What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-14 compared with 2021-11-15 · 329 added, 288 removed, 49 unchanged (93% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking

statements contained in this report that are not historical facts are forward-looking statements that are subject to certain risks and

uncertainties.

When used herein, the terms “anticipates,” “plans,” “expects,” “believes,”

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 differences include,

but are not limited to, general economic conditions, prices for real estate in the Company’s market areas, interest rate environment,

competitive conditions in the financial services industry, changes in law, governmental policies and regulations, rapidly changing technology

affecting financial services, the potential effects of the COVID-19 pandemic on the local and national economic environment, on our customers

and on our operations (as well as any changes to federal, state and local government laws, regulations and orders in connection with

the pandemic), and the other matters mentioned in Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30,

Except as required by applicable law or regulation, the Company does not undertake the responsibility, and specifically disclaims

any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events

or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements contained in this report that

are not historical facts are forward-looking statements that are subject to certain risks and uncertainties.

When used herein, the terms

“anticipates,” “plans,” “expects,” “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 uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions,

prices for real estate in the Company’s market areas, interest rate environment, competitive conditions in the financial services

industry, changes in law, governmental policies and regulations, rapidly changing technology affecting financial services, the potential

effects of the COVID-19 pandemic on the local and national economic environment, on our customers and on our operations (as well as any

changes to federal, state and local government laws, regulations and orders in connection with the pandemic), and the other matters mentioned

in Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2021.

Except as required by applicable law or

regulation, the Company does not undertake the responsibility, and specifically disclaims any obligation, to release publicly the result

of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements

or to reflect the occurrence of anticipated or unanticipated events.

Kentucky First Federal Bancorp

AND RESULTS OF OPERATIONS (continued)

Balance Sheets

following table represents the average balance sheets for the six month periods ended December 31, 2021 and 2020, 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’ equity

Total liabilities and shareholders’ equity

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)

Average Balance Sheets

The following table represents the average balance

sheets for the three-month periods ended September 30, 2021 and 2020, 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,

Balance Sheets

following table represents the average balance sheets for the three-month periods ended December 31, 2021 and 2020, 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 December 31,

(Dollars in thousands)

19 unchanged sentences

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.

Includes loan fees, immaterial

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

Also includes loans on nonaccrual status.

Kentucky First Federal Bancorp

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Discussion of Financial Condition Changes from

June 30, 2021 to September 30, 2021

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.

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.

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 volatility.

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 including the Consolidated Appropriations Act, 2021.

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.

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 September 30, 2021, totaled $8.5 million compared to $10.5 million at March

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.

Business Continuity, Processes and Controls

In response to the COVID-19 pandemic the Banks

are considered essential businesses and have remained open for business.

We implemented our pandemic preparedness plan and generally

maintained regular business hours through drive-through facilities, automated teller machines, remote deposit capture and online and

mobile banking applications.

We offer by-appointment options for transactions requiring in-person contact while maintaining social

distancing mandates and surface cleaning protocols.

Our staff is practicing recommended personal hygiene protocols and social distancing

while working on premises.

We do not face current material resource constraints through the implementation of our pandemic preparedness

plan and do not anticipate incurring any material cost related to its implementation.

We have not identified any material operational

or internal control challenges or risks, nor do we anticipate any significant challenges to our ability to maintain our systems and controls,

related to operational changes resulting from implementation of the pandemic preparedness plan.

Financial Position and Results of Operations

Bank regulators have issued guidance and are encouraging

banks to work with customers affected by COVID-19.

Accordingly, we have been actively working with borrowers affected by COVID-19 by offering

a payment deferral program providing for either a three-month interest-only period or a full payment deferral for three months.

interest and fees will continue to accrue to income, under normal GAAP accounting if eventual credit losses on these deferred payments

emerge, interest and/or fee income accrued may need to be reversed.

As a result, interest income in future periods could be negatively

At this time management anticipates that the deferral program will have an immaterial impact to the Company’s financial

condition and results of operation, while recognizing that a sustained negative economic impact from COVID-19 could change this assessment,

as borrowers’ ability to repay is impacted in future periods.

At September 30, 2021 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 Banks’ capital position and regulatory capital ratios

due to a potential increase in credit losses.

Lending Operations and Credit Risk

As noted herein the Company continues working

with its borrowers who are negatively impacted by COVID-19 by offering a payment deferral program.

During the year ended June 30, 2021,

a total of $815,000 in loans were accepted into the Company’s loan payment deferral plan.

At June 30, 2021 all of those loans had

reached the end of their three-month deferral periods and returned to regular payment status.

Kentucky First Federal Bancorp

of Financial Condition Changes from June 30, 2021 to December 31, 2021

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

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.

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 volatility.

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 time.

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 December 31, 2021 totaled $8.1 million compared to $10.5 million at March 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

response to the COVID-19 pandemic the Banks are considered essential businesses and have remained open for business.

We implemented our

pandemic preparedness plan and generally maintained regular business hours through drive-thru facilities, automated teller machines,

remote deposit capture and online and mobile banking applications.

We offer by-appointment options for transactions requiring in-person

contact while maintaining social distancing mandates and surface cleaning protocols.

Our staff is practicing recommended personal hygiene

protocols and social distancing while working on premises.

We do not face current material resource constraints through the implementation

of our pandemic preparedness plan and do not anticipate incurring any material cost related to its implementation.

We have not identified

any material operational or internal control challenges or risks, nor do we anticipate any significant challenges to our ability to maintain

our systems and controls, related to operational changes resulting from implementation of the pandemic preparedness plan.

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Discussion of Financial Condition Changes from

June 30, 2021 to September 30, 2021 (continued)

The CARES Act and subsequent Consolidated Appropriations

Act, 2021, includes a Paycheck Protection Program (“PPP”), which is administered by the Small Business Administration (“SBA”)

of Financial Condition Changes from June 30, 2021 to December 31, 2021 (continued)

Position and Results of Operations

regulators have issued guidance and are encouraging banks to work with customers affected by COVID-19.

Accordingly, we actively

worked with borrowers affected by COVID-19 by offering a payment deferral program providing for either a three-month interest-only

period or a full payment deferral for three months.

While interest and fees continued to accrue to income While interest and fees,

under normal GAAP accounting if eventual credit losses on these deferred payments emerge, interest and/or fee income accrued may

need to be reversed.

As a result, interest income in future periods could be negatively impacted.

At December 31, 2021 all loans had

returned to current status.

The deferral program did not have a material impact to the

Company’s financial condition and results of operation.

December 31, 2021 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 Banks’

capital position and regulatory capital ratios due to a potential increase in credit losses.

Operations and Credit Risk

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

During the year ended June 30, 2021, a total of $815,000 in loans were accepted into the Company’s loan payment deferral plan.

At June 30, 2021 all of those loans had reached the end of their three-month deferral periods and returned to regular payment status.

CARES Act includes a Paycheck Protection Program (“PPP”), which is administered by the Small Business Administration (“SBA”)

and is designed to aid small- and medium-sized businesses through federally-guaranteed loans disbursed through banks.

4 unchanged sentences

securing this important funding.

As of September 30, 2021, First Federal of Kentucky had approved and closed with the SBA 75 PPP loans

As of December 31, 2021, First Federal of Kentucky had approved and closed with the SBA 75 PPP loans

representing $2.6 million in funding.

4 unchanged sentences

in the provision for loan and lease losses.

The Banks are prepared to continue to offer short-term

assistance in accordance with regulatory guidelines.

Management continues to identify and monitor weaknesses in the loan portfolio resulting

from fallout from the pandemic.

On a portfolio level, management continues to monitor aggregate exposures to highly sensitive segments

such as residential rental properties for changes in asset quality and payment performance.

Management also monitors unfunded commitments

such as lines of credit and overdraft protection to determine liquidity and funding issues that may arise with our customers.

conditions worsen, the Company could need to increase its required allowance for loan losses through additional provisions for loan losses.

It is possible that the Company’s asset quality metrics could be materially and adversely impacted in future periods, if the effects

of COVID-19 are prolonged.

At September 30, 2021, the

Company’s assets totaled $336.9 million, a decrease of $1.2 million, or 0.3%, from total assets at June 30, 2021.

This decrease

was attributed primarily to a decrease in loans, net and loans available-for sale, which were somewhat offset by an increase in cash and

cash equivalents.

Cash and cash equivalents:

and cash equivalents increased $4.3 million or 19.8% to $25.9 million at September 30, 2021.

Most of the Company’s cash and cash

equivalents are held in interest-bearing demand deposits.

Time deposits in other financial institutions:

Time deposits in other financial institutions decreased by $247,000 or 100.0% to $0 at September 30, 2021.

Extremely low interest

rates make time deposits in other financial institutions unattractive at this time.

Investment securities:

30, 2021, our securities portfolio consisted of mortgage-backed securities, which decreased $28,000 or 5.7% to $467,000 at September 30,

Loans, net and loans

available-for sale in the aggregate decreased $5.1 million or 1.7% and totaled $294.0 million and $90,000, respectively at September 30,

Loans receivable, net, decreased by $3.9 million or 1.3% to $294.0 million at September 30, 2021.

Loans available-for-sale decreased

$1.2 million or 93.1% to $90,000 at September 30, 2021.

Management continues to look for high-quality loans to add to its portfolio and

will continue to emphasize loan originations to the extent that it is profitable, prudent and consistent with our interest rate risk strategies.

Non-Performing and Classified Loans:

September 30, 2021, 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 $6.7 million or 2.2%, of total loans at June 30, 2021.

The Company’s

allowance for loan losses totaled $1.6 million at September 30, 2021 and June 30, 2021.

The allowance for loan losses at September 30,

2021, represented 23.2% of nonperforming loans and 0.5% of total loans (including acquired loans), while at June 30, 2021, the allowance

represented 24.4% of nonperforming loans and 0.5% of total loans.

The Company had $8.1 million in assets classified

as substandard for regulatory purposes at September 30, 2021, including loans ($8.1 million), loans acquired in the CKF Bancorp transaction,

and real estate owned (“REO”) ($51,000.) Classified loans as a percentage of total loans (including loans acquired) was 2.7%

and 3.0% at September 30, 2021 and June 30, 2021, respectively.

Of substandard loans, 100.0% were secured by real estate on which the

Banks have priority lien position.

The table below shows the aggregate amounts of

our assets classified for regulatory purposes at the dates indicated:

(dollars in thousands)

September 30,

Substandard assets

Doubtful assets

Total classified assets

At September 30, 2021, the Company’s real

estate acquired through foreclosure represented 0.6% of substandard assets compared to 0.9% at June 30, 2021.

During the period 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 $43,000 and $43,000 at September 30, 2021 and June 30, 2021,

respectively.

Kentucky First Federal Bancorp

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

Management continues to identify

and monitor weaknesses in the loan portfolio resulting from fallout from the pandemic.

On a portfolio level, management continues to

monitor aggregate exposures to highly sensitive segments such as residential rental properties for changes in asset quality and payment

Management also monitors unfunded commitments such as lines of credit and overdraft protection to determine liquidity and

funding issues that may arise with our customers.

If economic conditions worsen, the Company could need to increase its required allowance

for loan losses through additional provisions for loan losses.

It is possible that the Company’s asset quality metrics could be

materially and adversely impacted in future periods, if the effects of COVID-19 are prolonged.

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Discussion of Financial Condition Changes from

June 30, 2021 to September 30, 2021 (continued)

The following table presents the aggregate carrying

value of REO at the dates indicated:

September 30, 2021

of Financial Condition Changes from June 30, 2021 to December 31, 2021 (continued)

At December 31, 2021, the Company’s assets totaled $339.6 million, an increase of $1.5 million, or 0.4%, from total assets

at June 30, 2021.

This increase was attributed primarily to an increase in cash and cash equivalents.

and cash equivalents:

Cash and cash equivalents increased $23.6 million or 109.2% to $45.3 million at December 31, 2021, and

was primarily due to increased deposits and loan repayments.

At December 31, 2021, our securities portfolio consisted of mortgage-backed securities.

Investment securities decreased

$54,000 or 10.9% to $441,000 at December 31, 2021.

Loans receivable, net, decreased by $21.2 million or 7.1% to $276.7 million at December 31, 2021.

There are multiple reasons for

the decline in loan balances.

Some borrowers have decided to take advantage of high prices and sell all or part of their real estate

Some borrowers have sold their properties due to age or death and some loans have been lost to competing financial institutions

who offered terms that our Banks did not believe were prudent to match.

Non-Performing

and Classified Loans:

At December 31, 2021, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual

status) of approximately $6.4 million, or 2.3% of total loans (including acquired loans), compared to $6.7 million or 2.2%, of total

loans at June 30, 2021.

The Company’s allowance for loan losses totaled $1.6 million at December 31, 2021 and June 30, 2021.

allowance for loan losses at December 31, 2021, represented 24.9% of nonperforming loans and 0.6% of total loans (including acquired

loans), while at June 30, 2021, the allowance represented 24.4% of nonperforming loans and 0.5% of total loans.

The Company had $8.1 million in assets classified as substandard for

regulatory purposes at December 31, 2021, including loans ($8.0 million) and real estate owned (“REO”) ($51,000.) Classified

loans as a percentage of total loans (including loans acquired) was 2.9% and 3.0% at December 31, 2021 and June 30, 2021, 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:

in thousands)

classified assets

December 31, 2021, the Company’s real estate acquired through foreclosure represented 0.6% of substandard assets compared to 0.9%

at June 30, 2021.

During the period presented the Company made one loan totaling $32,000 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 $43,000 at December 31, 2021 and June 30, 2021.

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

of Financial Condition Changes from June 30, 2021 to December 31, 2021 (continued)

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

December 31, 2021

June 30, 2021

One- to four-family

At September 30, 2021 and June 30, 2021, the Company

had $1.5 million and $1.6 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 decreased

$1.4 million, or 0.5% to $284.4 million at September 30, 2021, primarily as a result of decreases in advances and was somewhat offset

by an increase in deposits.

Advances decreased $6.5 million or 11.5% to $50.4 million at September 30, 2021.

Deposits increased $4.6 million

or 2.0% to $231.5 million at September 30, 2021.

Shareholders’ Equity:

30, 2021, the Company’s shareholders’ equity totaled $52.5 million, an increase of $253,000 or 0.5% from the June 30, 2021

The change in shareholders’ equity was primarily associated with net profits for the period less dividends paid on common

The Company paid dividends of $351,000 or 61.8%

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

On July 8, 2021, 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 2022.

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.

Factors” in Part II, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended June 30, 2021 for additional

discussion regarding dividends.

Kentucky First Federal Bancorp

December 31, 2021 and June 30, 2021, the Company had $1.5 million and $1.6 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 $1.1 million, or 0.4% to $286.9 million at December 31, 2021, primarily as a result an increase in

Deposits increased $10.0 million or 4.4% to $236.8 million at December 31, 2021, while advances decreased $8.1 million or 14.2%

to $48.8 million.

Shareholders’

At December 31, 2021, the Company’s shareholders’ equity totaled $52.7 million, an increase of $363,000 or

0.7% from the June 30, 2021 total.

The change in shareholders’ equity was primarily associated with common shares purchased by

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

Company paid dividends of $696,000 or 66.3% of net income for the six-month period just ended.

On July 8, 2021, 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 2022.

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, 2021 for additional discussion regarding dividends.

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Comparison of Operating Results for the Three-month

Periods Ended September 30, 2021 and 2020

Net income totaled $568,000 or $0.07 diluted earnings

per share for the three months ended September 30, 2021, an increase of $283,000 or 99.3% from net income of $285,000 or $0.04 diluted

earnings per share for the same period in 2020.

The increase in net income was primarily attributable to higher net interest income,

higher non-interest income, lower non-interest expense, and lower provision for loan loss, which were partially offset by increased provision

for income tax.

Net Interest Income

Net interest income increased $115,000 or 4.8%

to $2.5 million for the recently-ended quarter primarily due to decreased interest expense, which decreased $170,000 or 26.6% to $469,000

for the three months ended September 30, 2021 compared to the 2020 quarterly period, while interest income decreased by $55,000, or 1.8%,

to $3.0 million for the current period.

The decrease in interest income period-to-period

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

The average rate decreased 25 basis points to

3.63% for the recently-ended three-month period compared to the prior year period, while the average balance of interest-earning assets

increased $15.2 million or 4.9% to $327.3 million for the three months ended September 30, 2021.

Interest income on loans decreased $42,000

or 1.4% to $2.9 million, due to a decrease of 18 basis points in the average rate earned on the loan portfolio, which totaled 3.94% for

the three-month period ended September 30, 2021, while the average balance increased $8.9 million or 3.1% to $298.2 million for the period.

Interest income from interest-bearing deposits and other income decreased $9,000 or 19.6% to $37,000 for the three months just ended due

primarily to a decrease in the average rate earned, which decreased 33 basis points to 0.52% for the recently-ended period compared to

the period a year ago.

The decrease in interest expense was due primarily

to a decrease of 29 basis points on the average rate paid on funding sources, which totaled 0.69% for the three months ended September

The Company’s interest-bearing liabilities have repriced quickly in the low interest rate environment that currently exists.

Interest expense on deposits decreased $146,000 or 28.4% to $368,000 for the three months ended September 30, 2021, while interest expense

on borrowings decreased $24,000 or 19.2% to $101,000 for the same period.

The decrease in interest expense on deposits was attributed

to a decrease in the average rate paid on interest-bearing deposits, which decreased 31 basis points to 0.68% for the recently ended period,

while the average balance of interest-bearing deposits increased $7.6 million or 3.6% to $216.0 million for the most recent period.

decrease in interest expense on borrowings was attributed to a lower average rate paid on the borrowings, which decreased 22 basis points

to 0.75% for the three months ended September 30, 2021.

The average balance of borrowings outstanding increased $1.8 million or 3.5% to

$53.6 million for the recently ended three-month period.

Net interest spread increased from 2.90% for the

prior year quarterly period to 2.94% for the three-month period ended September 30, 2021.

Provision for Losses on Loans

There was no provision for loan losses for the

three-month period ended September 30, 2021, compared to a provision of $84,000 for the prior year period.

The lower provision was primarily

in response to favorable experience in the loan portfolio, strong real estate prices and positive overall sentiment in the economy.

Non-interest Income

Non-interest income increased $100,000 or 78.1%

to $228,000 for the three months ended September 30, 2021, 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 $104,000 to $162,000 for the recently-ended three-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

Non-interest Expense

Non-interest expense decreased $102,000 or 4.9%

and totaled $2.0 million for the three months ended September 30, 2021, primarily due to decreased franchise and other taxes as well as

decreased FDIC insurance premiums.

Kentucky First Federal Bancorp

of Operating Results for the Six-month Periods Ended December 31, 2021 and 2020

income totaled $1.1 million or $0.13 diluted earnings per share for the six months ended December 31, 2021, an increase of $395,000 or

60.3% from net income of $655,000 or $0.08 diluted earnings per share for the same period in 2020.

The increase in net income on a six-month

basis was primarily attributable to lower non-interest expense, decreased provision for loan losses, and higher non-interest income,

which were partially offset by increased provision for income tax and decreased net interest income.

Interest Income

interest income before provision for loan losses decreased $25,000 or 0.5% to $4.8 million for the six-month period just ended.

income decreased by $276,000, or 4.6%, to $5.8 million, while interest expense decreased $251,000 or 21.5% to $917,000 for the six months

ended December 31, 2021.

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

decreased 33 basis points to 3.50% for the recently-ended six-month period compared to the prior year period.

The average balance of

interest-earning assets increased $14.1 million or 4.5% to $329.0 million for the six months ended December 31, 2021.

income on loans decreased $259,000 or 4.4% to $5.7 million, due primarily to a decrease in the average rate earned on the loan portfolio,

which decreased 19 basis points to 3.87%, while the average balance increased $866,000 or 0.3% to $293.6 million for the six-month period

ended December 31, 2021.

Interest income from interest-bearing deposits and other decreased $12,000 or 14.3% to $72,000 for the six months

just ended due to a decrease in the average rate earned, which decreased 38 basis points to 0.41% for the recently-ended period compared

to the period a year ago.

Interest expense decreased $251,000 or 21.5% to

$917,000 for the six months ended December 31, 2021.

The decrease in interest expense was due primarily to a decrease in the average rate

paid on funding sources, which decreased 21 basis points and totaled 0.68% for the recently-ended period.

Interest expense on deposits

decreased $221,000 or 23.5% to $719,000 for the six months just ended, while the average balance of deposits increased $10.7 million or

5.1% to $219.1 million.

Interest expense on certificates of deposit decreased $235,000 or 29.4% to $565,000, for the six months just ended

primarily due to a decrease in the average cost, which decreased by 34 bps to 0.89%.

Also contributing to the overall decrease in interest

expense was a decrease in interest expense on borrowings, which decreased $30,000 or 13.2% to $198,000 for the period.

The decrease in

interest expense on borrowings was attributed primarily to a lower average rate paid on the borrowings, which decreased eight bps to 0.76%

for the recently-ended period.

The average balance of borrowings outstanding decreased $1.8 million or 3.4% to $52.4 million for the recently

ended six-month period.

interest spread decreased from 2.94% for the prior year semiannual period to 2.82% for the six-month period ended December 31, 2021.

for Losses on Loans

Company recorded no provision for loan losses for the six-month period ended December 31, 2021, compared to a provision of $192,000 recorded

for the prior year period.

The lower provision was primarily in response to decreases in total loans during the period.

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Comparison of Operating Results for the Three-month

Periods Ended September 30, 2021 and 2020 (continued)

Franchise and other taxes decreased $64,000 to

$1,000 for the three months ended September 30, 2021, due to a change to the tax system in the Commonwealth of Kentucky to which

the Company and its Banks are subject.

The income tax change primarily involves moving from a franchise tax for the Banks to an income

The franchise tax incurred previously by the Banks was included in non-interest expense.

Beginning January 1, 2021, the Company’s

income tax expense includes both federal and Kentucky income taxes.

FDIC insurance premiums decreased $53,000 or 93.0% to $4,000 for the

three months ended September 30, 2021, due to an improvement in factors used to determine premiums.

A non-cash $13.6 million goodwill

impairment charge recorded in the quarter ended June 30, 2020, significantly impacted earnings during that period and indirectly resulted

in higher FDIC premiums for the subsequent fiscal year by negatively impacting the financial ratio component used by the FDIC to determine

the bank’s assessment rate.

Improved financial results for the three- and twelve-months ended June 30, 2021, had a positive impact

on the financial ratio component of the bank’s assessment rate and resulted in the lower expense period to period.

Other non-interest

expenses increased $45,000 or 34.9% to $174,000 for the quarter ended September 30, 2021, primarily due to expenses incurred in the banks’

conversion of its core data processing systems during the period.

Various small, noncapital expenditures were made to effect the transition

to a new core system.

Income Tax Expense

Income tax expense increased $118,000 or 178.8%

to $184,000 for the three months ended September 30, 2021, compared to the prior year period.

The effective tax rates for the three-month

periods ended September 30, 2021 and 2020, were 24.5% and 18.8%, respectively.

The increase in the effective tax rate for the recently-ended

period compared to the prior year period was related to the Banks becoming subject to state income taxes rather than state franchise taxes,

as mentioned herein.

Kentucky First Federal Bancorp

Quantitative and Qualitative Disclosures

About Market Risk

This item is not applicable as the Company is

a smaller reporting company.

of Operating Results for the Six-month Periods Ended December 31, 2021 and 2020 (continued)

income increased $77,000 or 30.7% to $328,000 for the six months ended December 31, 2021, 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 $53,000 to $208,000 for the recently-ended

six-month period.

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

sell 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 $237,000 or 5.8% and totaled $3.9 million for the six months ended December 31, 2021, primarily due to a decrease in

expenses related to the Company’s employee compensation and benefits.

compensation and benefits decreased $165,000 or 6.3% to $2.4 million primarily due to a decrease in the required contribution to its

defined benefit (“DB”) pension plan for the current fiscal year.

The Company’s DB plan administrator estimates contributions

for the fiscal year ending June 30, 2022, to be approximately $376,000, compared to $955,000 in contributions for the fiscal year ended

June 30, 2021.

FDIC insurance decreased $62,000 or 70.5% to $26,000 for the six months just ended, as premiums decreased.

FDIC insurance

premiums increased in the prior year due primarily to a goodwill impairment charge recognized at one of the Company’s Banks in

the three month period ended June 30, 2020.

Franchise and other taxes decreased $39,000 or 30.0% period to period as the Banks became

subject to Kentucky income taxes rather than the Kentucky Savings & Loan Deposits tax effective January 1, 2021.

Occupancy and equipment

expense decreased $20,000 or 6.2% to $301,000 for the six months ended December 31, 2021, primarily due to lower general computer and

software expenses, depreciation expenses and utilities.

tax expense increased $86,000 or 55.5% to $241,000 for the six months ended December 31, 2021, compared to the prior year period.

effective tax rates for the six-month periods ended December 31, 2021 and 2020, were 18.7% and 19.1%, 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, 2021 and 2020

income totaled $482,000 or $0.06 diluted earnings per share for the three months ended December 31, 2021, an increase of $112,000 or

30.3% from net income of $370,000 or $0.04 diluted earnings per share for the same period in 2020.

The increase in net earnings for the

quarter ended December 31, 2021 was primarily attributable to lower non-interest expense, lower provision for loan losses, and lower

income taxes, which were partially offset by decreased net interest income and decreased non-interest income.

Interest Income

Net interest income before provision for loan

losses decreased $140,000 or 5.7% to $2.3 million for the three-month period just ended, as interest income decreased at a faster pace

than interest expense decreased for the quarter.

Interest income decreased by $221,000, or 7.4%, to $2.8 million, while interest expense

decreased $81,000 or 15.3% to $448,000 for the three months ended December 31, 2021.

income on loans decreased $217,000 or 7.3% to $2.7 million, due decreases in the average rate earned on the loan portfolio, as well a

decrease in the average balance.

The average rate earned on the loan portfolio decreased 21 basis points to 3.79%, while the average

balance decreased $6.8 million or 2.3% to $289.4 million for the three-month period ended December 31, 2021.

expense on deposits decreased $75,000 or 17.6% to $351,000 for the three months ended December 31, 2021, while interest expense on borrowings

decreased $6,000 or 5.8% to $97,000 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 18 basis points to 0.64% for the recently ended period, while

the average balance of interest-bearing deposits increased $11.9 million or 5.7% to $220.6 million for the most recent period.

in interest expense on borrowings was attributed primarily to a lower average balance of borrowings outstanding period to period, which

decreased $6.7 million or 11.9% to $50.0 million for the recently ended three-month period.

interest spread increased 25 basis points from 2.98% for the prior year quarterly period to 2.73% for the three-month period ended December

for Losses on Loans

Company recorded no provision for loan losses for the three-month period ended December 31, 2021, compared to a provision of $108,000

recorded for the prior year quarter.

The lower provision was primarily in response to decreases in total loans during the period.

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, 2021 and 2020 (continued)

income decreased $23,000 or 18.7% to $100,000 for the recently ended quarter due primarily to decreased net gains on sales of loans.

The decrease in net gains on sales of loans was primarily due to reduced volume of loans sold during the comparable period.

sells most of its long-term, fixed-rate mortgage loans to the Federal Home Loan Bank of Cincinnati, while retaining the servicing rights

on the loans.

Non-interest expense decreased $135,000 or 6.7%

to $1.9 million for the quarter ended December 31, 2021, due primarily to a decrease to expenses relating to the Company’s employee

compensation and benefits, which decreased $184,000 or 14.4% and totaled $1.1 million for the recently-ended quarter.

The decrease in

employee compensation and benefits was primarily due to a decrease in the required contribution to the Company’s defined benefit

(“DB”) pension plan for the current fiscal year.

The Company’s DB plan administrator estimates contributions for the

fiscal year ending June 30, 2022, to be approximately $376,000, compared to $955,000 in contributions for the fiscal year ended June 30,

Somewhat offsetting the decrease in employee compensation and benefits were increases in outside service fees and data processing.

Outside service fees increased $42,000 or 127.3% to $75,000 for the quarter just ended, while data processing expenses increased $41,000

or 28.3% to $186,000.

tax expense decreased $32,000 or 36.0% to $57,000 for the three months ended December 31, 2021, compared to the prior year period.

effective tax rates for the three-month periods ended December 31, 2021 and 2020 were 10.6% and 19.4%, respectively.

First Federal Bancorp

Quantitative and Qualitative Disclosures About Market Risk

item is not applicable as the Company is a smaller reporting company.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis