Kentucky First Federal plans to reduce future dividends

Kentucky First Federal Bancorp announced the Company will pay a cash dividend in the amount of ten cents per share to shareholders of record on October 31, 2023 and payable on November 20, 2023. However, the Company further reported that future dividends will be reduced primarily due to the recent decline in the earnings of the Banks. Don Jennings, CEO, stated, “We have experienced historic increases in short-term market interest rates as well as a persistent inversion of the yield curve that has resulted in compressed net interest margins and much lower earnings at the bank level. As designed, our loans are repricing in response to the higher rate environment, but due to contractual terms of those loans, increases are restricted as to time and amount, resulting in a slower pace of increase than that of liabilities. We are implementing strategies to emphasize core deposit relationships instead of higher-cost funding sources. Also, we plan to, over time, shift more of the loan portfolio towards higher-earning loans to include those secured by non-owner occupied residential and commercial real estate; doing so at prudent levels while continuing our community banking model and adhering to our conservative lending standards and practices. Currently, lower earnings limit the Banks’ ability to stream sufficient funds to the Company in order to fund operations and dividends while still maintaining adequate liquidity at the banks to fund operations and loan growth. While the Board continues to believe in a strong Company dividend policy, all of these factors, coupled with regulators’ enhanced scrutiny of liquidity and bank dividend payout ratios relative to earnings, will necessitate a change in dividend policy for future periods. Our board will carefully consider whether a dividend may be paid to shareholders in future periods and, if so, at what level. The Board currently expects that if quarterly dividends will continue in 2024, they will be limited to no more than five cents per share. Dividends are also dependent on ongoing relevant regulatory approval.”