: The focus is on high-quality loan originations, emphasizing profitability and interest rate risk strategies, which is why non-performing loans dropped to just 1.0% of total loans, or $3.2 million, as of September 30, 2025.

The bank's competitive advantage centers on its deep roots in Southeastern Kentucky, which fosters strong local relationships, plus a very strong capital position. Specifically, the common equity tier 1 capital ratio stood at an impressive 16.72% in Q3 2025, far exceeding regulatory minimums. This capital strength gives them the flexibility to absorb unexpected losses or pursue strategic growth, like shifting their loan portfolio toward higher-earning assets, a stated goal.

A key catalyst for future execution is the recent leadership transition, bringing back a seasoned CEO to leverage his community connections and financial acumen. This is a crucial move for accelerating profitability initiatives and operational improvement, especially as the bank continues to navigate regulatory requirements. You can read more about the bank's stability and risk management in Breaking Down Kentucky First Federal Bancorp (KFFB) Financial Health: Key Insights for Investors.

The table below summarizes the core financial drivers that underpin the bank's growth prospects:

What this estimate hides is the persistent pressure from non-interest expenses, which rose due to higher professional fees associated with compliance and regulatory oversight. This is a necessary cost for remediation, but you need to watch for normalization as their strategic and risk management plans are fully implemented. Finance: Monitor the trend in outside services and data processing costs in the next two quarterly reports.