Frankfort First Bancorp, Inc.
For Immediate Release August 17, 2004
Contact: Don Jennings, President, or Clay Hulette, Vice President
(502) 223-1638
216 West Main Street
P.O. Box 535 Frankfort, KY 40602
FRANKFORT FIRST BANCORP, INC. RELEASES EARNINGS
Frankfort First Bancorp, Inc. (Nasdaq: FKKY), the holding company for First
Federal Savings Bank of Frankfort, Kentucky, announced net earnings of $953,000
or $0.72 diluted earnings per share for the fiscal year ended June 30, 2004,
compared to $1.3 million or $1.02 diluted earnings per share for the fiscal year
ended June 30, 2004. This results in a 29.4% decrease in diluted earnings per
share for the fiscal year ended June 30, 2004.
Net earnings for the fiscal year decreased by $362,000 or 27.5% compared to
the prior year, largely due to a decrease in net interest income. Net interest
income decreased by $374,000 or 10.3% from $3.6 million for the year ended June
30, 2003 to $3.3 million for the year ended June 30, 2004 and was the result of
declining interest income, which declined at a faster pace than interest
expense. The decline in interest income was caused by the continuing decrease in
the rates earned on the Company's assets, particularly mortgage loans. The
weighted average rate earned on the Company's assets decreased from 6.3% for the
fiscal year ended June 30, 2003 to 5.6% for the fiscal year ended June 30,
2004--mostly as a result of borrowers refinancing their loans and to new loans
originated at lower rates. President Don Jennings stated that while margin
compression is affecting many financial institutions, the Company's earnings may
have been impacted to a greater extent as management has continued to adhere to
its longstanding technique for managing interest rate risk, i.e. emphasizing
investment in adjustable rate mortgages, as opposed to purchasing or originating
higher-yielding fixed rate investments. While this strategy currently
exacerbates the margin compression, such techniques will prove to be beneficial
as market interest rates rise. Also contributing to the decline in net earnings
was the increase in general, administrative, and other expense which increased
from $1.7 million in the fiscal year ended June 30, 2003 to $1.9 million in the
fiscal year ended June 30, 2004, an increase of $183,000 or 10.7%. This increase
was primarily due to increases in the Company's pension expense and other
expenses associated with employee compensation and benefits.
At June 30, 2004, the Company reported its book value per share as $13.83
compared to $14.35 at June 30, 2003.
On July 16, 2004, Frankfort First Bancorp, Inc. announced that it had
executed a definitive agreement with First Federal Savings and Loan Association
of Hazard, Kentucky pursuant to which First Federal Savings and Loan Association
of Hazard will reorganize into a mutual holding company in order to acquire
Frankfort First Bancorp for $23.50 per share of outstanding Frankfort First
Bancorp common stock. This transaction is expected to close in the first
calendar quarter of 2005.
The proposed acquisition will be submitted to Frankfort First Bancorp's
stockholders for their consideration. Kentucky First Federal Bancorp, Inc., the
new mid-tier holding company to be formed by First Federal in the
reorganization, will be filing a registration statement, including a prospectus,
and will be filing other relevant documents concerning the reorganization and
the merger; and Frankfort First Bancorp will be filing a proxy statement and
other relevant documents concerning the merger, with the United States
Securities and Exchange Commission (the "SEC").
We urge potential investors to read the registration statement and the
prospectus and Frankfort First Bancorp stockholders to read the Frankfort First
Bancorp proxy statement which will be filed with the SEC, because they will
contain important additional information. After the documents are filed with the
SEC interested parties will be able to obtain these documents free of charge at
the SEC's web site (www.sec.gov). When the documents are finalized, copies of
the prospectus will be sent to First Federal Savings and Loan Association of
Hazard's members and the proxy statement to Frankfort First Bancorp's
stockholders. Copies of the proxy statement can be obtained, without charge,
from the Investor Relations Department at Frankfort First Bancorp, Inc., 216
West Main Street, P.O. Box 535, Frankfort, Kentucky 40602. Copies of the
prospectus can be obtained, without charge, from the Secretary of First Federal
Savings and Loan Association of Hazard, 479 Main Street, P.O. Box 1069, Hazard,
Kentucky 41702.
The directors, executive officers, and certain other members of management
of Frankfort First Bancorp, Inc. may be soliciting proxies in favor of the
merger from the Frankfort First Bancorp, Inc. stockholders. For information
about these directors, executive officers, and members of management,
stockholders are asked to refer to the most recent proxy statement filed by
Frankfort First Bancorp, Inc. with the SEC on Schedule 14A. Additional
information about the interest of those participants may be obtained from
reading the definitive proxy statement regarding the proposed merger when it
becomes available.
This press release may contain statements that are forward-looking, as that
term is defined by the Private Securities Litigation Act of 1995 or the
Securities and Exchange Commission in its rules, regulations and releases. The
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. All forward-looking statements are based on current
expectation regarding important risk factors including, but not limited to, real
estate values and the impact of interest rates on financing. Accordingly, actual
results may differ from those expressed in the forward-looking statements, and
the making of such statements should not be regarded as a representation by the
Company or any other person that results expressed therein will be achieved.
First Federal Savings Bank of Frankfort operates three offices in
Frankfort, Kentucky. Frankfort First Bancorp, Inc. shares are traded on the
Nasdaq National Market under the symbol FKKY. At June 30, 2004 the Company had
approximately 1,267,000 shares outstanding.
SUMMARY OF FINANCIAL HIGHLIGHTS
Condensed Consolidated Statements of Financial Condition
June 30, June 30,
2004 2003
---- ----
(In thousands, except per share data)
(Unaudited) (Audited)
Assets
Cash and Cash Equivalents $ 1,122 $ 2,028
Investment Securities 4,858 7,097
Loans Receivable, net 125,262 124,596
Other Assets 6,876 4,615
-------------- --------------
Total Assets $ 138,118 $ 138,336
============== ==============
Liabilities
Deposits $ 75,025 $ 75,622
FHLB Advances 43,718 43,017
Other Liabilities 1,861 1,699
-------------- --------------
Total Liabilities 120,604 120,338
Shareholders' Equity 17,514 17,998
-------------- --------------
Total Liabilities and Equity $ 138,118 $ 138,336
============== ==============
Book Value Per Share $ 13.83 $ 14.35
============== ==============
Condensed Consolidated Statements of Earnings
Twelve months ended June 30, Three months ended June 30,
2004 2003 2004 2003
---- ---- ---- ----
(In thousands, except per share data) (In thousands, except per share data)
(Unaudited) (Unaudited)
Interest Income $ 7,693 $ 8,652 $ 1,860 $ 2,060
Interest Expense 4,435 5,020 1,059 1,186
-------------- -------------- --------------- ---------------
Net Interest Income 3,258 3,632 801 874
Provision for Losses on Loans -- -- -- --
Other Operating Income 69 71 31 16
General, Administrative, and Other Expense 1,893 1,710 485 434
-------------- -------------- --------------- ---------------
Earnings Before Federal Income Taxes 1,434 1,993 347 456
Federal Income Taxes 481 678 110 155
-------------- -------------- --------------- ---------------
Net Earnings $ 953 $ 1,315 $ 237 $ 301
============== ============== =============== ===============
Basic Earnings Per Share $ 0.76 $ 1.05 $ 0.19 $ 0.24
Diluted Earnings Per Share $ 0.72 $ 1.02 $ 0.18 $ 0.23
Dividends Per Share $ 1.12 $ 1.12 $ 0.28 $ 0.28