Kentucky First Federal Bancorp 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ____________ to _______________ Commission File Number: 0-51176 KENTUCKY FIRST FEDERAL BANCORP (Exact name of registrant as specified in its charter) United States of America 61-1484858 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 655 Main Street , Hazard , Kentucky 41702 (Address of principal executive offices)(Zip Code) (502) 223-1638 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading symbol(s) Name of each exchange on which registered Common Stock, $0.01 par value per share KFFB The NASDAQ Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-Accelerated filer Smaller Reporting Company ☒ Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: At May 9, 2022, the latest practicable date, the Corporation had 8,218,215 shares of $.01 par value common stock outstanding. INDEX Page PART I FINANCIAL INFORMATION 1 ITEM 1 FINANCIAL STATEMENTS 1 Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Operations 2 Condensed Consolidated Statements of Comprehensive Income 3 Consolidated Statements of Changes in Shareholders’ Equity 4 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 8 ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 26 ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 37 ITEM 4 Controls and Procedures 37 PART II OTHER INFORMATION 38 SIGNATURES 40 i PART I ITEM 1: Financial Statements Kentucky First Federal Bancorp CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) March 31, June 30, 2022 2021 Unaudited ASSETS Cash and due from financial institutions $ 2,214 $ 1,834 Fed funds sold 34,016 5,001 Interest-bearing demand deposits 9,831 14,813 Cash and cash equivalents 46,061 21,648 Time deposits in other financial institutions – 247 Securities available-for-sale 29 33 Securities held-to-maturity, at amortized cost- approximate fair value of $ 353 and $ 476 at March 31, 2022 and June 30, 2021, respectively 358 462 Loans held for sale 1,342 1,307 Loans, net of allowance of $ 1,484 and $ 1,622 at March 31, 2022 and June 30, 2021, respectively 269,396 297,902 Real estate owned, net 61 82 Premises and equipment, net 4,630 4,697 Federal Home Loan Bank stock, at cost 6,498 6,498 Accrued interest receivable 631 694 Bank-owned life insurance 2,731 2,672 Goodwill 947 947 Prepaid federal income taxes 262 40 Prepaid expenses and other assets 952 834 Total assets $ 333,898 $ 338,063 LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits $ 238,642 $ 226,843 Federal Home Loan Bank advances 40,782 56,873 Advances by borrowers for taxes and insurance 529 838 Accrued interest payable 16 20 Deferred income taxes 767 614 Other liabilities 516 579 Total liabilities 281,252 285,767 Commitments and contingencies – – Shareholders’ equity Preferred stock, 500,000 shares authorized, $ .01 par value; no shares issued and outstanding – – Common stock, 20,000,000 shares authorized, $ .01 par value; 8,596,064 shares issued 86 86 Additional paid-in capital 34,893 34,916 Retained earnings 20,703 20,364 Unearned employee stock ownership plan (ESOP), 688 shares and 10,255 shares at March 31, 2022 and June 30, 2021, respectively ( 7 ) ( 102 ) Treasury shares at cost, 377,849 and 369,349 common shares at March 31, 2022 and June 30, 2021, respectively ( 3,029 ) ( 2,968 ) Accumulated other comprehensive income – – Total shareholders’ equity 52,646 52,296 Total liabilities and shareholders’ equity $ 333,898 $ 338,063 See accompanying notes to condensed consolidated financial statements. 1 Kentucky First Federal Bancorp CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except per share data) Nine months ended March 31, Three months ended March 31, 2022 2021 2022 2021 Interest income Loans, including fees $ 8,190 $ 8,835 $ 2,513 $ 2,899 Mortgage-backed securities 8 11 2 3 Other securities – 3 – – Interest-bearing deposits and other 118 122 46 38 Total interest income 8,316 8,971 2,561 2,940 Interest expense Interest-bearing demand deposits 29 23 10 8 Savings 203 194 68 69 Certificates of Deposit 823 1,110 258 310 Deposits 1,055 1,327 336 387 Borrowings 285 333 87 105 Total interest expense 1,340 1,660 423 492 Net interest income 6,976 7,311 2,138 2,448 Provision (credit) for loan losses ( 106 ) 192 ( 106 ) – Net interest income after provision for loan losses 7,082 7,119 2,244 2,448 Non-interest income Earnings on bank-owned life insurance 59 58 19 19 Net gain on sales of loans 231 280 23 125 Net loss on sales of real estate owned ( 8 ) ( 18 ) – – Valuation adjustment for real estate owned – ( 19 ) – – Other 140 132 52 38 Total non-interest income 422 433 94 182 Non-interest expense Employee compensation and benefits 3,675 3,964 1,237 1,362 Occupancy and equipment 460 488 159 166 FDIC insurance premiums 49 129 23 41 Voice and data communications 93 80 31 23 Advertising 106 114 20 38 Outside service fees 133 139 31 43 Data processing 416 430 109 138 Auditing and accounting 128 119 48 40 Franchise and other taxes 114 130 23 – Regulatory Assessments 77 77 25 25 Foreclosure and real estate owned expenses (net) 67 66 23 19 Other 428 395 142 124 Total non-interest expense 5,746 6,131 1,871 2,019 Income before income taxes 1,758 1,421 467 611 Income tax expense 374 293 133 138 NET INCOME $ 1,384 $ 1,128 $ 334 $ 473 EARNINGS PER SHARE Basic and diluted $ 0.17 $ 0.14 $ 0.04 $ 0.06 DIVIDENDS PER SHARE $ 0.30 $ 0.30 $ 0.10 $ 0.10 See accompanying notes to condensed consolidated financial statements. 2 Kentucky First Federal Bancorp CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In thousands) Nine months ended March 31, Three months ended March 31, 2022 2021 2022 2021 Net income $ 1,384 $ 1,128 $ 334 $ 473 Other comprehensive gains (losses), net of tax: Unrealized holding Gains (losses) on securities designated as available-for-sale, net of taxes of $ 0 , $ 0 , $( 1 ) and $ 0 during the respective periods – ( 2 ) – – Comprehensive income $ 1,384 $ 1,126 $ 334 $ 473 See accompanying notes to condensed consolidated financial statements. 3 Kentucky First Federal Bancorp CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY For the nine months ended (Unaudited) (Dollar amounts in thousands, except per share data) March 31, 2022 Common stock Additional paid-in capital Retained earnings Unearned employee stock ownership plan (ESOP) Treasury shares Accumulated other comprehensive income (loss) Total Balance at June 30, 2021 $ 86 $ 34,916 $ 20,364 $ ( 102 ) $ ( 2,968 ) $ – $ 52,296 Net income – – 1,384 – – – 1,384 Allocation of ESOP shares – ( 23 ) – 95 – – 72 Acquisition of shares for Treasury – – – – ( 61 ) – ( 61 ) Cash dividends of $ 0.30 per common share – – ( 1,045 ) – – – ( 1,045 ) Balance at March 31, 2022 $ 86 $ 34,893 $ 20,703 $ ( 7 ) $ ( 3,029 ) $ – $ 52,646 March 31, 2021 Common stock Additional paid-in capital Retained earnings Unearned employee stock ownership plan (ESOP) Treasury shares Accumulated other comprehensive income (loss) Total Balance at June 30, 2020 $ 86 $ 34,981 $ 19,932 $ ( 289 ) $ ( 2,801 ) $ 2 $ 51,911 Net income – – 1,128 – – – 1,128 Allocation of ESOP shares – ( 80 ) – 140 – – 60 Acquisition of shares for treasury – – – – ( 167 ) – ( 167 ) Other comprehensive loss – – – – – ( 2 ) ( 2 ) Cash dividends of $ 0.30 per common share – – ( 1,040 ) – – – ( 1,040 ) Balance at March 31, 2021 $ 86 $ 34,901 $ 20,020 $ ( 149 ) $ ( 2,968 ) $ – $ 51,890 See accompanying notes to condensed consolidated financial statements. 4 Kentucky First Federal Bancorp CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY For the three months ended (Unaudited) (Dollar amounts in thousands, except per share data) March 31, 2022 Common stock Additional paid-in capital Retained earnings Unearned employee stock ownership plan (ESOP) Treasury shares Accumulated other comprehensive income Total Balance at December 31, 2021 $ 86 $ 34,893 $ 20,718 $ ( 9 ) $ ( 3,029 ) $ – $ 52,659 Net income – – 334 – – – 334 Allocation of ESOP shares – – – 2 – – 2 Cash dividends of $ 0.10 per common share – – ( 349 ) – – – ( 349 ) Balance at March 31, 2022 $ 86 $ 34,893 $ 20,703 $ ( 7 ) $ ( 3,029 ) $ – $ 52,646 March 31, 2021 Common stock Additional paid-in capital Retained earnings Unearned employee stock ownership plan (ESOP) Treasury shares Accumulated other comprehensive income Total Balance at December 31, 2020 $ 86 $ 34,948 $ 19,896 $ ( 196 ) $ ( 2,902 ) $ – $ 51,832 Net income – – 473 – – – 473 Allocation of ESOP shares – ( 47 ) – 47 – – – Acquisition of shares for treasury – – – – ( 66 ) – ( 66 ) Cash dividends of $ 0.10 per common share ( 349 ) ( 349 ) Balance at March 31, 2021 $ 86 $ 34,901 $ 20,020 $ ( 149 ) $ ( 2,968 ) $ – $ 51,890 See accompanying notes to condensed consolidated financial statements. 5 Kentucky First Federal Bancorp CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine months ended March 31, 2022 2021 Cash flows from operating activities: Net income $ 1,384 $ 1,128 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 194 218 Accretion of purchased loan credit discount ( 38 ) ( 43 ) Amortization of purchased loan premium – 26 Amortization of deferred loan origination costs (fees) ( 88 ) ( 1 ) Amortization of premiums on investment securities 2 7 Net gain on sale of loans ( 231 ) ( 280 ) Net loss on sale of real estate owned 8 18 Valuation adjustments of real estate owned – 19 ESOP compensation expense 72 60 Earnings on bank-owned life insurance ( 59 ) ( 58 ) Provision (credit) for loan losses ( 106 ) 192 Origination of loans held for sale ( 6,283 ) ( 6,468 ) Proceeds from loans held for sale 6,479 6,154 Increase (decrease) in cash, due to changes in: Accrued interest receivable 63 103 Prepaid expenses and other assets ( 118 ) 104 Accrued interest payable ( 4 ) ( 2 ) Other liabilities ( 63 ) 123 Income taxes ( 68 ) ( 41 ) Net cash provided by operating activities 1,144 1,259 Cash flows from investing activities: Maturities of time deposits in other financial institutions 247 1,982 Securities maturities, prepayments and calls: Held to maturity 102 100 Available for sale 4 506 Loans originated for investment, net of principal collected 28,724 ( 13,767 ) Proceeds from sale of real estate owned 26 753 Additions to real estate owned – ( 1 ) Additions to premises and equipment, net ( 127 ) ( 68 ) Net cash provided by (used in) investing activities 28,976 ( 10,495 ) Cash flows from financing activities: Net increase in deposits 11,799 13,270 Payments by borrowers for taxes and insurance, net ( 309 ) ( 240 ) Proceeds from Federal Home Loan Bank advances 8,000 38,600 Repayments on Federal Home Loan Bank advances ( 24,091 ) ( 40,122 ) Treasury stock purchased ( 61 ) ( 167 ) Dividends paid on common stock ( 1,045 ) ( 1,040 ) Net cash provided by (used in) financing activities ( 5,707 ) 10,301 Net increase in cash and cash equivalents 24,413 1,065 Beginning cash and cash equivalents 21,648 13,702 Ending cash and cash equivalents $ 46,061 $ 14,767 See accompanying notes to condensed consolidated financial statements. 6 Kentucky First Federal Bancorp CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (Unaudited) (In thousands) Nine months ended March 31, 2022 2021 Supplemental disclosure of cash flow information: Cash paid during the period for: Federal income taxes $ 500 $ 191 Interest on deposits and borrowings $ 1,344 $ 1,662 Transfers of loans to real estate owned, net $ 45 $ 327 Loans made on sale of real estate owned $ 32 $ 37 See accompanying notes to condensed consolidated financial statements. 7 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2022 (unaudited) The Kentucky First Federal Bancorp (“Kentucky First” or the “Company”) was incorporated under federal law in March 2005, and is the mid-tier holding company for First Federal Savings and Loan Association of Hazard, Hazard, Kentucky (“First Federal of Hazard”) and Frankfort First Bancorp, Inc. (“Frankfort First”). Frankfort First is the holding company for First Federal Savings Bank of Kentucky, Frankfort, Kentucky (“First Federal of Kentucky”). First Federal of Hazard and First Federal of Kentucky (hereinafter collectively the “Banks”) are Kentucky First’s primary operations, which consist of operating the Banks as two independent, community-oriented savings institutions. In December 2012, the Company acquired CKF Bancorp, Inc., a savings and loan holding company which operated three banking locations in Boyle and Garrard Counties in Kentucky. In accounting for the transaction, the assets and liabilities of CKF Bancorp were recorded on the books of First Federal of Kentucky in accordance with accounting standard ASC 805, Business Combinations. 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements, which represent the condensed consolidated balance sheets and results of operations of the Company, were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) which are necessary for a fair presentation of the condensed consolidated financial statements have been included. The results of operations for the nine-month period ended March 31, 2022, are not necessarily indicative of the results which may be expected for an entire fiscal year. The condensed consolidated balance sheet as of June 30, 2021, has been derived from the audited consolidated balance sheet as of that date. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report for 2021 filed with the Securities and Exchange Commission. Principles of Consolidation - The consolidated financial statements include the accounts of the Company, Frankfort First, and its wholly-owned banking subsidiaries, First Federal of Hazard and First Federal of Kentucky (collectively hereinafter “the Banks”). All intercompany transactions and balances have been eliminated in consolidation. 8 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 1. Basis of Presentation (continued) New Accounting Standards FASB ASC 326 - In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The final standard will change estimates for credit losses related to financial assets measured at amortized cost such as loans, held-to-maturity debt securities, and certain other contracts. For estimating credit losses, the FASB is replacing the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model. The Company will now use forward-looking information to enhance its credit loss estimates. The amendment requires enhanced disclosures to aid investors and other users of financial statements to better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of our portfolio. The largest impact to the Company will be on its allowance for loan and lease losses, although the ASU also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standard is effective for public companies for annual periods and interim periods within those annual periods beginning after December 15, 2019. However, the FASB has delayed the implementation of the ASU for smaller reporting companies until years beginning after December 15, 2022, or in the Company’s case the fiscal year beginning July 1, 2023. ASU 2016-13 will be applied through a cumulative effect adjustment to retained earnings (modified-retrospective approach), except for debt securities for which an other-than-temporary impairment had been recognized before the effective date. A prospective transition approach is required for these debt securities. We have formed a functional committee that is assessing our data and system needs and are evaluating the impact of adopting the new guidance. Management is in the final stages of selecting a third-party vendor to partner with and expects to begin working with the successful vendor on data validation and implementation efforts over the next several months. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements. However, the Company does expect ASU 2016-13 to add complexity and costs to its current credit loss evaluation process. FASB ASC 740– In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. The amendments in this ASU removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes during interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. For public business entities, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, or July 1, 2021, with respect to the Company. Early adoption is permitted. We did not have a significant impact to our consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. 9 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 2. Earnings Per Share Diluted earnings per share is computed taking into consideration common shares outstanding and dilutive potential common shares to be issued or released under the Company’s share-based compensation plans. The factors used in the basic and diluted earnings per share computations follow: Nine months ended March 31, Three months ended March 31, (in thousands)  2022 2021 2022 2021 Net income allocated to common shareholders, basic and diluted $ 1,384 $ 1,128 $ 334 $ 473 Nine months ended March 31, Three months ended March 31, 2022 2021 2022 2021 Weighted average common shares outstanding, basic and diluted 8,216,989 8,217,654 8,215,825 8,211,789 There were no stock option shares outstanding for the nine- or three-month periods ended March 31, 2022 and 2021. 3. Investment Securities The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at March 31, 2022 and June 30, 2021, the corresponding amounts of gross unrealized gains recognized in accumulated other comprehensive income and gross unrecognized gains and losses: March 31, 2022 (in thousands) Amortized cost Gross unrealized/ unrecognized gains Gross unrealized/ unrecognized losses Estimated fair value Available-for-sale Securities Agency mortgage-backed: residential $ 29 $ – $ – $ 29 Held-to-maturity Securities Agency mortgage-backed: residential $ 358 $ 5 $ 10 $ 353 June 30, 2021 (in thousands) Amortized cost Gross unrealized/ unrecognized gains Gross unrealized/ unrecognized losses Estimated fair value Available-for-sale Securities Agency mortgage-backed: residential $ 33 $ – $ – $ 33 Held-to-maturity Securities Agency mortgage-backed: residential $ 462 $ 16 $ 2 $ 476 10 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 3. Investment Securities (continued) Our pledged securities (including overnight and time deposits in other financial institutions) totaled $ 1.5 million and $ 1.8 million at March 31, 2022 and June 30, 2021, respectively. We evaluated securities in unrealized loss positions for evidence of other-than-temporary impairment, considering duration, severity, financial condition of the issuer, our intention to sell or requirement to sell. Those securities were agency mortgage-backed securities, which carry a very limited amount of risk. Also, we have no intention to sell nor feel that we will be compelled to sell such securities before maturity. Based on our evaluation, no impairment has been recognized through earnings. 4. Loans receivable The composition of the loan portfolio was as follows: March 31, June 30, (in thousands) 2022 2021 Residential real estate One- to four-family $ 209,344 $ 224,145 Multi-family 13,298 19,781 Construction 1,891 5,433 Land 1,097 1,308 Farm 1,839 2,234 Nonresidential real estate 33,246 35,492 Commercial nonmortgage 1,032 2,259 Consumer and other: Loans on deposits 891 1,129 Home equity 7,662 7,135 Automobile 71 75 Unsecured 509 533 270,880 299,524 Allowance for loan losses ( 1,484 ) ( 1,622 ) $ 269,396 $ 297,902 The amounts above include net deferred loan costs of $ 269,000 and $ 167,000 as of March 31, 2022, and June 30, 2021, respectively. 11 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 4. Loans receivable (continued) The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2022: (in thousands) Beginning balance Provision for loan losses Loans charged off Recoveries Ending balance Residential real estate: One- to four-family $ 794 $ ( 4 ) $ ( 31 ) $ – $ 759 Multi-family 291 ( 68 ) – – 223 Construction 12 ( 7 ) – – 5 Land 3 1 – – 4 Farm 5 1 – – 6 Nonresidential real estate 494 ( 33 ) – – 461 Commercial nonmortgage 5 ( 3 ) – – 2 Consumer and other: Loans on deposits 2 ( 1 ) – – 1 Home equity 15 7 – – 22 Automobile – – – – – Unsecured 1 1 ( 3 ) 2 1 Totals $ 1,622 $ ( 106 ) $ ( 34 ) $ 2 $ 1,484 The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2022: (in thousands) Beginning balance Provision for loan losses Loans charged off Recoveries Ending balance Residential real estate: One- to four-family $ 831 $ ( 58 ) $ ( 14 ) $ – $ 759 Multi-family 212 11 – – 223 Construction 6 ( 1 ) – – 5 Land – 4 – – 4 Farm 6 – – – 6 Nonresidential real estate 526 ( 65 ) – – 461 Commercial nonmortgage 3 ( 1 ) – – 2 Consumer and other: Loans on deposits 1 – – – 1 Home equity 17 5 – – 22 Automobile – – – – – Unsecured 1 ( 1 ) – 1 1 Totals $ 1,603 $ ( 106 ) $ ( 14 ) $ 1 $ 1,484 12 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 4. Loans receivable (continued) The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2021: (in thousands) Beginning balance Provision for loan losses Loans charged off Recoveries Ending balance Residential real estate: One- to four-family $ 671 $ ( 3 ) $ ( 23 ) $ – $ 645 Multi-family 184 96 – – 280 Construction 6 3 – – 9 Land 1 1 – – 2 Farm 4 – – – 4 Nonresidential real estate 405 61 – – 466 Commercial nonmortgage 3 – – – 3 Consumer and other: Loans on deposits 2 – – – 2 Home equity 11 37 ( 45 ) 7 10 Automobile – – – – – Unsecured 1 ( 3 ) – 3 1 Unallocated 200 – – – 200 Totals $ 1,488 $ 192 $ ( 68 ) $ 10 $ 1,622 The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2021: (in thousands) Beginning balance Provision for loan losses Loans charged off Recoveries Ending balance Residential real estate: One- to four-family $ 647 $ ( 2 ) $ – $ – $ 645 Multi-family 277 3 – – 280 Construction 6 3 – – 9 Land 2 – – – 2 Farm 5 ( 1 ) – – 4 Nonresidential real estate 469 ( 3 ) – – 466 Commercial nonmortgage 2 1 – – 3 Consumer and other: Loans on deposits 2 – – – 2 Home equity 11 ( 1 ) – – 10 Automobile – – – – – Unsecured 1 – – – 1 Unallocated 200 – – – 200 Totals $ 1,622 $ – $ – $ – $ 1,622 13 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 4. Loans receivable (continued) The 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 March 31, 2022. The recorded investment in loans excludes accrued interest receivable due to immateriality. March 31, 2022: (in thousands) Loans individually evaluated Loans acquired with deteriorated credit quality Unpaid principal balance and recorded investment Ending allowance attributed to loans Loans individually evaluated for impairment: Residential real estate: One- to four-family $ 3,250 $ 497 $ 3,747 $ – Multi-family 574 574 – Farm 273 273 – Nonresidential real estate 1,091 1,091 Consumer: Home equity 87 87 – Unsecure 5 5 – 5,280 497 5,777 – Loans collectively evaluated for impairment: Residential real estate: One- to four-family $ 205,597 $ 759 Multi-family 12,724 223 Construction 1,891 5 Land 1,097 4 Farm 1,566 6 Nonresidential real estate 32,155 461 Commercial nonmortgage 1,032 2 Consumer: Loans on deposits 891 1 Home equity 7,575 22 Automobile 71 – Unsecured 504 1 265,103 1,484 $ 270,880 $ 1,484 14 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 4. Loans receivable (continued) The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of June 30, 2021. June 30, 2021: (in thousands) Loans individually evaluated Loans acquired with deteriorated credit quality Unpaid principal balance and recorded investment Ending allowance attributed to loans Loans individually evaluated for impairment: Residential real estate: One- to four-family $ 3,738 $ 595 $ 4,333 $ – Multi-family 646 – 646 – Farm 274 – 274 – Nonresidential real estate 1,367 – 1,367 – Consumer and other: Unsecured 16 – 16 – 6,041 595 6,636 – Loans collectively evaluated for impairment: Residential real estate: One- to four-family $ 219,792 $ 794 Multi-family 19,135 291 Construction 5,433 12 Land 1,308 3 Farm 1,960 5 Nonresidential real estate 34,125 494 Commercial nonmortgage 2,259 5 Consumer: Loans on deposits 1,129 2 Home equity 7,135 15 Automobile 75 – Unsecured 537 1 292,888 1,622 $ 299,524 $ 1,622 15 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 4. Loans receivable (continued) The following table presents interest income on loans individually evaluated for impairment by class of loans for the nine months ended March 31: (in thousands) Average Recorded Investment Interest Income Recognized Cash Basis Income Recognized Average Recorded Investment Interest Income Recognized Cash Basis Income Recognized 2022 2021 With no related allowance recorded: One- to four-family $ 3,494 $ 94 $ 94 $ 3,941 $ 120 $ 120 Multi-family 610 16 16 662 18 18 Construction – – – 32 – – Farm 274 – – 300 23 23 Nonresidential real estate 1,229 40 40 648 24 24 Consumer and other 54 1 1 9 – – Purchased credit-impaired loans 546 19 19 709 40 40 6,207 170 170 6,301 225 225 With an allowance recorded: One- to four-family – – – $ 6,207 $ 170 $ 170 $ 6,301 $ 225 $ 225 The following table presents interest income on loans individually evaluated for impairment by class of loans for the three months ended March 31: (in thousands) Average Recorded Investment Interest Income Recognized Cash Basis Income Recognized Average Recorded Investment Interest Income Recognized Cash Basis Income Recognized 2022 2021 With no related allowance recorded: Residential real estate: One- to four-family $ 3,329 $ 83 $ 83 $ 3,971 $ 36 $ 36 Multi-family 577 5 5 655 6 6 Farm 274 – – 291 – – Nonresidential real estate 1,215 12 12 641 17 17 Consumer and other 57 1 1 9 – – Purchased credit-impaired loans 487 5 5 676 16 16 5,939 106 106 6,243 75 75 With an allowance recorded: One- to four-family – – – $ 5,939 $ 106 $ 106 $ 6,243 $ 75 $ 75 16 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 4. 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 March 31, 2022 and June 30, 2021: March 31, 2022 June 30, 2021 (in thousands) Nonaccrual Loans Past Due Over 90 Days Still Accruing Nonaccrual Loans Past Due Over 90 Days Still Accruing Residential real estate: One- to four-family residential real estate $ 3,589 $ 121 $ 4,104 $ 243 Multifamily 574 646 – Construction – – – Farm 273 274 – Nonresidential real estate and land 1,090 1,367 – Commercial and industrial – – Consumer 91 21 $ – $ 5,617 $ 121 $ 6,412 $ 243 One- to four-family loans in process of foreclosure totaled $ 692,000 and $ 577,000 at March 31, 2022 and June 30, 2021, 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.” In December 2020, Congress amended the CARES Act through the Consolidated Appropriation Act of 2021, which provided additional COVID-19 relief to American families and businesses, including extending the TDR relief under the CARES Act until the earlier of December 31, 2021 or 60 days following the termination of the 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. In response to the COVID-19 pandemic and the widespread economic downturn that immediately resulted, the Company adopted a loan forbearance plan in which then-current affected borrowers could request deferral of their loan payments for a period of three months. A total of $ 815,000 in loans were accepted into the plan for the twelve months ended June 30, 2021. At June 30, 2021 all of those loans had reached the end of their three-month deferral data period and returned to regular payment status. At March 31, 2022 and June 30, 2021, the Company had $ 1.4 million and $ 1.7 million of loans classified as TDRs, respectively. Of the TDRs at March 31, 2022, approximately 24.9 % were related to the borrower’s completion of Chapter 7 bankruptcy proceedings with no reaffirmation of the debt to the Banks. During the nine- and three-months ended March 31, 2022, the Company restructured no loans as TDRs. No TDRs defaulted during the nine-month periods ended March 31, 2022, or 2021. 17 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 4. Loans receivable (continued) During the nine months ended March 31, 2021, 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 $ 143,000 at March 31, 2021. The following table summarizes TDR loan modifications that occurred during the nine months ended March 31, 2021, and their performance, by modification type: (in thousands) Troubled Debt Restructurings Performing to Modified Terms Troubled Debt Restructurings Not Performing to Modified Terms Total Troubled Debt Restructurings Nine months ended March 31, 2021 Residential real estate: Chapter 7 bankruptcy $ 143 $ – $ 143 There were no TDR loan modifications that occurred during the three months ended March 31, 2021. 18 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 4. Loans receivable (continued) The following table presents the aging of the principal balance outstanding in past due loans as of March 31, 2022, by class of loans: (in thousands) 30-89 Days Past Due 90 Days or Greater Past Due Total Past Due Loans Not Past Due Total Residential real estate: One-to four-family $ 2,651 $ 981 $ 3,632 $ 205,712 $ 209,344 Multi-family – – – 13,298 13,298 Construction 72 – 72 1,819 1,891 Land – – – 1,097 1,097 Farm – – – 1,839 1,839 Nonresidential real estate – – – 33,246 33,246 Commercial non-mortgage 20 – 20 1,012 1,032 Consumer and other: Loans on deposits – – – 891 891 Home equity 14 71 85 7,577 7,662 Automobile – – – 71 71 Unsecured 8 – 8 501 509 Total $ 2,765 $ 1,052 $ 3,817 $ 267,063 $ 270,880 The following tables present the aging of the principal balance outstanding in past due loans as of June 30, 2021, by class of loans: (in thousands) 30-89 Days Past Due 90 Days or Greater Past Due Total Past Due Loans Not Past Due Total Residential real estate: One-to four-family $ 2,392 $ 1,338 $ 3,730 $ 220,395 $ 224,125 Multi-family – – – 19,781 19,781 Construction 80 – 80 5,353 5,433 Land – – – 1,308 1,308 Farm 101 – 101 2,133 2,234 Nonresidential real estate – 241 241 35,251 35,492 Commercial nonmortgage 6 – 6 2,253 2,259 Consumer: Loans on deposits – – – 1,129 1,129 Home equity 116 – 116 7,019 7,135 Automobile – – – 75 75 Unsecured 4 – 4 549 553 Total $ 2,699 $ 1,579 $ 4,278 $ 295,246 $ 299,524 19 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 4. Loans receivable (continued) 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. The 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: Special Mention. Loans 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. Substandard. 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 of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful. 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. 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 March 31, 2022, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (in thousands) Pass Special Mention Substandard Doubtful Residential real estate: One- to four-family $ 203,430 $ 199 $ 5,715 $ – Multi-family 13,024 – 274 – Construction 1,891 – – – Land 1,097 – – – Farm 1,566 – 273 – Nonresidential real estate 31,449 707 1,090 – Commercial nonmortgage 1,032 – – – Consumer: Loans on deposits 891 – – – Home equity 7,540 – 122 – Automobile 71 – – – Unsecured 504 – 5 – $ 262,495 $ 906 $ 7,479 $ – 20 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 4. Loans receivable (continued) At June 30, 2021, the risk category of loans by class of loans was as follows: (in thousands) Pass Special Mention Substandard Doubtful Residential real estate: One- to four-family $ 217,485 $ 596 $ 6,044 $ – Multi-family 19,135 – 646 – Construction 5,433 – – – Land 1,308 – – – Farm 1,960 – 274 – Nonresidential real estate 32,748 924 1,820 – Commercial nonmortgage 2,259 – – – Consumer: Loans on deposits 1,129 – – – Home equity 7,044 39 52 – Automobile 75 – – – Unsecured 546 – 7 – $ 289,122 $ 1,559 $ 8,843 $ – 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 $ 88,000 and $ 88,000 at March 31, 2022 and June 30, 2021, respectively, is as follows: (in thousands) March 31, 2022 June 30, 2021 One- to four-family residential real estate $ 497 $ 595 21 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 4. Loans receivable (continued) Accretable yield, or income expected to be collected, is as follows: (in thousands) Nine months ended March 31, 2022 Twelve months ended June 30, 2021 Balance at beginning of period $ 390 $ 447 Accretion of income ( 38 ) ( 57 ) Disposals, net of recoveries -- – Balance at end of period $ 352 $ 390 For those purchased loans disclosed above, the Company made no increase in allowance for loan losses for the year ended June 30, 2021, nor for the nine-month period ended March 31, 2022. Neither were any allowance for loan losses reversed during those periods. 5. 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 – Quoted prices in active markets for identical assets or liabilities. Level 2 – 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. Level 3 – Unobservable 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. Securities 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. 22 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 5. Disclosures About Fair Value of Assets and Liabilities (continued) Financial assets measured at fair value on a recurring basis are summarized below: Fair Value Measurements Using (in thousands) Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) March 31, 2022 Agency mortgage-backed: residential $ 29 $ – $ 29 $ – June 30, 2021 Agency mortgage-backed: residential $ 33 $ – $ 33 $ – Impaired Loans Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheet as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below. 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. 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. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. There were no loans measured on a nonrecurring basis using the fair value of the collateral for collateral-dependent loans at March 31, 2022 or June 30, 2021. 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. These assets 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. There was no other real estate owned (“OREO”) written down during the nine- or three-month periods ended March 31, 2022 or 2021. There was no OREO measured on a nonrecurring basis during the period at fair value less costs to sell at March 31, 2022 or June 30, 2021. 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 exchange for certain financial instruments. 23 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 5. Disclosures About Fair Value of Assets and Liabilities (continued) Based on the foregoing methods and assumptions, the carrying value and fair value of the Company’s financial instruments at March 31, 2022 and June 30, 2021 are as follows: Fair Value Measurements at Carrying March 31, 2022 Using (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 46,061 $ 46,061 $ 46,061 Available-for-sale securities 29 $ 29 29 Held-to-maturity securities 358 353 353 Loans held for sale 1,342 $ 1,352 1,352 Loans receivable - net 269,396 273,014 273,014 Federal Home Loan Bank stock 6,498 n/a Accrued interest receivable 631 631 631 Financial liabilities Deposits $ 238,642 $ 111,934 126,901 238,835 Federal Home Loan Bank advances 40,782 40,771 40,771 Advances by borrowers for taxes and insurance 529 529 529 Accrued interest payable 16 16 16 Fair Value Measurements at Carrying June 30, 2021 Using (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 21,648 $ 21,648 $ 21,648 Term deposits in other financial institutions 247 248 248 Available-for-sale securities 33 $ 33 33 Held-to-maturity securities 462 476 476 Loans held for sale 1,307 1,336 1,336 Loans receivable – net 297,902 $ 306,346 306,346 Federal Home Loan Bank stock 6,498 n/a Accrued interest receivable 694 694 694 Financial liabilities Deposits $ 226,843 $ 101,951 $ 125,232 $ 227,183 Federal Home Loan Bank advances 56,873 57,314 57,314 Advances by borrowers for taxes and insurance 838 838 838 Accrued interest payable 20 20 20 24 Kentucky First Federal Bancorp NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 2022 (unaudited) 6. Other Comprehensive Income (Loss) 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: Other comprehensive income (loss) components and related tax effects for the periods indicated were as follows: Nine months ended March 31, (in thousands) 2022 2021 Unrealized holding gains (losses) on available-for-sale securities $ – $ ( 3 ) Tax effect – 1 Net-of-tax amount $ – $ ( 2 ) There was no other comprehensive income for the three months ended March 31, 2022 and 2021. 25 Kentucky First Federal Bancorp ITEM 2: 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. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic trends and conditions, including inflation and its impacts, 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), the impacts related to or resulting from Russia’s military action in Ukraine, including the broader impacts to financial markets, 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. 26 Kentucky 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 nine month periods ended March 31, 2022 and 2021, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods. Nine Months Ended March 31, 2022 2021 Average Balance Interest And Dividends Yield/ Cost Average Balance Interest And Dividends Yield/ Cost (Dollars in thousands) Interest-earning assets: Loans 1 $ 287,377 $ 8,190 3.80 % $ 294,765 $ 8,835 4.00 % Mortgage-backed securities 445 8 2.40 586 11 2.50 Other securities – – – 132 3 3.03 Other interest-earning assets 40,067 118 0.39 21,646 122 0.75 Total interest-earning assets 327,889 8,316 3.38 317,129 8,971 3.77 Less: Allowance for loan losses (1,607 ) (1,552 ) Non-interest-earning assets 12,124 12,234 Total assets $ 338,406 $ 327,811 Interest-bearing liabilities: Demand deposits $ 19,398 $ 29 0.20 % $ 17,871 $ 23 0.17 % Savings 72,729 203 0.37 62,674 194 0.41 Certificates of deposit 126,614 823 0.87 128,343 1,110 1.15 Total deposits 218,741 1,055 0.64 208,888 1,327 0.85 Borrowings 49,934 285 0.76 55,160 333 0.81 Total interest-bearing liabilities 268,675 1,340 0.67 264,048 1,660 0.84 Noninterest-bearing demand deposits 15,155 9,817 Noninterest-bearing liabilities 2,246 2,035 Total liabilities 268,076 275,900 Shareholders’ equity 52,330 51,911 Total liabilities and shareholders’ equity $ 338,406 $ 327,811 Net interest spread $ 6,976 2.71 % $ 7,311 2.93 % Net interest margin 2.84 % 3.07 % Average interest-earning assets to average interest-bearing liabilities 122.04 % 120.10 % 1 Includes loan fees, immaterial in amount, in both interest income and the calculation of yield on loans. Also includes loans on nonaccrual status. 27 Kentucky 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 March 31, 2022 and 2021, 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 March 31, 2022 2021 Average Balance Interest And Dividends Yield/ Cost Average Balance Interest And Dividends Yield/ Cost (Dollars in thousands) Interest-earning assets: Loans 1 $ 274,197 $ 2,513 3.67 % $ 298,828 $ 2,899 3.88 % Mortgage-backed securities 405 2 2.96 550 3 2.18 Other securities – – – – – – Other interest-earning assets 51,544 46 0.35 22,270 38 0.68 Total interest-earning assets 326,146 2,561 3.14 321,648 2,940 3.66 Less: Allowance for loan losses (1,599 ) (1,622 ) Non-interest-earning assets 12,094 11,619 Total assets $ 336,641 $ 331,645 Interest-bearing liabilities: Demand deposits $ 19,398 $ 10 0.21 % $ 18,567 $ 8 0.17 % Savings 75,004 68 0.36 67,532 69 0.41 Certificates of deposit 126,964 258 0.81 123,975 310 1.00 Total deposits 221,366 336 0.61 210,074 387 0.74 Borrowings 45,302 87 0.77 56,998 105 0.74 Total interest-bearing liabilities 266,668 423 0.63 267,072 492 0.74 Noninterest-bearing demand deposits 15,155 11,181 Noninterest-bearing liabilities 2,282 1,586 Total liabilities 284,105 279,839 Shareholders’ equity 52,536 51,806 Total liabilities and shareholders’ equity $ 336,641 $ 331,645 Net interest spread $ 2,138 2.51 % $ 2,448 2.92 % Net interest margin 2.62 % 3.04 % Average interest-earning assets to average interest-bearing liabilities 122.30 % 120.44 % 1 Includes loan fees, immaterial in amount, in both interest income and the calculation of yield on loans. Also includes loans on nonaccrual status. 28 Kentucky 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 March 31, 2022 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 March 31, 2022, totaled $7.5 million compared to $8.5 million at March 31, 2021. Management attributes some of this improved performance to the overall strengthening in the residential real estate market. Nearly 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-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. 29 Kentucky 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 March 31, 2022 (continued) 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. While 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 impacted. 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 March 31, 2022 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 is working with its borrowers who are negatively impacted by COVID-19 by offering a payment deferral program. As of March 31, 2022, 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. One borrower with outstanding principal of $859,000 had been granted an additional extension and returned to regular paying status in April 2021. All other borrowers granted a deferral, composed of 100 loans totaling $17.5 million in principal had resumed regular payments. The CARES Act and subsequent Consolidated Appropriations Act, 2021, 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. These loans are intended to provide eight weeks of payroll and other costs to assist those businesses to either remain open or to re-open quickly and allow their workers to pay their bills. First Federal of Kentucky qualified as an SBA lender to assist the small business community in securing this important funding. As of March 31, 2022, First Federal of Kentucky had approved and closed with the SBA 75 PPP loans representing $2.6 million in funding. Of those loans a total of 51 loans aggregating $2.2 million 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. 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. 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. 30 Kentucky 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 March 31, 2022 (continued) Assets: At March 31, 2022, the Company’s assets totaled $333.9 million, a decrease of $4.2 million, or 1.2%, from total assets at June 30, 2021. This increase was attributed primarily to an increase in cash and cash equivalents. Cash and cash equivalents: Cash and cash equivalents increased $24.4 million or 112.8% to $46.1 million at March 31, 2022, and was primarily due to increased deposits and loan repayments. Investment securities: At March 31, 2022, our securities portfolio consisted of mortgage-backed securities. Investment securities decreased $108,000 or 21.8% to $387,000 at March 31, 2022. Loans : Loans receivable, net, decreased by $28.5 million or 9.6% to $269.4 million at March 31, 2022. 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 holdings. 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 March 31, 2022, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of approximately $5.7 million, or 2.1% 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 $1.5 million and $1.6 million at March 31, 2022 and June 30, 2021, respectively. The allowance for loan losses at March 31, 2022, represented 25.9% 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 $7.5 million in assets classified as substandard for regulatory purposes at March 31, 2022, including loans ($7.5 million), loans acquired in the CKF Bancorp transaction and real estate owned (“REO”) ($61,000.) Classified loans as a percentage of total loans (including loans acquired) was 2.8% and 3.0% at March 31, 2022 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) March 31, 2022 June 30, 2021 Substandard assets $ 7,540 $ 8,925 Doubtful assets – – Loss assets – – Total classified assets $ 7,540 $ 8,925 At March 31, 2022, the Company’s real estate acquired through foreclosure represented 0.8% of substandard assets compared to 0.9% at June 30, 2021. During the periods 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 $0 and $43,000 at March 31, 2022 and June 30, 2021, respectively. 31 Kentucky 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 March 31, 2022 (continued) The following table presents the aggregate carrying value of REO at the dates indicated: March 31, 2022 June 30, 2021 Number of Properties Net Carrying Value Number of Properties Net Carrying Value One- to four-family 2 $ 61 2 $ 82 Building lot – – 1 – Total REO 2 $ 61 3 $ 82 At March 31, 2022 and June 30, 2021, the Company had $906,000 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. Liabilities: Total liabilities decreased $4.5 million, or 1.6% to $281.3 million at March 31, 2022, primarily as a result of a decrease in borrowings and was somewhat offset by an increase in deposits. FHLB advances decreased $16.1 million or 28.3% to $40.8 million at March 31, 2022, while deposits increased $11.8 million or 5.2% to $238.6 million. Shareholders’ Equity: At March 31, 2022, the Company’s shareholders’ equity totaled $52.6 million, an increase of $350,000 or 0.7% from the June 30, 2021 total. The change in shareholders’ equity was primarily associated with net profits for the period less dividends paid on common stock. The Company paid dividends of $1.0 million or 75.5% of net income for the nine-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. 32 Kentucky First Federal Bancorp MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Comparison of Operating Results for the Nine-month Periods Ended March 31, 2022 and 2021 General Net earnings were $1.4 million or $0.17 diluted earnings per share for the nine months ended March 31, 2022, compared to net earnings of $1.1 million or $0.14 diluted earnings per share for the nine months ended March 31, 2021, an increase of $256,000 or 22.7%. The increase in net earnings on a nine-month basis was primarily attributable to lower non-interest expense and decreased provision for loan losses, which were partially offset by decreased net interest income, increased provision for income tax and decreased non-interest income. Net Interest Income Net interest income before provision for loan losses decreased $335,000 or 4.6% and totaled $7.0 million for the nine months ended March 31, 2022, as interest income decreased more than interest expense decreased. Interest income decreased $655,000 or 7.3% and totaled $8.3 million for the nine months just ended primarily due to a decrease in the average rate earned on the assets, although the average volume of assets also decreased period to period. Interest expense decreased $320,000 or 19.3% and totaled $1.3 million for the nine months just ended, primarily due to a decrease in the average rate paid on funding sources. The 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 earned decreased 39 basis points to 3.38% for the recently-ended nine-month period compared to the prior year period, while the average balance of interest-earning assets increased $10.8 million or 3.4% to $327.9 million for the nine months ended March 31, 2022. Interest income on loans decreased $645,000 or 7.3% to $8.2 million, due primarily to a decrease in the average rate earned on the loan portfolio, which decreased 20 basis points to 3.80%, while the average balance of loans, net decreased $7.4 million or 2.5% to $287.4 million for the nine-month period ended March 31, 2022. As the average balance of loans decreased, the funds were invested in short-term deposits, which have provided much lower yields. Management is working diligently to effectively manage excess liquidity and to build back the Company’s loan balances, which will replace lower-yielding assets with higher-yielding loans. The decrease in interest expense was due primarily to a decrease of 17 basis points on the average rate paid on funding sources, which totaled 0.67% for the nine months ended March 31, 2022. Interest expense on deposits decreased $272,000 or 20.5% to $1.1 million for the nine months ended March 31, 2022, while interest expense on borrowings decreased $48,000 or 14.4% to $285,000 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 21 basis points to 0.64% for the recently ended period, while the average balance of interest-bearing deposits increased $9.9 million or 4.7% to $218.7 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 $5.2 million or 9.5% to $49.9 million for the recently ended nine-month period, while the average rate paid on borrowings decreased 5 basis points to 0.76% for the most recent period. Net interest spread decreased from 2.93% for the prior year nine month period to 2.71% for the nine-month period ended March 31, 2022. Provision for Losses on Loans The Company recorded a negative provision for loan losses of $106,000 for the nine-month period ended March 31, 2022, compared to a provision of $192,000 recorded for the prior year period. Management’s determination of the appropriate level of allowance for loan losses was impacted by an overall lower level of loans in the loan portfolio, as well as changes within the portfolio, and strong real estate values existing in the Banks’ lending areas. 33 Kentucky First Federal Bancorp MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Comparison of Operating Results for the Nine-month Periods Ended March 31, 2022 and 2021 (continued) Non-interest Income Non-interest income decreased $11,000 or 2.5% to $422,000 for the nine months ended March 31, 2022 compared to the prior year period, primarily because of a decrease in net gains on sales of loans. Net gain on sales of loans decreased $49,000 to $231,000 for the recently-ended nine-month period. Non-interest Expense Non-interest expense decreased $385,000 or 6.3% and totaled $5.7 million for the nine months ended March 31, 2022. Employee compensation and benefits decreased $289,000 or 7.3% to $3.7 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 $80,000 or 62.0% to $49,000 for the nine months just ended. 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. Occupancy and equipment expense decreased $28,000 or 5.7% to $460,000 for the nine months ended March 31, 2022, primarily due to lower general computer and software expenses, depreciation expenses and utilities. Franchise and other taxes decreased $16,000 or 12.3% period to period as the Banks became subject to Kentucky income taxes rather than the Kentucky Savings & Loan Deposits tax effective January 1, 2021. Income Tax Expense Income tax expense increased $81,000 or 27.6% to $374,000 for the nine months ended March 31, 2022, compared to the prior year period. The effective tax rates for the nine-month periods ended March 31, 2022 and 2021, were 21.3% and 20.6%, respectively. 34 Kentucky 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 March 31, 2022 and 2021 (continued) General Net income totaled $334,000 or $0.04 diluted earnings per share for the three months ended March 31, 2022, a decrease of $139,000 or 29.4% from net income of $473,000 or $0.06 diluted earnings per share for the same period in 2021. The decrease in net earnings for the quarter ended March 31, 2022 was primarily attributable to lower net interest income and lower non-interest income, which were partially offset by decreased non-interest expense and negative provision for losses on loans. Net Interest Income Net interest income before provision for loan losses decreased $310,000 or 12.7% to $2.1 million for the three-month period just ended, primarily because interest income decreased more than interest expense decreased. Interest income decreased $379,000 or 12.9% and totaled $2.6 million for the recently-ended quarterly period due primarily to decreased average balance of interest-earning assets period to period as well as a lower average interest rate earned on those assets. Interest expense decreased $69,000 or 14.0% and totaled $423,000 for the three months just ended primarily due to lower average interest rates paid on funding sources. Interest income on loans decreased $386,000 or 13.3% to $2.5 million, due to both decreases in the average balance of the loan portfolio as well as the average rate earned on the loan portfolio. The average balance of the loan portfolio decreased $24.6 million or 8.2% to $274.2 million for the three-month period ended March 31, 2022, while the average rate earned on the loan portfolio decreased 21 basis points to 3.67%. Interest income from interest-bearing deposits and other increased $8,000 or 21.17% to $46,000 for the three months just ended due to an increase in the average balance, which increased $29.3 million or 131.5% to $51.5 million for the recently-ended period compared to the period a year ago. Interest expense on deposits decreased $51,000 or 13.2% to $336,000 for the three months ended March 31, 2022, while interest expense on borrowings decreased $18,000 or 17.1% to $87,000 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 13 basis points to 0.61% for the recently ended period, while the average balance of interest-bearing deposits increased $11.3 million or 5.4% to $221.4 million for the most recent period. The decrease in interest expense on borrowings was attributed primarily to a lower average balance of borrowings period to period. The average balance of borrowings outstanding decreased $11.7 million or 20.5% to $45.3 million for the recently ended three-month period. The average rate paid on borrowings increased three basis points to 0.77% for the most recent period. Net interest spread decreased 41 basis points from 2.92% for the prior year quarterly period to 2.51% for the three-month period ended March 31, 2022. Provision for Losses on Loans The Company recorded a negative provision for loan losses of $106,000 for the three-month period ended March 31, 2022, compared to no provision for the prior year period. The negative provision was due in part to continued strong repayment performance of the Company’s loan portfolio. In calculating the allowance for loan and lease losses, management considers historical losses which have been reduced considerably due to a strong real estate market. Further, the volume in the overall portfolio has declined over the most recent three quarters, particularly in certain areas for which management weight heavier in its loss analysis, such as multi-family loans. 35 Kentucky 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 March 31, 2022 and 2021 (continued) Non-interest Income Non-interest income decreased $88,000 or 48.4% to $94,000 for the three months ended March 31, 2022, compared to the prior year period, primarily because of a decrease in net gains on sales of loans. Net gain on sales of loans decreased $102,000 to $23,000 for the recently-ended three-month period over the prior year amount. Non-interest Expense Non-interest expense decreased $148,000 or 7.3% and totaled $1.9 million for the three months ended March 31, 2022, due primarily to a decrease in employee compensation and benefits. Employee compensation and benefits decreased $125,000 or 9.2% to $1.2 million primarily due to a decrease in the required contribution to its DB pension plan referenced above. Data processing expenses decreased $29,000 or 21.0% and totaled $109,000 for the period just ended primarily due to upgraded data processing operations conducted by the Company. FDIC insurance decreased $18,000 or 43.9% to $23,000 for the three months just ended, while advertising expense decreased $18,000 or 47.4% period to period. Franchise and other taxes increased $23,000 or 100.0% for the three months ended March 31, 2022, as the Banks became subject to local deposits tax rather than being subject to the Kentucky Savings and Loan tax effective January 1, 2021. Income Tax Expense Income tax expense decreased $5,000 or 3.6% to $133,000 for the three months ended March 31, 2022, compared to the prior year period. The effective tax rates for the three-month periods ended March 31, 2022 and 2021, were 28.5% and 22.6%, respectively. 36 Kentucky First Federal Bancorp ITEM 3: Quantitative and Qualitative Disclosures About Market Risk This item is not applicable as the Company is a smaller reporting company. ITEM 4: Controls and Procedures The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, and have concluded that the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based upon their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have also concluded that there were no significant changes during the quarter ended March 31, 2022, in the Company’s internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 37 Kentucky First Federal Bancorp PART II-OTHER INFORMATION ITEM 1. Legal Proceedings None. ITEM 1A. Risk Factors There have been no material changes in the risk factors disclosed in Part I, “Item 1A- Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, as updated by the disclosure in Part II, Item 1A-Risk Factors of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, which risk factors could materially affect our business, financial condition or future results. The risks described therein are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds (c) The following table sets forth information regarding Company’s repurchases of its common stock during the quarter ended March 31, 2022. Period Total # of shares purchased Average price paid per share (including commissions) Total # of shares purchased as part of publicly announced plans or programs Maximum # of shares that may yet be purchased under the plans or programs January 1-31, 2022 – $ – – 131,500 February 1-28, 2022 – $ – – 131,500 March 1-31, 2022 – $ – – 131,500 (1) On February 3, 2021, the Company announced that it had substantially completed its program initiated on December 19, 2018 to repurchase of up to 150,000 shares of its common stock and that it was initiating a new stock repurchase plan in which the Board of Directors authorized the purchase of up to 150,000 shares of its common stock. ITEM 3. Defaults Upon Senior Securities Not applicable. ITEM 4. Mine Safety Disclosures. Not applicable. ITEM 5. Other Information None. 38 ITEM 6. Exhibits 3.1 1 Charter of Kentucky First Federal Bancorp 3.2 2 Bylaws of Kentucky First Federal Bancorp, as amended and restated 3.3 3 Amendment No. 1 to the Bylaws of Kentucky First Federal Bancorp 3.4 4 Amendment No. 2 to the Bylaws of Kentucky First Federal Bancorp 3.4 5 Amendment No. 3 to the Bylaws of Kentucky First Federal Bancorp 4.1 1 Specimen Stock Certificate of Kentucky First Federal Bancorp 31.1 CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.0 The following materials from Kentucky First Federal Bancorp’s Quarterly Report On Form 10-Q for the quarter ended March 31, 2022 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Changes in Shareholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows: and (vi) the related Notes. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). (1) Incorporated herein by reference to the Company’s Registration Statement on Form S-1 (File No. 333-119041). (2) Incorporated herein by reference to the Company’s Annual Report on Form 10-K for the Year Ended June 30, 2012 (File No. 0-51176). (3) Incorporated herein by reference to the Company’s Current Report on Form 8-K filed August 25, 2017 (File No. 0-51176). (4) Incorporated herein by reference to the Company’s Current Report on Form 8-K filed September 28, 2020 (File No. 0-51176). (5) Incorporated herein by reference to the Company’s Current Report on Form 8-K filed February 2, 2022 (File No. 51176). 39 Kentucky First Federal Bancorp SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KENTUCKY FIRST FEDERAL BANCORP Date: May 16, 2022 By: /s/ Don D. Jennings Don D. Jennings Chief Executive Officer Date: May 16, 2022 By: /s/ R. Clay Hulette R. Clay Hulette Vice President and Chief Financial Officer 40