What changed in this filing

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Item 1. Financial Statements

2021-02-16 compared with 2020-11-16 · 751 added, 422 removed, 590 unchanged (67% of the section changed)

3 unchanged sentences

thousands, except share data)

September 30,

Cash and due from financial institutions

3 unchanged sentences

Securities available-for-sale

Securities held-to-maturity, at amortized cost- approximate fair value of $582 and $611 at September 30, 2020 and June 30, 2020, respectively

Securities held-to-maturity, at amortized cost- approximate fair value of $550 and $611 at December 31, 2020 and June 30, 2020, respectively

Loans held for sale

Loans, net of allowance of $1,536 and $1,488 at September 30, 2020 and June 30, 2020, respectively

Loans, net of allowance of $1,622 and $1,488 at December 31, 2020 and June 30, 2020, respectively

Real estate owned, net

9 unchanged sentences

Accrued interest payable

Accrued federal income taxes

Deferred income taxes

9 unchanged sentences

Retained earnings

Unearned employee stock ownership plan (ESOP), 24,262 shares and 28,931 shares at September 30, 2020 and June 30, 2020, respectively

Treasury shares at cost, 351,849 and 342,849 common shares at September 30, 2020 and June 30, 2020, respectively

Unearned employee stock ownership plan (ESOP), 19,593 shares and 28,931 shares at December 31, 2020 and June 30, 2020, respectively

Treasury shares at cost, 359,349 and 342,849 common shares at December 31, 2020 and June 30, 2020, respectively

Accumulated other comprehensive income

1 unchanged sentence

Total liabilities and shareholders’

See accompanying

notes to condensed consolidated financial statements.

accompanying notes to condensed consolidated financial statements.

First Federal Bancorp

1 unchanged sentence

in thousands, except per share data)

Three months ended

September 30,

Six months ended December 31,

Three months ended December 31,

Interest income

14 unchanged sentences

Net gain on sales of loans

Net gain on sales of real estate owned

Net gain (loss) on sales of real estate owned

Valuation adjustment for real estate owned

Total non-interest income

11 unchanged sentences

Income before income taxes

Income tax expense

Federal income tax expense

EARNINGS PER SHARE

1 unchanged sentence

DIVIDENDS PER SHARE

See accompanying

notes to condensed consolidated financial statements.

accompanying notes to condensed consolidated financial statements.

First Federal Bancorp

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended

September 30,

Other comprehensive income, net of tax:

Unrealized holding gains on securities designated as available-for-sale, net of taxes of $(1), and $0 during the respective periods

Six months ended December 31,

Three months ended December 31,

Other comprehensive gains (losses), net of tax:

Unrealized holding Gains (losses) on securities designated as available-for-sale, net of taxes of $(1), $0, $0 and $0 during the respective periods

Comprehensive income

See accompanying

notes to condensed consolidated financial statements.

accompanying notes to condensed consolidated financial statements.

First Federal Bancorp

STATEMENTS OF CHANGES IN SHAREHOLDERS’

the three months ended

the six months ended

amounts in thousands, except per share data)

comprehensive

Additional paid-in

Retained earnings

Unearned employee stock ownership plan

Treasury shares

Accumulated other

comprehensive income

Balance at June 30, 2020

1 unchanged sentence

Acquisition of shares for Treasury

Other comprehensive income

Other comprehensive loss

Cash dividends of $0.20 per common share

Balance at September 30, 2020

comprehensive

Balance at December 31, 2020

Additional paid-in

Retained earnings

Unearned employee stock ownership plan

Treasury shares

Accumulated other

comprehensive income

Balance at June 30, 2019

1 unchanged sentence

Acquisition of shares for treasury

Other comprehensive loss

Cash dividends of $0.20 per common share

Balance at December 31, 2019

accompanying notes to condensed consolidated financial statements.

First Federal Bancorp

STATEMENTS OF CHANGES IN SHAREHOLDERS’

the three months ended

amounts in thousands, except per share data)

Additional paid-in

Retained earnings

Unearned employee stock ownership plan

Treasury shares

Accumulated other

comprehensive income

Balance at September 30, 2020

Allocation of ESOP shares

Acquisition of shares for Treasury

Other comprehensive income

Cash dividends of $0.10 per common share

Balance at December 31, 2020

Additional paid-in

Retained earnings

Unearned employee stock ownership plan

Treasury shares

Accumulated other

comprehensive income

Balance at September 30, 2019

See accompanying

notes to condensed consolidated financial statements.

Allocation of ESOP shares

Acquisition of shares for treasury

Other comprehensive income

Cash dividends of $0.10 per common share

Balance at December 30, 2019

accompanying notes to condensed consolidated financial statements.

First Federal Bancorp

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended

September 30,

Six months ended December 31,

Cash flows from operating activities:

5 unchanged sentences

Net gain on sale of loans

Net gain on sale of real estate owned

Net (gain) loss on sale of real estate owned

Valuation adjustments of real estate owned

ESOP compensation expense

8 unchanged sentences

Other liabilities

Federal income taxes

Net cash provided by operating activities

20 unchanged sentences

Ending cash and cash equivalents

See accompanying

notes to condensed consolidated financial statements.

accompanying notes to condensed consolidated financial statements.

First Federal Bancorp

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Three months ended

September 30,

Six months ended December 31,

Supplemental disclosure of cash flow information:

4 unchanged sentences

Loans made on sale of real estate owned

See accompanying

notes to condensed consolidated financial statements.

accompanying notes to condensed consolidated financial statements.

First Federal Bancorp

22 unchanged sentences

have been included.

The results of operations for the three-month period ended September 30, 2020, are not necessarily indicative

The results of operations for the six-month period ended December 31, 2020, are not necessarily indicative

of the results which may be expected for an entire fiscal year.

14 unchanged sentences

- Certain amounts presented in prior periods may have been reclassified to conform to the current period presentation.

reclassifications had no impact on prior years’

Such reclassifications had no impact on prior years’

net income or shareholders’

1 unchanged sentence

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

of Presentation (continued)

Basis of Presentation (continued)

Accounting Standards

55 unchanged sentences

per share computations follow:

Three months ended

September 30,

Six months ended December 31,

Three months ended December 31,

(in thousands)

Net income allocated to common shareholders, basic and diluted

Earnings per share, basic and diluted

Six months ended December 31,

Three months ended December 31,

Weighted average common shares outstanding, basic and diluted

were no stock option shares outstanding for the three-month periods ended September 30, 2020 and 2019.

were no stock option shares outstanding for the six- or three-month periods ended December 31, 2020 and 2019.

Investment Securities

following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity

at September 30, 2020 and June 30, 2020, the corresponding amounts of gross unrealized gains recognized in accumulated other comprehensive

at December 31, 2020 and June 30, 2020, the corresponding amounts of gross unrealized gains recognized in accumulated other comprehensive

income and gross unrecognized gains and losses:

September 30, 2020

December 31, 2020

(in thousands)

Amortized cost

Gross unrealized/ unrecognized

Estimated fair

Available-for-sale Securities

4 unchanged sentences

(in thousands)

Amortized cost

Gross unrealized/ unrecognized

Estimated fair

Available-for-sale Securities

6 unchanged sentences

pledged securities (including overnight and time deposits in other financial institutions) totaled $1.8 million and $1.9 million

at September 30, 2020 and June 30, 2020, respectively.

at December 31, 2020 and June 30, 2020, respectively.

evaluated securities in unrealized loss positions for evidence of other-than-temporary impairment, considering duration, severity,

7 unchanged sentences

composition of the loan portfolio was as follows:

September 30,

(in thousands)

9 unchanged sentences

Loans receivable (continued)

following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September

following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended December

(in thousands)

Provision for

Beginning balance

Provision for loan losses

Loans charged off

Ending balance

Residential real estate:

4 unchanged sentences

Loans on deposits

following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September

following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December

(in thousands)

Beginning balance

Provision for loan losses

Loans charged off

Ending balance

Residential real estate:

7 unchanged sentences

Loans receivable (continued)

following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended December

(in thousands)

Beginning balance

Provision for loan losses

Loans charged off

Ending balance

Residential real estate:

One- to four-family

Nonresidential real estate

Commercial nonmortgage

Consumer and other:

Loans on deposits

following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December

(in thousands)

Beginning balance

Provision for loan losses

Loans charged off

Ending balance

Residential real estate:

One- to four-family

Nonresidential real estate

Commercial nonmortgage

Consumer and other:

Loans on deposits

First Federal Bancorp

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Loans receivable (continued)

following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class

and based on impairment method as of September 30, 2020.

and based on impairment method as of December 31, 2020.

The recorded investment in loans excludes accrued interest receivable

due to immateriality.

September 30, 2020:

(in thousands)

Loans individually evaluated

Loans acquired with deteriorated credit quality

Unpaid principal balance

and recorded investment

Ending allowance attributed to loans

Unallocated allowance

Total allowance

Loans individually evaluated for impairment:

13 unchanged sentences

and based on impairment method as of June 30, 2020.

June 30, 2020:

(in thousands)

Loans individually

Loans acquired with

deteriorated credit quality

Unpaid principal balance

and recorded investment

Ending allowance attributed to loans

Unallocated allowance

Total allowance

Loans individually evaluated for impairment:

10 unchanged sentences

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

receivable (continued)

Loans receivable (continued)

following table presents interest income on loans individually evaluated for impairment by class of loans for the six months ended

(in thousands)

With no related allowance recorded:

One- to four-family

Nonresidential real estate

Purchased credit-impaired loans

With an allowance recorded:

One- to four-family

following table presents interest income on loans individually evaluated for impairment by class of loans for the three months

ended September 30:

ended December 31:

(in thousands)

Average Recorded Investment

Income Recognized

Cash Basis Income Recognized

Average Recorded Investment

Cash Basis Income Recognized

With no related allowance recorded:

Residential real estate:

One- to four-family

3 unchanged sentences

One- to four-family

following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans

as of September 30, 2020 and June 30, 2020:

September 30, 2020

Kentucky First

Federal Bancorp

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2020

Loans receivable (continued)

The following table presents the recorded

investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of December 31, 2020 and June 30,

December 31, 2020

June 30, 2020

8 unchanged sentences

Commercial and industrial

First Federal Bancorp

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

receivable (continued)

to four-family loans in process of foreclosure totaled $563,000 and $694,000 at September 30, 2020 and June 30, 2020, respectively.

Debt Restructurings:

Troubled Debt Restructuring (“TDR”) is the situation where the Bank grants a concession to the borrower that the Banks

would not otherwise have considered due to the borrower’s financial difficulties.

One- to four-family loans in process of

foreclosure totaled $790,000 and $694,000 at December 31, 2020 and June 30, 2020, respectively.

Troubled Debt Restructurings:

A Troubled Debt Restructuring (“TDR”)

is the situation where the Bank grants a concession to the borrower that the Banks would not otherwise have considered due to the

borrower’s financial difficulties.

All TDRs are considered “impaired.”

The provisions of the CARES Act included an

election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or

deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the end

of the COVID-19 national emergency.

The relief can only be applied to modifications for borrowers that were not more than 30 days

past due as of December 31, 2019.

The provisions of the CARES Act included

an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions

or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the

end of the COVID-19 national emergency.

The relief can only be applied to modifications for borrowers that were not more than 30

days past due as of December 31, 2019.

The Company elected to adopt these provisions of the CARES Act.

As of September 30, 2020,

As of December 31,

2020, the Banks had granted deferrals to 101 loans totaling $18.4 million.

At September 30, 2020, 81 loans totaling $16.2 million had

completed their approved deferral periods and $16.0 million or 98.6% had returned to normal repayment status.

At September 30,

2020, 15 loans totaling $1.9 million remained on their original deferral periods.

September 30, 2020 and June 30, 2020, the Company had $1.8 million and $1.9 million of loans classified as TDRs, respectively.

Of the TDRs at September 30, 2020, approximately 23.7% were related to the borrower’s completion of Chapter 7 bankruptcy

proceedings with no reaffirmation of the debt to the Banks.

the three months ended September 30, 2020, the Company had no loans restructured as TDRs.

the three months ended September 30, 2019, the Company had one loan restructured as a TDR.

A borrower refinanced a piece of one-

to four-family, non-owner occupied, residential property to bring to current amounts owed on other loans with the Bank.

the borrower’s financial condition had deteriorated, it was unlikely that the borrower could have secured financing elsewhere.

The restructured loan is collateralized and cross-collateralized by real estate.

following table summarizes TDR loan modifications that occurred during the three months ended September 30, 2019, and their performance,

by modification type:

Of those, five loans totaling $293,000 had not yet completed

the initial 3-month deferral period at December 31, 2020.

One borrower who owes $859,000 had been granted an additional extension.

All other borrowers granted a deferral, composed of 95 loans totaling $17.2 million in principal had resumed regular payments.

At December 31, 2020 and June 30, 2020,

the Company had $1.9 million and $1.9 million of loans classified as TDRs, respectively.

Of the TDRs at December 31, 2020, approximately

29.6% were related to the borrower’s completion of Chapter 7 bankruptcy proceedings with no reaffirmation of the debt to

During the six months ended December 31,

2020, the Company had two loans, which were associated with a single borrower and were both secured by a single-family residence,

restructured as TDRs.

The loans were classified as TDRs pursuant to court action under Chapter 7 bankruptcy proceedings without

the borrower reaffirming the debt personally, and totaled $144,000 at December 31, 2020, and were current on payments.

Kentucky First

Federal Bancorp

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2020

Loans receivable (continued)

During the six months ended December 31,

2019, the Company had two loans restructured as TDRs.

One borrower refinanced a piece of one- to four-family, non-owner occupied,

residential property to bring to current amounts owed on other loans with the Bank.

Because the borrower’s financial condition

had deteriorated, it was unlikely that the borrower could have secured financing elsewhere.

The restructured loan is collateralized

and cross-collateralized by real estate.

Another single-family residential borrower filed for Chapter 7 bankruptcy protection and

did not reaffirm the debt personally, although the Company’s collateral position remains intact.

The following table summarizes TDR loan

modifications that occurred during the six months ended December 31, 2020 and 2019, and their performance, by modification type:

(in thousands)

7 unchanged sentences

Restructurings

Three months ended September 30, 2019

Six months ended December 31, 2020

Residential real estate:

Chapter 7 bankruptcy

Six months ended December 31, 2019

Residential real estate:

Terms extended

Terms extended and additional funds advanced

TDRs defaulted during the three-month periods ended September 30, 2020 or 2019.

First Federal Bancorp

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

receivable (continued)

following table presents the aging of the principal balance outstanding in past due loans as of September 30, 2020, by class of

Chapter 7 bankruptcy

No TDRs defaulted during the six-month

periods ended December 31, 2020 or 2019.

The following table summarizes TDR loan

modifications that occurred during the three months ended December 31, 2020 and 2019, and their performance, by modification type:

(in thousands)

Troubled Debt

Restructurings

Performing to

Troubled Debt

Restructurings

Performing to

Troubled Debt

Restructurings

Three months ended December 31, 2020

Residential real estate:

Chapter 7 bankruptcy

Three months ended December 31, 2019

Residential real estate:

Terms extended

Chapter 7 bankruptcy

Kentucky First

Federal Bancorp

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2020

Loans receivable (continued)

The following table presents the aging

of the principal balance outstanding in past due loans as of December 31, 2020, by class of loans:

(in thousands)

Residential real estate:

One-to four-family

3 unchanged sentences

Loans on deposits

following tables present the aging of the principal balance outstanding in past due loans as of June 30, 2020, by class of loans:

The following tables present the aging

of the principal balance outstanding in past due loans as of June 30, 2020, by class of loans:

(in thousands)

4 unchanged sentences

Loans on deposits

First Federal Bancorp

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Kentucky First

Federal Bancorp

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2020

Loans receivable (continued)

Quality Indicators:

Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt

current financial information, historical payment experience, credit documentation, public information, and current economic

trends, among other factors.

The Company analyzes loans individually by classifying the loans as to credit risk.

This analysis

is performed on an annual basis.

Credit Quality Indicators:

The Company categorizes loans into risk

categories based on relevant information about the ability of borrowers to service their debt such as:

current financial information,

historical payment experience, credit documentation, public information, and current economic trends, among other factors.

Company analyzes loans individually by classifying the loans as to credit risk.

This analysis is performed on an annual basis.

The Company uses the following definitions for risk ratings:

Loans classified as special mention have a potential weakness that deserves management’s close attention.

left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s

credit position at some future date.

Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or

of the collateral pledged, if any.

Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation

They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies

are not corrected.

Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic

that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly

questionable and improbable.

not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass

Loans listed that are not rated are included in groups of homogeneous loans and are evaluated for credit quality

based on performing status.

See the aging of past due loan table above.

As of September 30, 2020, and based on the most recent

analysis performed, the risk category of loans by class of loans is as follows:

Special Mention.

classified as special mention have a potential weakness that deserves management’s close attention.

If left uncorrected,

these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit

position at some future date.

Loans classified

as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged,

Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

They are characterized

by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Loans classified

as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses

make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and

Loans not meeting the criteria above that

are analyzed individually as part of the above-described process are considered to be pass rated loans.

Loans listed that are not

rated are included in groups of homogeneous loans and are evaluated for credit quality based on performing status.

See the aging

of past due loan table above.

As of December 31, 2020, and based on the most recent analysis performed, the risk category of loans

by class of loans is as follows:

(in thousands)

4 unchanged sentences

Loans on deposits

First Federal Bancorp

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Kentucky First

Federal Bancorp

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2020

Loans receivable (continued)

June 30, 2020, the risk category of loans by class of loans was as follows:

At June 30, 2020, the risk category of

loans by class of loans was as follows:

(in thousands)

4 unchanged sentences

Loans on deposits

Credit Impaired Loans:

Company purchased loans during fiscal year 2013 for which there was, at acquisition, evidence of deterioration of credit quality

since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

amount of those loans, net of a purchase credit discount of $351,000 and $351,000 at September 30, 2020 and June 30, 2020, respectively,

is as follows:

Purchased Credit Impaired Loans:

The Company purchased loans during fiscal

year 2013 for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable,

at acquisition, that all contractually required payments would not be collected.

The carrying amount of those loans, net of a purchase

credit discount of $351,000 and $351,000 at December 31, 2020 and June 30, 2020, respectively, is as follows:

(in thousands)

September 30,

One- to four-family residential real estate

First Federal Bancorp

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Kentucky First

Federal Bancorp

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2020

Loans receivable (continued)

yield, or income expected to be collected, is as follows:

Accretable yield, or income expected to be collected, is as

(in thousands)

September 30,

Twelve months

3 unchanged sentences

Balance at end of period

those purchased loans disclosed above, the Company made no increase in allowance for loan losses for the year ended June 30, 2020,

nor for the three-month period ended September 30, 2020.

For those purchased loans disclosed above,

the Company made no increase in allowance for loan losses for the year ended June 30, 2020, nor for the six-month period ended

December 31, 2020.

Neither were any allowance for loan losses reversed during those periods.

Disclosures About Fair Value of Assets and Liabilities

topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants (exit price) at the measurement date.

ASC topic 820 also establishes a fair value hierarchy

which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair

The standard describes six levels of inputs that may be used to measure fair value:

Quoted prices in active markets for identical assets or liabilities.

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

quoted prices

in active markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for

substantially the full term of the assets or liabilities.

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value

of the assets or liabilities.

is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification

of such instruments pursuant to the valuation hierarchy.

quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.

quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with

similar characteristics.

Level 2 securities include agency mortgage-backed securities and agency bonds.

First Federal Bancorp

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Disclosures About Fair Value of Assets and Liabilities (continued)

the time a loan is considered impaired, it is evaluated for loss based on the fair value of collateral securing the loan if the

loan is collateral dependent.

If a loss is identified, a specific allocation will be established as part of the allowance for

loan losses such that the loan’s net carrying value is at its estimated fair value.

Impaired loans carried at fair value

generally receive specific allocations of the allowance for loan losses.

For collateral-dependent loans, fair value is commonly

based on recent real estate appraisals.

These appraisals may utilize a single valuation approach or a combination of approaches

including comparable sales and the income approach.

Adjustments are routinely made in the appraisal process by the independent

appraisers to adjust for differences between the comparable sales and income data available.

Such adjustments are usually significant

and typically result in a Level 3 classification of the inputs for determining fair value.

Non-real estate collateral may be valued

using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based

on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s

expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification.

loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing

a new cost basis.

These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell.

value is commonly based on recent real estate appraisals.

These appraisals may utilize a single valuation approach or a combination

of approaches including comparable sales and the income approach.

Adjustments are routinely made in the appraisal process by the

independent appraisers to adjust for differences between the comparable sales and income data available.

Such adjustments are

usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

assets measured at fair value on a recurring basis are summarized below:

Disclosures About Fair Value of Assets

and Liabilities

ASC topic 820 defines fair value as the

price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants

(exit price) at the measurement date.

ASC topic 820 also establishes a fair value hierarchy which requires an entity to maximize

the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes six

levels of inputs that may be used to measure fair value:

Level 1 –

prices in active markets for identical assets or liabilities.

Level 2 –

inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

quoted prices in active markets that

are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full

term of the assets or liabilities.

Level 3 –

inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Following is a description of the valuation

methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to

the valuation hierarchy.

Where quoted market prices are available

in an active market, securities are classified within Level 1 of the valuation hierarchy.

If quoted market prices are not available,

then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics.

Level 2 securities

include agency mortgage-backed securities and agency bonds.

Kentucky First

Federal Bancorp

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2020

Disclosures About Fair Value of Assets

and Liabilities (continued)

Impaired Loans

At the time a loan is considered impaired,

it is evaluated for loss based on the fair value of collateral securing the loan if the loan is collateral dependent.

is identified, a specific allocation will be established as part of the allowance for loan losses such that the loan’s net

carrying value is at its estimated fair value.

Impaired loans carried at fair value generally receive specific allocations of the

allowance for loan losses.

For collateral-dependent loans, fair value is commonly based on recent real estate appraisals.

appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable

sales and income data available.

Such adjustments are usually significant and typically result in a Level 3 classification of the

inputs for determining fair value.

Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s

financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market

conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business,

resulting in a Level 3 fair value classification.

Impaired loans are evaluated on a quarterly basis for additional impairment and

adjusted accordingly.

Other Real Estate

Assets acquired through or instead of loan

foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.

are subsequently accounted for at lower of cost or fair value less estimated costs to sell.

Fair value is commonly based on recent

real estate appraisals.

These appraisals may utilize a single valuation approach or a combination of approaches including comparable

sales and the income approach.

Adjustments are routinely made in the appraisal process by the independent appraisers to adjust

for differences between the comparable sales and income data available.

Such adjustments are usually significant and typically

result in a Level 3 classification of the inputs for determining fair value.

Financial assets measured at fair value

on a recurring basis are summarized below:

Fair Value Measurements Using

1 unchanged sentence

Quoted Prices

September 30, 2020

December 31, 2020

Agency mortgage-backed:

June 30, 2020

Agency mortgage-backed:

First Federal Bancorp

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Disclosures About Fair Value of Assets and Liabilities (continued)

measured at fair value on a non-recurring basis are summarized below:

Kentucky First

Federal Bancorp

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2020

Disclosures About Fair Value of Assets

and Liabilities (continued)

Assets measured at fair value on a non-recurring

basis are summarized below:

Fair Value Measurements Using

1 unchanged sentence

Quoted Prices

June 30, 2020

December 31, 2020

Other real estate owned, net

One- to four-family

There were no impaired loans, which were measured

using the fair value of the collateral for collateral-dependent loans, at September 30, 2020, or at June 30, 2020.

charge off of $8,000 for the three-month period ended September 30, 2019.

There was no other real estate owned written

down during the three-months ended September 30, 2020 or 2019.

Other real estate owned measured at fair value less costs to sell,

had a carrying amount of $577,000 at September 30, 2020.

following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at

fair value on a non-recurring basis at September 30, 2020 and June 30, 2020:

June 30, 2020

Other real estate owned, net

One- to four-family

There were no impaired loans, which were

measured using the fair value of the collateral for collateral-dependent loans, at December 31, 2020, or at June 30, 2020.

was a charge off of $8,000 for the six-month period ended December 31, 2019.

There was one single-family residential

property held as other real estate owned (“OREO”) written down by $19,000 during the six- and three-months ended December

31, 2020, while OREO was written down $24,000 during the six- and three-months ended December 31, 2019.

Other real estate owned

measured at fair value less costs to sell, had a carrying amount of $74,000 at December 31, 2020.

The following table presents quantitative

information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at

December 31, 2020 and June 30, 2020:

(in thousands)

December 31, 2020

Foreclosed and repossessed assets:

1 unchanged sentence

Sales comparison approach

Adjustments for

differences between

Adjustments for differences between comparable sales

to 10.7% (-4.1%)

June 30, 2020

Foreclosed and repossessed assets:

One- to four-family

Sales comparison approach

Adjustments for differences between

comparable sales

to 41.2% (20.4%)

First Federal Bancorp

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Disclosures About Fair Value of Assets and Liabilities (continued)

following is a disclosure of the fair value of financial instruments, both assets and liabilities, whether or not recognized in

the consolidated balance sheet, for which it is practicable to estimate that value.

For financial instruments where quoted market

prices are not available, fair values are based on estimates using present value and other valuation methods.

methods used are greatly affected by the assumptions applied, including the discount rate and estimates of future cash flows.

Therefore, the fair values presented may not represent amounts that could be realized in an exchange for certain financial instruments.

on the foregoing methods and assumptions, the carrying value and fair value of the Company’s financial instruments at September

30, 2020 and June 30, 2020 are as follows:

Kentucky First

Federal Bancorp

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2020

Disclosures About Fair Value of Assets

and Liabilities (continued)

The following is a disclosure of the fair

value of financial instruments, both assets and liabilities, whether or not recognized in the consolidated balance sheet, for which

it is practicable to estimate that value.

For financial instruments where quoted market prices are not available, fair values are

based on estimates using present value and other valuation methods.

The methods used are greatly affected by

the assumptions applied, including the discount rate and estimates of future cash flows.

Therefore, the fair values presented may

not represent amounts that could be realized in an exchange for certain financial instruments.

Based on the foregoing methods and assumptions,

the carrying value and fair value of the Company’s financial instruments at December 31, 2020 and June 30, 2020 are as follows:

Fair Value Measurements at

September 30, 2020 Using

December 31, 2020 Using

(in thousands)

28 unchanged sentences

Accrued interest payable

First Federal Bancorp

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Kentucky First

Federal Bancorp

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2020

Other Comprehensive Income (Loss)

Company’s other comprehensive income is comprised solely of unrealized gains and losses on available-for-sale securities.

The following is a summary of the accumulated other comprehensive income balances, net of tax:

September 30,

The Company’s other comprehensive

income is comprised solely of unrealized gains and losses on available-for-sale securities.

The following is a summary of the accumulated

other comprehensive income balances, net of tax:

Six months ended

Beginning balance

1 unchanged sentence

Ending balance

comprehensive income (loss) components and related tax effects for the periods indicated were as follows:

September 30,

Other comprehensive income (loss) components

and related tax effects for the periods indicated were as follows:

Six months ended

(in thousands)

1 unchanged sentence

Net-of-tax amount

Three months ended

(in thousands)

Unrealized holding gains (losses) on available-for-sale securities

Net-of-tax amount

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

RESULTS OF OPERATIONS

AND RESULTS OF OPERATIONS

Forward-Looking

5 unchanged sentences

“believes,”

and similar expressions as they relate to Kentucky First Federal Bancorp or its management are intended to identify such forward

looking statements.

Kentucky First Federal Bancorp’s actual results, performance or achievements may materially differ from

those expressed or implied in the forward-looking statements.

and similar expressions as they relate to Kentucky First Federal Bancorp or its management are intended to identify such forward-looking

Kentucky First Federal Bancorp’s actual results, performance or achievements may materially differ from those

expressed or implied in the forward-looking statements.

Risks and uncertainties that could cause or contribute to such material

10 unchanged sentences

First Federal Bancorp

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

RESULTS OF OPERATIONS (continued)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Balance Sheets

following table represents the average balance sheets for the three-month periods ended September 30, 2020 and 2019, along with

following table represents the average balance sheets for the six month periods ended December 31, 2020 and 2019, along with the

related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

Six Months Ended December 31,

(Dollars in thousands)

Interest-earning assets:

Mortgage-backed securities

Other securities

Other interest-earning assets

Total interest-earning assets

Allowance for loan losses

Non-interest-earning assets

Interest-bearing liabilities:

Demand deposits

Certificates of deposit

Total deposits

Total interest-bearing liabilities

Noninterest-bearing demand deposits

Noninterest-bearing liabilities

Total liabilities

Shareholders’

Total liabilities and shareholders’

Net interest spread

Net interest margin

Average interest-earning assets to average interest-bearing liabilities

Includes loan fees,

immaterial in amount, in both interest income and the calculation of yield on loans.

Also includes loans on nonaccrual status.

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Balance Sheets

following table represents the average balance sheets for the three-month periods ended December 31, 2020 and 2019, along with

the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

Three Months Ended September 30,

And Dividends

Three Months Ended December 31,

(Dollars in thousands)

19 unchanged sentences

Average interest-earning assets to average interest-bearing liabilities

loan fees, immaterial in amount, in both interest income and the calculation of yield on loans.

Also includes loans on nonaccrual

Includes loan fees,

immaterial in amount, in both interest income and the calculation of yield on loans.

Also includes loans on nonaccrual status.

First Federal Bancorp

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

RESULTS OF OPERATIONS (continued)

of Financial Condition Changes from June 30, 2020 to September 30, 2020

and Uncertainties Related to COVID-19 - In March 2020 the World Health Organization determined that the spread of a new

coronavirus, COVID-19, had risen to such a level as to constitute a worldwide pandemic.

The spread of this virus has created a

global public health crisis.

Uncertainty related to the effects of the virus have disrupted financial markets, activity in all

aspects of life including governmental, business and consumer routines and the markets in which the Company operates.

to the crisis governmental authorities have closed non-essential businesses and required various responses from individuals including

stay-at-home restrictions and social distancing.

These governmental restrictions, along with a fear of contracting the virus,

have resulted in severe reduction of commercial and consumer activity, which is resulting in loss of revenues by businesses, a

dramatic spike in unemployment, material decreases in oil and gas prices and in business valuations, disrupted global supply chains

and market volatility.

expects the general impact of COVID-19, as well as certain provisions of the Coronavirus Aid, Relief and Economic Security (“CARES”)

Act, enacted on March 27, 2020, and other more recent legislative and regulatory relief efforts, to have a material impact on

the Company’s operations.

Because the impact is contingent upon the duration and severity of the economic downturn, management

cannot determine or estimate the magnitude of the impact at this time.

However, we are disclosing potentially material items of

which we are currently aware.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

of Financial Condition Changes from June 30, 2020 to December 31, 2020

Risks and Uncertainties Related to

COVID-19 - In March 2020 the World Health Organization determined that the spread of a new coronavirus, COVID-19, had risen

to such a level as to constitute a worldwide pandemic.

The spread of this virus has created a global public health crisis.

related to the effects of the virus have disrupted financial markets, activity in all aspects of life including governmental, business

and consumer routines and the markets in which the Company operates.

In response to the crisis governmental authorities closed

or limited the operations of many non-essential businesses and required various responses from individuals including stay-at-home

restrictions and social distancing.

These governmental restrictions, along with a fear of contracting the virus, have resulted

in severe reduction of commercial and consumer activity, which is resulting in loss of revenues by businesses, a dramatic spike

in unemployment, material decreases in oil and gas prices and in business valuations, disrupted global supply chains and market

Management continues to monitor the general

impact of COVID-19, as well as certain provisions of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act,

enacted on March 27, 2020, and other more recent legislative and regulatory relief efforts.

Because the impact is contingent upon

the duration and severity of the economic downturn, management cannot determine or estimate the magnitude of the impact at this

While the pandemic has affected the physical operations of the Banks, the business has been mostly unchanged with consistent

levels of consumer transactions and loan originations.

The potential for a deterioration in asset quality remains, but actual asset

quality has improved.

Classified assets at March 31, 2020, totaled $10.5 million compared to $8.7 million at December 31, 2020.

Management attributes some of this improved performance to the overall strengthening in the residential real estate market.

Approximately

95% of the Company’s loans are secured by residential real estate.

Continuity, Processes and Controls

16 unchanged sentences

First Federal Bancorp

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

RESULTS OF OPERATIONS (continued)

of Financial Condition Changes from June 30, 2020 to September 30, 2020 (continued)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

of Financial Condition Changes from June 30, 2020 to December 31, 2020 (continued)

Position and Results of Operations

11 unchanged sentences

to repay is impacted in future periods.

September 30, 2020 the Company and the Banks were considered well-capitalized with capital ratios in excess of regulatory requirements.

December 31, 2020 the Company and the Banks were considered well-capitalized with capital ratios in excess of regulatory requirements.

However, an extended economic recession resulting from the COVID-19 pandemic could adversely impact the Company’s and the

2 unchanged sentences

noted herein the Company is working with its borrowers who are negatively impacted by COVID-19 by offering a payment deferral

As of September 30, 2020, we had 96 customers to avail themselves of our payment deferral program with a total principal

balance of $18.1 million in loans modified.

Of those 81 customers with principal balances totaling $16.2 million had returned

to amortizing status, while 15 customers (with principal totaling $1.9 million) had not completed the allowed deferral period

and three customers (with principal totaling $226,000) had not returned to amortizing status.

As of December 31, 2020, we had borrowers with 101 loans avail themselves of our payment deferral program with a total

principal balance of $18.4 million in loans modified.

Of those modified loans five loans totaling $293,000 in principal had not

yet completed the initial three-month deferral period.

One borrower with outstanding principal of $859,000 had been granted an

additional extension.

All other borrowers granted a deferral, composed of 95 loans totaling $17.2 million in principal had resumed

regular payments.

The CARES Act includes a Paycheck Protection

6 unchanged sentences

securing this important funding.

As of September 30, 2020, First Federal of Kentucky had approved and closed with the SBA 44 PPP

As of December 31, 2020, First Federal of Kentucky had approved and closed with the SBA 45 PPP

loans representing $1.5 million in funding.

It is our understanding that loans funded through the PPP are fully guaranteed by the

United States government.

Should those circumstances change, the bank could be required to increase its allowance for loan and

lease losses related to these loans resulting in an increase in the provision for loan and lease losses.

Of those loans a total of 13 loans aggregating $931,000 had been repaid at the end

of the period.

It is our understanding that loans funded through the PPP are fully guaranteed by the United States government.

Should those circumstances change, the bank could be required to increase its allowance for loan and lease losses related to these

loans resulting in an increase in the provision for loan and lease losses.

On December 21, 2020, Congress passed a second Coronavirus

Relief Bill, which provides for a second round of PPP loans, in which the Company plans to participate.

Banks are prepared to continue to offer short-term assistance in accordance with regulatory guidelines.

12 unchanged sentences

First Federal Bancorp

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

RESULTS OF OPERATIONS (continued)

of Financial Condition Changes from June 30, 2020 to September 30, 2020 (continued)

At September 30, 2020, the Company’s assets totaled $327.7 million, an increase of $6.5 million, or 2.0%, from total

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

of Financial Condition Changes from June 30, 2020 to December 31, 2020 (continued)

At December 31, 2020, the Company’s assets totaled $330.7 million, an increase of $9.5 million, or 3.0%, from total

assets at June 30, 2020.

This increase was attributed primarily to an increase in loans, net, and an increase in cash and cash

This increase was attributed primarily to an increase in loans, net.

and cash equivalents:

Cash and cash equivalents increased $3.4 million or 24.9% to $17.1 million at September 30, 2020.

Cash and cash equivalents increased $1.0 million or 7.5% to $14.7 million at December 31, 2020.

Most of the Company’s cash and cash equivalents are held in interest-bearing demand deposits.

deposits in other financial institutions:

Time deposits in other financial institutions decreased by $988,000 or 44.3%

to $1.2 million at September 30, 2020.

As short-term time deposits matured the funds were used to repay FHLB advances, reinvested

at the highest earning level possible or simply carried as interest-bearing demand deposits.

At September 30, 2020, our securities portfolio consisted of mortgage-backed securities.

Time deposits in other financial institutions decreased by $1.5 million or 66.6%

to $745,000 at December 31, 2020.

As short-term time deposits matured the funds were used to repay FHLB advances, reinvested at

the highest earning level possible or simply carried as interest-bearing demand deposits.

At December 31, 2020, our securities portfolio consisted of mortgage-backed securities.

Investment securities

decreased $539,000 or 47.3% to $600,000 at September 30, 2020.

Loans receivable, net, increased by $4.6 million or 1.6% to $290.5 million at September 30, 2020.

decreased $569,000 or 50.0% to $570,000 at December 31, 2020.

Loans receivable, net, increased by $10.4 million or 3.6% to $296.3 million at December 31, 2020.

Management continues to

1 unchanged sentence

profitable, prudent and consistent with our interest rate risk strategies.

Non-Performing and Classified Loans:

At September 30, 2020, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of

approximately $6.9 million, or 2.4% of total loans (including acquired loans), compared to $7.4 million or 2.6%, of total loans

at June 30, 2020.

The Company’s allowance for loan losses totaled $1.5 million and $1.5 million at September 30, 2020 and

June 30, 2020, respectively.

The allowance for loan losses at September 30, 2020, represented 22.4% of nonperforming loans and

0.5% of total loans (including acquired loans), while at June 30, 2020, the allowance represented 20.1% of nonperforming loans

and 0.5% of total loans.

The Company had $9.2 million in assets classified

as substandard for regulatory purposes at September 30, 2020, including loans ($8.5 million), including loans acquired in the CKF

Bancorp transaction and also including real estate owned (“REO”) ($679,000.) Classified loans as a percentage of total

loans (including loans acquired) was 2.9% and 3.1% at September 30, 2020 and June 30, 2020, respectively.

Of substandard loans,

99.9% were secured by real estate on which the Banks have priority lien position.

Non-Performing

and Classified Loans:

At December 31, 2020, the Company had non-performing loans (loans 90 or more days past due or on

nonaccrual status) of approximately $6.5 million, or 2.2% of total loans (including acquired loans), compared to $7.4 million

or 2.6%, of total loans at June 30, 2020.

The Company’s allowance for loan losses totaled $1.6 million and $1.5 million

at December 31, 2020 and June 30, 2020, respectively.

The allowance for loan losses at December 31, 2020, represented 24.8% of

nonperforming loans and 0.5% of total loans (including acquired loans), while at June 30, 2020, the allowance represented 20.1%

of nonperforming loans and 0.5% of total loans.

The Company had $8.7 million in assets

classified as substandard for regulatory purposes at December 31, 2020, including loans ($8.5 million), loans acquired in the CKF

Bancorp transaction and real estate owned (“REO”) ($164,000.) Classified loans as a percentage of total loans (including

loans acquired) was 2.9% and 3.1% at December 31, 2020 and June 30, 2020, respectively.

Of substandard loans, 100.0% were secured

by real estate on which the Banks have priority lien position.

table below shows the aggregate amounts of our assets classified for regulatory purposes at the dates indicated:

(dollars in thousands)

September 30,

Substandard assets

1 unchanged sentence

Total classified assets

At September 30, 2020, the Company’s

real estate acquired through foreclosure represented 7.4% of substandard assets compared to 6.7% at June 30, 2020.

During the periods

presented the Company made no loans to facilitate the purchase of its other real estate owned by qualified buyers.

Loans to facilitate

the sale of other real estate owned, which were included in substandard loans, totaled $46,000 and $23,000 at September 30, 2020

and June 30, 2020, respectively.

December 31, 2020, the Company’s real estate acquired through foreclosure represented 1.9% of substandard assets compared

to 6.7% at June 30, 2020.

During the periods presented the Company made one loan totaling $37,000 to facilitate the purchase of

its other real estate owned by qualified buyers.

Loans to facilitate the sale of other real estate owned, which were included

in substandard loans, totaled $45,000 and $23,000 at December 31, 2020 and June 30, 2020, respectively.

First Federal Bancorp

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

RESULTS OF OPERATIONS (continued)

of Financial Condition Changes from June 30, 2020 to September 30, 2020 (continued)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

of Financial Condition Changes from June 30, 2020 to December 31, 2020 (continued)

following table presents the aggregate carrying value of REO at the dates indicated:

September 30, 2020

December 31, 2020

June 30, 2020

One- to four-family

September 30, 2020 and June 30, 2020, the Company had $1.7 million and $1.7 million of loans classified as special mention, respectively

(including loans acquired in the CKF Bancorp transaction on December 31, 2012.) This category includes assets which do not currently

expose us to a sufficient degree of risk to warrant classification, but do possess credit deficiencies or potential weaknesses

deserving our close attention.

At December 31, 2020 and June 30, 2020,

the Company had $1.7 million and $1.7 million of loans classified as special mention, respectively (including loans acquired in

the CKF Bancorp transaction on December 31, 2012).

This category includes assets which do not currently expose us to a sufficient

degree of risk to warrant classification, but do possess credit deficiencies or potential weaknesses deserving our close attention.

Total liabilities

increased $6.6 million, or 2.5% to $275.9 million at September 30, 2020, primarily as a result of increases in advances and deposits.

Advances increased $3.7 million or 6.7% to $58.4 million at September 30, 2020, while deposits increased $2.8 million or 1.3% to

$215.1 million at September 30, 2020.

increased $9.6 million, or 3.6% to $278.8 million at December 31, 2020, primarily as a result of increases in advances and deposits.

Advances increased $6.3 million or 11.6% to $61.0 million at December 31, 2020, while deposits increased $4.0 million or 1.9% to

$216.3 million at December 31, 2020.

Advances were used to fund loan growth.

Shareholders’

At September 30, 2020, the Company’s shareholders’

At December 31, 2020, the Company’s shareholders’

equity totaled $51.8 million, a decrease of $79,000

3 unchanged sentences

by the Company to hold as treasury shares, and net profits for the period less dividends paid on common stock.

The Company paid dividends of $344,000 or 120.7%

of net income for the three-month period just ended.

On July 7, 2020, the members of First Federal MHC again approved a dividend

waiver on annual dividends of up to $0.40 per share of Kentucky First Federal Bancorp common stock.

The Board of Directors of First

Federal MHC applied for approval of another waiver.

The Federal Reserve Bank of Cleveland has notified the Company that it did

not object to the waiver of dividends paid by the Company to First Federal MHC, and, as a result, First Federal MHC will be permitted

to waive the receipt of dividends for quarterly dividends up to $0.10 per common share through the third calendar quarter of 2021.

Management believes that the Company has sufficient capital to continue the current dividend policy without affecting the well-capitalized

status of either subsidiary bank.

Management cannot speculate on future dividend levels, because various factors, including capital

levels, income levels, liquidity levels, regulatory requirements and overall financial condition of the Company are considered

before dividends are declared.

However, management continues to believe that a strong dividend is consistent with the Company’s

long-term capital management strategy.

Company paid dividends of $691,000 or 105.5% of net income for the six-month period just ended.

On July 7, 2020, the members of

First Federal MHC again approved a dividend waiver on annual dividends of up to $0.40 per share of Kentucky First Federal Bancorp

common stock.

The Board of Directors of First Federal MHC applied for approval of another waiver.

The Federal Reserve Bank of

Cleveland has notified the Company that it did not object to the waiver of dividends paid by the Company to First Federal MHC,

and, as a result, First Federal MHC will be permitted to waive the receipt of dividends for quarterly dividends up to $0.10 per

common share through the third calendar quarter of 2021.

Management believes that the Company has sufficient capital to continue

the current dividend policy without affecting the well-capitalized status of either subsidiary bank.

Management cannot speculate

on future dividend levels, because various factors, including capital levels, income levels, liquidity levels, regulatory requirements

and overall financial condition of the Company are considered before dividends are declared.

However, management continues to

believe that a strong dividend is consistent with the Company’s long-term capital management strategy.

See “Risk Factors”

in Part II, Item 1A, of the Company’s Annual Report

on Form 10-K for the year ended June 30, 2020 for additional discussion regarding dividends.

in Part II, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 for additional discussion

regarding dividends.

First Federal Bancorp

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

RESULTS OF OPERATIONS (continued)

of Operating Results for the Three-month Periods Ended September 30, 2020 and 2019

income totaled $285,000 or $0.04 diluted earnings per share for the three months ended September 30, 2020, an increase of $51,000

or 21.8% from net income of $234,000 for the same period in 2019.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

of Operating Results for the Six-month Periods Ended December 31, 2020 and 2019

income totaled $655,000 or $0.08 diluted earnings per share for the six months ended December 31, 2020, an increase of $173,000

or 35.9% from net income of $482,000 or $0.06 diluted earnings per share for the same period in 2019.

The increase in net income

on a six-month basis was primarily attributable to higher net interest income, higher non-interest income and lower non-interest

expense, which were partially offset by increased provision for loan losses and increased provision for income tax.

Interest Income

interest income before provision for loan losses increased $9,000 or 0.4% to $2.4 million for the three-month period just ended.

Interest income decreased by $299,000, or 9.0%, to $3.0 million, while interest expense decreased $308,000 or 32.5% to $639,000

for the three months ended September 30, 2020.

interest income before provision for loan losses increased $141,000 or 3.0% to $4.9 million for the six-month period just ended.

Interest income decreased by $560,000, or 8.5%, to $6.0 million, while interest expense decreased $701,000 or 37.5% to $1.2 million

for the six months ended December 31, 2020.

decrease in interest income period-to-period was due primarily to a decrease in the average rate earned on interest-earning assets,

as the average volume of interest-earning assets increased period-to-period.

The average rate decreased 49 basis points to 3.83%

for the recently-ended six-month period compared to the prior year period, while the average balance of interest-earning assets

increased $9.4 million or 3.1% to $314.9 million for the six months ended December 31, 2020.

Interest income on loans decreased

or 6.2% to $3.0 million, due primarily to a decrease in the average rate earned on the loan portfolio.

The average rate earned

on the loan portfolio decreased 39 basis points to 4.12%, while the average balance increased $7.6 million or 2.7% to $289.3 million

for the three-month period ended September 30, 2020.

Interest income on mortgage-backed securities decreased $2,000 or 33.3% to

$4,000 for the three-month period just ended due to lower asset levels and lower yields earned.

Interest income from other securities

decreased $3,000 to $3,000 for the recently-ended period due primarily to a lower average volume of other securities period to

Interest income from interest-bearing deposits and other decreased $98,000 or 68.1% to $46,000 for the three months just

ended due to a decrease in the average rate earned, which decreased 186 basis points to 84 basis points for the recently-ended

$361,000 or 5.7% to $5.9 million, due primarily to a decrease in the average rate earned on the loan portfolio, which decreased

40 basis points to 4.06%, while the average balance increased $10.6 million or 3.7% to $292.8 million for the six-month period

ended December 31, 2020.

Interest income from interest-bearing deposits and other decreased $188,000 or 69.13% to $84,000 for

the six months just ended due to a decrease in the average rate earned, which decreased 172 basis points to 0.79% for the recently-ended

period compared to the period a year ago.

decrease in interest expense was due primarily to a decrease of 57 basis points on the average rate paid on funding sources, which

totaled 0.89% for the six months ended December 31, 2020.

The Company’s interest-bearing liabilities have repriced quickly

as we are able to take advantage of the low interest rate environment that currently exists.

Interest expense on deposits decreased

or 12.6% to $514,000 for the three months ended September 30, 2020, while interest expense on borrowings decreased $234,000 or

65.2% to $125,000 for the same period.

The decrease in interest expense on deposits was attributed primarily to a decrease in the

average rate paid on interest-bearing deposits, which decreased 23 basis points to 99 basis points for the recently ended period.

The average balance of interest-bearing deposits increased $15.9 million or 8.3% to $208.4 million for the most recent period.

$256,000 or 21.4% to $940,000 for the six months ended December 31, 2020, while interest expense on borrowings decreased $445,000

or 66.1% to $228,000 for the same period.

The decrease in interest expense on deposits was attributed primarily to a decrease

in the average rate paid on interest-bearing deposits, which decreased 34 basis points to 0.90% for the recently ended period,

while the average balance of interest-bearing deposits increased $15.5 million or 8.0% to $208.5 million for the most recent period.

The decrease in interest expense on borrowings was attributed to both to a lower average rate paid on the borrowings and a lower

average balance of borrowings decreased period to period.

The average balance of borrowings outstanding decreased $11.0 million

or 17.5% to $51.8 million for the recently ended three-month period, while the average rate paid on borrowings decreased 132 basis

points to 97 basis points for the most recent period.

Net interest spread increased from 2.89% for

the prior year quarterly period to 2.90% for the three-month period ended September 30, 2020.

average balance of borrowings period to period.

The average balance of borrowings outstanding decreased $8.8 million or 14.0%

to $54.3 million for the recently ended six-month period, while the average rate paid on borrowings decreased 129 basis points

to 0.84% for the most recent period.

interest spread increased from 2.85% for the prior year semiannual period to 2.94% for the six-month period ended December 31,

for Losses on Loans

Company recorded an $84,000 provision for losses on loans during the three months ended September 30, 2020, compared to a provision

of $59,000 for the three months ended September 30, 2019.

Provision for loan losses increased $128,000

for the six-month period ended December 31, 2020, and totaled $192,000 compared to $64,000 for the prior year semi-annual period.

The higher provision was primarily in response to the higher level of loans maintained in the portfolio as well as increased levels

of multi-family and commercial real estate loans, which carry somewhat more risk.

While management continues to consider the potential

impact of COVID-19 on asset quality, no adjustment to the allowance for loan losses has been made for that specific reason.

the onset of the pandemic, the Company granted deferrals to borrowers representing $18.1 million in loans, but the overwhelming

majority of those borrowers have resumed regular payments.

Further, 95% of the Company’s loan portfolio is secured by residential

real estate, which has performed well during the pandemic.

First Federal Bancorp

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

RESULTS OF OPERATIONS (continued)

of Operating Results for the Three-month Periods Ended September 30, 2020 and 2019 (continued)

income increased $54,000 or 73.0% to $128,000 for the three months ended September 30, 2020, compared to the prior year period,

primarily because of an increase in net gains on sales of loans.

Net gain on sales of loans increased $52,000 to $58,000 for the

recently-ended three-month period over the prior year amount.

The Company has seen significant loan refinance activity since the

emergency interest rate cut implemented by the Federal Open Market Committee in March of this year.

The Company’s long-term,

fixed rate loans, which some borrowers are preferring at this time, are usually sold to the FHLB of Cincinnati after they are

originated, which produced the gains.

expense decreased $19,000 or 0.9% and totaled $2.1 million for the three months ended September 30, 2020, primarily due to cost-saving

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

of Operating Results for the Six-month Periods Ended December 31, 2020 and 2019 (continued)

income increased $99,000 or 65.1% to $251,000 for the six months ended December 31, 2020, compared to the prior year period, primarily

because of an increase in net gains on sales of loans.

Net gain on sales of loans increased $115,000 to $155,000 for the recently-ended

six-month period.

In the current interest rate environment, many borrowers are choosing long-term, fixed rate loans, which the

bank usually sells to the Federal Home Loan Bank of Cincinnati (“FHLB”).

An increase in volume of these loans sold

was responsible for the increase in gain on sale of loans.

expense decreased $98,000 or 2.3% and totaled $4.1 million for the six months ended December 31, 2020, primarily due to cost-saving

measures implemented by management.

Voice and data communications expense decreased

$40,000 or 65.6% to $21,000 for the quarterly period just ended, as upgraded technology was implemented.

Other non-interest expense

decreased $19,000 or 10.9% to $155,000 for the three months ended September 30, 2020, primarily due to lower general loan expenses.

Employee compensation and benefits decreased $17,000 or 1.3% to $1.3 million primarily due to lower employee compensation.

Banks were operating with two fewer full-time equivalent employees in the recently-ended quarterly period compared to the prior

year quarter, which resulted in lower compensation cost, lower fringe benefit cost and lower payroll taxes period to period.

offsetting the decreases in other employee compensation and benefits expense was an increase in contributions to the Company’s

Defined Benefit (“DB”) pension plan.

DB pension contributions increased $73,000 or 41.2% to $252,000 for the three-month

period recently ended compared to the prior year period.

Higher DB pension contributions were a result of higher administrative

fees and Pension Benefit Guarantee Corporation premiums, as the Company’s DB plan was frozen effective April 1, 2019.

and OREO expenses, net decreased $17,000 or 50.0% to $17,000 for the quarter just ended, due to lower levels of such activity.

Advertising expenses decreased $11,000 or 22.9% to $37,000 for the recently ended three-month period.

compensation and benefits decreased $124,000 or 4.5% to $2.6 million primarily due to lower employee compensation.

The Banks were

operating with two fewer full-time equivalent employees in the recently-ended semi-annual period compared to the prior year period,

which resulted in lower compensation cost, lower fringe benefit cost and lower payroll taxes period to period.

Also contributing

to lower compensation cost was an increase in the number of loans originated in the recently-ended period compared to the prior

The Banks are required to defer a portion of the costs associated with loan originations and those costs are primarily related

to personnel costs.

Somewhat offsetting the decreases in other employee compensation and benefits expense was an increase in contributions

to the Company’s Defined Benefit (“DB”) pension plan.

DB pension contributions increased $56,000 or 12.9% to

$486,000 for the six-month period recently ended compared to the prior year period.

Higher DB pension contributions were a result

of higher administrative fees and Pension Benefit Guarantee Corporation premiums, as the Company’s DB plan was frozen effective

April 1, 2019.

Other non-interest expense decreased $47,000 or 12.7% to $323,000 for the six months ended December 31, 2020, primarily

due to lower general insurance expenses, discretionary employee and meeting expenses, regulatory assessments and general loan

Voice and data communications expense decreased $43,000 or 43.0% to $57,000 for the six-month period just ended as upgraded

technology savings were realized.

offsetting the decreases in various non-interest expense items were increases in FDIC insurance premiums and data processing

FDIC insurance premiums increased to $88,000 for the six months ended December 31, 2020.

In the prior year

semi-annual period the Banks were able to utilize their Small Bank Assessment Credits (“SBAC”).

The SBAC were

depleted in the quarterly period ended June 30, 2020.

Data processing increased $53,000 or 22.2% to $292,000 for the period

just ended as core processing costs increased and the Company expanded its technology infrastructure.

tax expense increased $37,000 or 31.4% to $155,000 for the six months ended December 31, 2020, compared to the prior year period.

The effective tax rates for the six-month periods ended December 31, 2020 and 2019, were 19.1% and 19.7%, respectively.

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

of Operating Results for the Three-month Periods Ended December 31, 2020 and 2019

income totaled $370,000 or $0.04 diluted earnings per share for the three months ended December 31, 2020, an increase of $122,000

or 49.2% from net income of $248,000 or $0.03 diluted earnings per share for the same period in 2019.

Interest Income

interest income before provision for loan losses increased $132,000 or 5.6% to $2.5 million for the three-month period just ended,

as interest expense decreased at a faster pace than interest income decreased for the quarter just ended.

Interest income decreased

by $261,000, or 8.0%, to $3.0 million, while interest expense decreased $393,000 or 42.6% to $529,000 for the three months ended

December 31, 2020.

income on loans decreased $165,000 or 5.3% to $3.0 million, due primarily to a decrease in the average rate earned on the loan

The average rate earned on the loan portfolio decreased 42 basis points to 4.00%, while the average balance increased

$13.5 million or 4.8% to $296.3 million for the three-month period ended December 31, 2020.

Interest income from interest-bearing

deposits and other decreased $90,000 or 70.3% to $38,000 for the three months just ended due to a decrease in the average rate

earned, which decreased 159 basis points to 0.73% for the recently-ended period compared to the period a year ago.

expense on deposits decreased $182,000 or 29.9% to $426,000 for the three months ended December 31, 2020, while interest expense

on borrowings decreased $211,000 or 67.2% to $103,000 for the same period.

The decrease in interest expense on deposits was attributed

primarily to a decrease in the average rate paid on interest-bearing deposits, which decreased 44 basis points to 0.82% for the

recently ended period, while the average balance of interest-bearing deposits increased $15.3 million or 7.9% to $208.7 million

for the most recent period.

The decrease in interest expense on borrowings was attributed to both to a lower average rate paid

on the borrowings and a lower average balance of borrowings period to period.

The average balance of borrowings outstanding decreased

$6.7 million or 10.5% to $56.7 million for the recently ended three-month period, while the average rate paid on borrowings decreased

125 basis points to 0.73% for the most recent period.

interest spread increased 15 basis points from 2.83% for the prior year quarterly period to 2.98% for the three-month period ended

December 31, 2020.

for Losses on Loans

for loan losses totaled $108,000 for the three-month period ended December 31, 2020, an increase of $103,000 over the $5,000 provision

recorded for the prior year quarter.

The higher provision was primarily in response to the higher level of loans maintained in

the portfolio as well as increased levels of multi-family and commercial real estate loans, which carry somewhat more risk.

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

of Operating Results for the Three-month Periods Ended December 31, 2020 and 2019 (continued)

Non-interest income increased $45,000 or

57.7% to $123,000 for the three months ended December 31, 2020, compared to the prior year period, primarily because of an increase

in net gains on sales of loans.

Net gain on sales of loans increased $63,000 to $97,000 for the recently-ended three-month period

over the prior year amount.

In the current interest rate environment, many borrowers are choosing long-term, fixed rate loans,

which the Banks usually sell to the FHLB.

An increase in volume of these loans sold was responsible for the increase in gain on

sale of loans.

expense decreased $79,000 or 3.7% and totaled $2.0 million for the three months ended December 31, 2020, primarily due to cost-saving

measures implemented by management.

compensation and benefits decreased $107,000 or 7.6% to $1.3 million primarily due to lower employee and director compensation.

Also contributing to lower compensation cost was an increase in the number of loans originated during the period, which increases

the expense deferred for those loans.

The Company’s DB pension contributions decreased $18,000 or 7.1% to $234,000 for the

three-month period recently ended compared to the prior year period.

Lower DB pension contributions for the quarter were a result

of lower total costs than originally anticipated.

Other non-interest expense decreased $14,000 or 7.7% to $168,000 for the three

months ended December 31, 2020, primarily due to lower general insurance expenses, discretionary employee and meeting expenses,

and regulatory assessments.

Auditing and accounting expenses decreased $13,000 or 25.0% to $39,000 for the quarter just ended.

Somewhat offsetting the decreases in various

non-interest expense items were increases in FDIC insurance premiums, data processing expenses, and outside service fees.

FDIC insurance premiums increased $43,000 to $57,000 for the three months ended September 30, 2020.

In the prior year quarterly

period the Banks were able to utilize their Small Bank Assessment Credits (“SBAC”).

The SBAC were depleted in the quarterly

period ended June 30, 2020.

Data processing increased $42,000 or 40.0% to $147,000 for the period just ended as core processing

costs increased and the Company expanded its technology infrastructure.

Outside service fees increased $12,000 or 23.5% to $63,000

for the quarter ended September 30, 2020, primarily due to professional services related to the Company’s goodwill impairment

valuation during the period.

Federal Income Tax Expense

Federal income tax expense increased $6,000

or 10.0% to $66,000 for the three months ended September 30, 2020, compared to the prior year period.

The effective tax rates for

the three-month periods ended September 30, 2020 and 2019, were 18.8% and 20.4%, respectively.

non-interest expense items were increases in FDIC insurance premiums, foreclosure and OREO expenses, and data processing expenses.

FDIC insurance premiums totaled $31,000 for the three months ended December 31, 2020, compared to zero for the prior year period

due to a lack of SBAC credits for the current year.

Foreclosure and OREO expenses, net, increased $24,000 to $30,000 for the period

just ended as the Company resolved various substandard loans and incurred losses on the existing OREO.

Data processing expenses

increased $11,000 or 8.2% to $145,000 for the quarter ended December 31, 2020, primarily due to higher costs associated with enhanced

voice and data capabilities.

tax expense increased $31,000 or 53.4% to $89,000 for the three months ended December 31, 2020, compared to the prior year period.

The effective tax rates for the three-month periods ended December 31, 2020 and 2019, were 19.4% and 19.0%, respectively.

First Federal Bancorp

2 unchanged sentences

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What changed 10-Q

Item 1. Financial Statements