Kentucky First Federal Bancorp (KFFB) FY2026 Earnings: Revenue $12M (+32.8%)
KFFB — FY2026 Financial Report Analysis
Full Year · Fiscal year 2026 · Published by Pham Hop
Kentucky First Federal's FY2026 profit rose to $1.9M ($0.24/share) from $181K as net interest margin widened to 3.07% from 2.28%, even though loans shrank 2.3%; the OCC lifted its formal agreement and the dividend resumed at $0.05.
Net interest income
$11M
+33.2% YoY
Net interest margin
3.07%
Net income
$1.9M
+954.7% YoY
Diluted EPS
$0.24
+1100.0% YoY
Efficiency ratio
76.7%
Net charge-off ratio
0.05%
CET1 capital ratio
13.6%
Net interest margin (NIM): what a bank earns on its loans and securities minus what it pays for deposits and borrowing, as a share of those assets. Efficiency ratio: operating costs per dollar of revenue (lower is better). Net charge-off (NCO) ratio: loans written off as unrecoverable, net of recoveries, as a share of average loans. CET1: the bank's core capital cushion against losses, as a share of risk-weighted assets.
This period vs a year ago
Same period last year
This period
Net interest income▲+33.2%
≈$8.3M
$11M
Net income▲+954.7%
≈$181K
$1.9M
Diluted EPS+1100.0%
Kentucky First Federal Bancorp, the holding company for two small savings banks (First Federal of Hazard in eastern Kentucky and First Federal of Kentucky in Frankfort, Danville and Lancaster), earned $1.9 million, or $0.24 a share, in the year ended June 30, 2026, up from $181,000, or $0.02, the year before. Almost all of the improvement came from one line: net interest income — what the banks earn on loans and securities minus what they pay depositors and lenders — rose 33.2% to $11.1 million, because older loans repriced to higher rates while the cost of deposits and borrowings fell. The loan book itself shrank. The year also closed out a regulatory chapter: the OCC terminated its formal agreement with First Federal of Kentucky on February 19, 2026, and the company has since restarted its dividend.
At a glance
Net interest margin 3.07%, up from 2.28%. For every $100 of loans and securities, the banks now keep about $3.07 a year after paying for funding, versus $2.28 — the single biggest reason profit rose tenfold from a very low base.
Return on equity 3.88% (0.38% last year). Much better, but still a low return: each $100 of shareholders' money earned under $4 over the year.
Nonperforming loans $2.6 million, down from $3.9 million (0.80% of loans vs 1.17%). Credit quality improved even as the company booked a slightly larger provision.
Results versus last year
Metric
FY2026 (year to June 30, 2026)
FY2025
YoY Change
Total revenue (net interest income + non-interest income)
$11.7M
$8.8M
+32.8%
Net interest income
$11.1M
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▲
≈$0.02
$0.24
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
$8.3M
+33.2%
Net interest margin
3.07%
2.28%
+0.79 pts
Non-interest income
$629K
$500K
+25.8%
Non-interest expense
$9.0M
$8.6M
+5.1%
Efficiency ratio
76.65%
96.87%
−20.2 pts
Net income
$1.9M
$181K
+954.7%
Diluted EPS
$0.24
$0.02
+$0.22
Total loans (gross, period-end)
$321.7M
$329.4M
−2.3%
Deposits (period-end)
$260.8M
$277.6M
−6.0%
Net charge-offs / average loans
0.05%
0.00%
+0.05 pts
Community Bank Leverage Ratio
13.56%
12.99%
+0.57 pts
Return on average equity
3.88%
0.38%
+3.50 pts
Revenue here is net interest income plus non-interest income, the usual way to measure a bank's top line. The efficiency ratio is non-interest expense divided by that revenue — how many cents it costs to earn a dollar, where lower is better. The capital figure is the Community Bank Leverage Ratio (Tier 1 capital divided by average total assets), which both banks have elected to use since 2021; the filing lists Common Equity Tier 1 and the risk-weighted ratios as "N/A", so no CET1 ratio is reported. All figures are GAAP; the company reports no adjusted or tax-equivalent measures.
Where the extra income came from: prices, not volume
Total interest income rose $1.6 million (8.1%) to $20.8 million, and the filing attributes this "primarily to higher average rates earned on interest-earning assets." Loan interest rose $1.8 million (10.1%) to $19.5 million even though average loans fell $3.8 million (1.2%) to $329.7 million: the average yield on loans rose 60 basis points (0.60 percentage points) to 5.92%. This is a thrift whose book is 74.6% one- to four-family home mortgages, so a large share of it was written when mortgage rates were far lower; as those loans pay off or reset, the replacements earn more.
The funding side helped nearly as much. Interest expense fell $1.2 million (11.2%) to $9.7 million:
Certificates of deposit (CDs) — fixed-term deposits, which make up most of the banks' funding — cost 45 basis points less, averaging 3.76%, cutting CD interest by $540,000 to $7.4 million even though the average CD balance grew $8.1 million to $196.0 million.
Federal Home Loan Bank (FHLB) borrowings fell on average by $13.1 million (22.0%) to $46.3 million, and their average rate dropped 34 basis points to 4.29%, trimming interest on them by $760,000 (27.6%) to $2.0 million.
Put together, the spread between what the banks earn and what they pay widened from 1.78% to 2.61%, and net interest income rose $2.8 million. Pre-tax income rose by less than that — $2.3 million, to $2.5 million — because expenses and the provision also rose.
Costs and credit
Non-interest expense rose $435,000 (5.1%) to $9.0 million. The largest piece was data processing, up $344,000 (51.0%) to $1.0 million "due to increased costs associated with the core processing system." Staff costs rose $221,000 (4.6%) to $5.1 million on additional full-time employees and normal raises. Non-interest income rose $129,000 to $629,000, mostly from $108,000 more in gains on selling mortgages — in line with management's stated plan to sell more of the loans it writes into the secondary market rather than keep them, which reduces interest-rate risk and brings in fee-like income. Loans originated for sale nearly doubled to $14.0 million from $7.6 million.
The provision for credit losses — money set aside for loans expected to go bad — rose to $237,000 from $39,000. Management says $150,000 of that replaced actual charge-offs during the year; net charge-offs were 0.05% of average loans, still very low. Meanwhile nonperforming loans fell to $2.6 million, and the allowance now covers 87.9% of them, up from 56.1%.
What the headline numbers hide
The tenfold jump is off a near-zero base. Net income of $1.9 million is up 954.7%, but it is only modestly above FY2022's $1.6 million, and return on assets of 0.51% is still low for a bank. FY2024 was a loss year ($1.7 million, including a $947,000 goodwill write-off); FY2026 has no comparable one-off in either year, so this is a clean earnings comparison.
EPS growth is all operations. The weighted share count was identical in both years (8,086,715), so there were no buybacks, and the effective tax rate barely moved (23.8% vs 24.0%). The whole increase came from wider interest margins.
Cash conversion is decent but not full. Operating cash flow was $1.2 million against $1.9 million of net income, versus −$86,000 the year before. Some of the gap is timing: accrued interest payable fell $283,000 and other assets rose $360,000.
The balance sheet got smaller. Total assets fell to $362.4 million from $371.2 million. Originations of $60.3 million fell $5.3 million short of repayments, so gross loans declined 2.3%. Margin expansion is carrying earnings; loan growth is not.
Funding still leans on rate-sensitive money. Deposits fell $16.7 million, but $14.4 million of that was the deliberate run-off of brokered deposits (bought through intermediaries, usually at higher rates), down to $29.6 million from $44.0 million. The company partly replaced them with FHLB advances, which rose $5.8 million (13.6%) to $48.6 million at a weighted-average rate of 4.26%. CDs maturing within a year total $163.3 million — 62.6% of all deposits — so the next year's funding cost depends heavily on the rates those CDs roll over at.
Still an expensive operation for its size. Even after a 20-point improvement, the efficiency ratio of 76.65% means about 77 cents of costs for every dollar of revenue, and the core-processing cost jump is recurring rather than one-time.
Takeaway: FY2026 profit rose tenfold because the interest margin widened from 2.28% to 3.07% — loan yields rose 60 basis points while deposit and borrowing costs fell — not because the banks grew; the loan book shrank 2.3%, and with 62.6% of deposits in CDs maturing within a year, further gains depend on funding costs continuing to fall.
Regulatory reset and the dividend
On August 13, 2024, First Federal of Kentucky entered a formal written agreement with the OCC, which also imposed higher individual minimum capital requirements. The OCC terminated both on February 19, 2026; the bank is no longer considered to be in "troubled condition." Management's letter says the work behind that outcome continues: less reliance on non-core funding (such as brokered deposits), more income from sources other than interest, more loans sold into the secondary market, and building out commercial lending and commercial and public deposits.
The company suspended its quarterly dividend in January 2024. After First Federal MHC — the mutual holding company that owns about 58.5% of the shares — voted on July 28, 2026 to waive its right to up to $0.40 per share of dividends over the following 12 months, the board declared $0.05 per share, paid September 21, 2026. That $0.05 is well below the $0.40 a year paid before FY2024, and against $0.24 of FY2026 earnings per share.
Outlook
Management gives no numeric earnings guidance. What the filing does show:
Margin tailwind is still in the book, as long as older, lower-rate mortgages keep repricing and maturing CDs renew at lower rates. The size of that second effect depends on the rate environment when $163.3 million of CDs roll over, which the company does not control.
Growth is the open question. With loan balances falling and management choosing to sell more mortgages rather than hold them, earnings growth from here has to come from margin and fee income, or from the commercial lending push the letter describes, which has no figures attached yet.
Capital is ample. The leverage ratio of 13.56% is well above the 9% threshold for the community bank framework, which leaves room for the dividend and for growth if lending picks up.
Our read: the move from breakeven to a 3.9% return on equity is real and comes from core spread income, not accounting items or buybacks. But at 77 cents of cost per revenue dollar and a shrinking loan book, getting to a return that matches most banks will take either loan growth or another meaningful step up in margin. The next quarterly reports will show whether the margin kept widening after June.