- Key insight: Executives at Kentucky First Federal Bancorp were prepared to operate under a written agreement for as long as four years, but the regulatory order was terminated after just 20 months.
- Why it's important: The faster-than-expected action comes as data shows that Trump-era regulators are moving more quickly to resolve existing enforcement actions.
- Expert quote: "The median time period for getting out from under these orders, until quite recently, was trending in a direction of getting longer." — Klaros Group co-founder and partner Konrad Alt
When Kentucky First Federal Bancorp entered into a written agreement with the Office of the Comptroller of the Currency in August 2024, the bank's management feared that resolving the matter might take as long as four years, requiring outlays of time and money that the $367 million-asset company could ill afford to spare.
But on Thursday, after just 18 months, Kentucky First announced the written agreement's termination.
President Don Jennings credited the quicker-than-expected exit to an "all-bank effort" that propelled a subsidiary, First Federal Savings Bank of Kentucky, back to profitability and accelerated its transformation from a traditional thrift to a more commercial-bank-like business model.
Kentucky First operates a second subsidiary, Hazard, Kentucky-based First Federal Savings and Loan Association, that wasn't impacted by the written agreement with the OCC.
"I'm not going to say that it was worth the heartache and the significant legal and consulting costs to get there — I think we would have gotten there anyway — but certainly we are a better bank than we were two or three years ago," Jennings told American Banker.
According to Konrad Alt, co-founder and partner at Klaros Group, the Walnut Creek, California-based investment and advisory firm, Jennings was right to worry about how long the written agreement would remain in effect. A four-year term "would not be unusual at any of the federal banking agencies in recent years," Alt told American Banker.
"The median time period for getting out from under these orders, until quite recently, was trending in a direction of getting longer," Alt added.
Kentucky First's release from the 2024 written agreement comes at a time when enforcement activity across the industry is on the decline, amid the Trump administration's deregulatory push. Terminations of enforcement actions have ticked up in recent months, while new actions have dropped to near zero, according to data compiled by Klaros Group.
"In this administration, the regulators are lifting enforcement actions quite aggressively, and the median time frames for relief are falling as a consequence," Alt said.
While First Federal Savings Bank of Kentucky's 16-page written agreement touched on a wide range of issues, including strategic planning, succession planning, interest-rate risk and liquidity risk, Jennings traced the root cause of the problems to an earnings drought brought on by the spike in interest rates that began in 2022.
The $289 million-asset bank subsidiary's net income totaled $1.5 million in 2021, according to the Federal Deposit Insurance Corp. Earnings fell to $681,000 in 2022, and swung to a loss of $242,000 in 2023. Through the first six months of 2024, the deficit swelled further, to $955,000.
"We had a couple years without significant earnings and a little bit of loss," Jennings said. "That certainly got [regulators'] attention."
In response to the enforcement action, Kentucky First strengthened its liquidity and interest-rate policies. It also put more emphasis on collecting noninterest deposits and making more multifamily and commercial real estate loans.
First Federal Savings Bank of Kentucky's net interest margin had shrunk to 2.19% at midyear 2024, down from 3.08% on Dec. 31, 2021. But with the heightened attention on cheaper deposits and more profitable loans, the metric began moving in the opposite direction, reaching 2.62% on Sept. 30, 2025. The wider margin acted as a tonic to the bottom line, as the bank reported profits totaling $581,000 for the nine months ending Sept. 30.
Returning to profitability "had a big effect on the overall picture," according to Jennings.
"Pretty much everything we had to do policy-wise was completed by the end of 2024," Jennings said. "We were prepared for a longer period of assessment and looking for progress. We're very pleased it only took a little over a year for that to happen. We definitely thought it might take longer."
