What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-05-16 · 214 added, 290 removed, 142 unchanged (78% of the section changed)

8 unchanged sentences

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 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.

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,

(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.

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, 2022.

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

3 unchanged sentences

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,

sheets for the three-month periods ended September 30, 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 September 30,

(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.

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

Also includes loans on nonaccrual status.

3 unchanged sentences

Discussion of Financial Condition Changes from

June 30, 2021 to March 31, 2022

June 30, 2022 to September 30, 2022

Risks and Uncertainties Related to COVID-19 -

19 unchanged sentences

actual asset quality has improved.

Classified assets at March 31, 2022, totaled $7.5 million compared to $8.5 million at March 31, 2021.

Classified assets at September 30, 2021, totaled $8.5 million compared to $10.5 million at March 31,

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.

Approximately

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

Business Continuity, Processes and Controls

1 unchanged sentence

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

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.

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)

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

9 unchanged sentences

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.

At September 30, 2022 the Company and the Banks

were considered well-capitalized with capital ratios in excess of regulatory requirements.

However, an extended economic recession resulting

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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.

with outstanding principal of $859,000 had been granted an additional extension and returned to regular paying status in April 2021.

other borrowers granted a deferral, composed of 100 loans totaling $17.5 million in principal had resumed regular payments.

As noted herein the Company continues working

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

As of September 30, 2022, we had borrowers

with 101 loans avail themselves of our payment deferral program with a total principal of $18.4 million in loans modified.

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

At June 30, 2022 all of those loans had reached the

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

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, 2022 to September 30, 2022 (continued)

The CARES Act and subsequent Consolidated Appropriations

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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.

As of September 30, 2021, 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 48 loans aggregating $2.0 million had been repaid at the end of the period.

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.

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

9 unchanged sentences

of COVID-19 are prolonged.

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)

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.

At September 30, 2022, the

Company’s assets totaled $330.9 million, an increase of $2.8 million, or 0.9%, from total assets at June 30, 2022.

This increase

was attributed primarily to an increase in loans, net, and investment securities, which were somewhat offset by a decrease in cash and

cash equivalents.

Cash and cash equivalents:

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.

and cash equivalents decreased $17.2 million or 66.6% to $8.6 million at September 30, 2022.

Most of the Company’s cash and cash

equivalents are held in interest-bearing demand deposits.

Investment securities:

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 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.

30, 2022, our securities portfolio, which consisted of mortgage-backed securities, increased $3.7 million or 33.8% and totaled $14.5 million,

compared to June 30, 2022.

Loans, net and loans

available-for sale in the aggregate increased $18.1 million or 6.6% and totaled $292.7 million and $0, respectively at September 30, 2022.

Loans receivable, net, increased by $18.1 million or 6.6% to $292.7 million at September 30, 2022.

Loans available-for-sale decreased

$152,000 to $0 at September 30, 2022, as higher general interest rates have reduced demand for long-term, fixed rate loans in our market.

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:

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.

September 30, 2022, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of approximately $5.3

million, or 1.8% of total loans (including acquired loans), compared to $5.8 million or 2.1%, of total loans at June 30, 2022.

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.

allowance for loan losses totaled $1.6 million and $1.5 million at September 30, 2022 and June 30, 2022, respectively.

The allowance for

loan losses at September 30, 2022, represented 31.1% of nonperforming loans and 0.6% of total loans (including acquired loans), while

at June 30, 2022, the allowance represented 26.3% of nonperforming loans and 0.6% 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.

as substandard for regulatory purposes at September 30, 2022, including $7.5 million of loans acquired in the CKF Bancorp transaction,

and real estate owned (“REO”) of $10,000.

Classified loans as a percentage of total loans (including loans acquired) was 2.5%

and 2.7% at September 30, 2022 and June 30, 2022, 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

1 unchanged sentence

(dollars in thousands)

September 30,

Substandard assets

1 unchanged sentence

Total classified assets

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.

At September 30, 2022, the Company’s real

estate acquired through foreclosure represented 0.1% of substandard assets compared to 0.1% at June 30, 2022.

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 $0 and $0 at September 30, 2022 and June 30, 2022, respectively.

Kentucky First Federal Bancorp

2 unchanged sentences

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, 2022 to September 30, 2022 (continued)

The following table presents the aggregate

carrying value of REO at the dates indicated:

September 30, 2022

June 30, 2022

One- to four-family

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

At September 30, 2022 and June 30, 2022, the Company

had $887,000 and $896,000 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

$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.

but does possess credit deficiencies or potential weaknesses deserving our close attention.

Total liabilities increased

$3.2 million, or 1.2% to $279.3 million at September 30, 2022, primarily as a result of increases in advances and was somewhat offset

by a decrease in deposits.

Advances increased $16.7 million or 50.0% to $50.8 million at September 30, 2022, while deposits decreased

$13.6 million or 5.7% to $226.3 million at September 30, 2022.

Of the deposit decrease certificates of deposit decreased $7.6 million

or 6.1% and totaled $117.1 million at September 30, 2022, while demand deposit accounts decreased $5.1 million or 12.8% and totaled $34.6

million at quarter end.

Savings accounts decreased $931,000 or 1.2% and totaled $74.6 million at the end of the current period.

the decrease in overall deposits to customers seeking to earn additional yield on their funds and plan to respond with deposit pricing

intended to retain the Banks’ overall core funding.

Shareholders’ Equity:

31, 2022, the Company’s shareholders’ equity totaled $52.6 million, an increase of $350,000 or 0.7% 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 $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

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.

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

“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.

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

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.

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,

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

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

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

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.

30, 2022, the Company’s shareholders’ equity totaled $51.6 million, a decrease of $396,000 or 0.8% from the June 30, 2022

The decrease in shareholders’ equity was primarily associated with unrealized losses on available-for-sale securities, which

totaled $430,000 at September 30, 2022.

Other changes in shareholders’ equity included net profits for the period less dividends

paid on common stock.

The Company paid dividends of $342,000 or 91.7%

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

On July 7, 2022, 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 2023.

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, 2022 for additional

discussion regarding dividends.

Kentucky First Federal Bancorp

2 unchanged sentences

Comparison of Operating Results for the Three-month

Periods Ended March 31, 2022 and 2021 (continued)

Periods Ended September 30, 2022 and 2021

Net income totaled $373,000 or $0.05 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.

per share for the three months ended September 30, 2022, a decrease of $195,000 or 34.3% from net income of $568,000 or $0.07 diluted

earnings per share for the same period in 2021.

The decrease in net income was primarily attributable to lower non-interest income, higher

provision for loan loss, and lower net interest income, which were partially offset by lower non-interest expense, and lower income tax.

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

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.

Net interest income decreased $73,000 or 2.9%

to $2.4 million for the recently-ended quarter primarily due to decreased interest income, which decreased $89,000 or 3.0% to $2.9 million

for the three months ended September 30, 2022 compared to the 2021 quarterly period, while interest expense decreased by $16,000, or 3.4%,

to $453,000 for the current period.

The decrease in interest income was due primarily

to a decrease in interest income from loans, which decreased $290,000 or 9.9% to $2.6 million compared to the prior year period.

income from mortgage-backed securities and interest-bearing deposits and other increased $111,000 and $90,000, respectively from the 2021

quarterly period to the one just ended.

Interest income from mortgage-backed securities totaled $114,000 for the quarter ended September

30, 2022, due to an increase in investments made recently in that asset class, while interest income from interest-bearing deposits and

other totaled $127,000 for the period and is due primarily to higher interest rates earned on those assets.

The decrease in interest income from loans period-to-period

was due to decreases in both the average balance of loans and the average rate earned on those loans.

The average balance of loans decreased

$14.6 million or 4.9% to $283.6 million for the three months ended September 30, 2022, while the average rate decreased 21 basis points

to 3.73% for the recently-ended three-month period compared to the prior year period.

The decrease in the average balance of loans in

the portfolio was due to several reasons.

Prior to the interest rate tightening which began in March 2022 interest rates in general remained

The low interest rate environment, along with strong consumer demand that occurred after COVID-19 pandemic restrictions eased,

fueled strong demand in the real estate market.

Some of the Banks’ borrowers decided to take advantage of high property prices and

sold all or part of their real estate holdings, while other borrowers sold their properties due to advanced age or death.

were lost to competing financial institutions who offered terms that we did not believe were prudent to match.

However, in the past six

months the Banks have been able to partially build back the loan portfolio.

The average return on loans indicates a downward trend reflective

of overall lower loan balances and stagnant rates in the recent past.

Prior to June 30, 2022, most loans that were paid off were

either replaced with loans with lower rates or were refinances to lower rates.

Loans with adjustable rate features were either adjusting

downward or not adjusting at all.

In the quarter ended September 30, 2022, loan originations increased significantly, newer loans

had higher rates, and some loans with adjustable rate features had increases in rates.

The effect of this was not clearly shown

in the interest earned during the quarter and may be better reflected by stating that the weighted-average coupon rate on loans at September

30, 2022 had increased 27 bps to 3.74% from 3.47% at September 30, 2021.

The decrease in interest expense was due primarily

to a decrease in interest expense on deposits, which decreased $18,000 or 4.9% and totaled $350,000 for the quarter ended September 30,

The composition of interest expense on deposits changed period to period as interest expense on savings accounts increased $34,000

or 50.0% and totaled $102,000, while interest expense on certificates of deposit decreased $54,000 or 18.6% and totaled $237,000 for the

three months ended September 30, 2022.

We believe that the change was related to the interest rate increases that began in March 2022

and consumers’ response to higher interest rates compared to a relatively long period of low interest rates.

The average rate paid

on savings accounts increased 15 basis points to 0.54%, while the average rate paid on certificates of deposit decreased 14 basis points

to 0.78% for the three months ended September 30, 2022.

The average balance of borrowings decreased $15.6 million from period to period,

while the average rate paid on borrowings increased 33 basis points to 1.08% for the recently-ended quarter.

We expect interest expense

to increase in the future as we use FHLB advances to replace deposits that are leaving the Banks in search of higher yield.

rates have increased along with the rise in general interest rates.

In addition, the Banks will be implementing deposit pricing strategies

intended to retain core deposit funding, which is expected to result in higher interest expense.

Net interest spread increased from 2.94% for the

prior year quarterly period to 2.96% for the three-month period ended September 30, 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.

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.

Management determined that a $113,000 provision

for loan loss was prudent in light of the relatively large increase in the loan portfolio during the recently-ended quarter.

increased $18.1 million or 6.6% and totaled $292.7 million at September 30, 2022, compared to $274.6 million at June 30, 2022.

The additional

provision was appropriate not only for the increase in the loan portfolio but also, in part, to reflect an increase in multi-family loans,

which increased $9.0 million or 63.2% and totaled $23.3 million at September 30, 2022.

Multi-family loans carry a slightly higher risk

profile than 1-4 family residential loans, which makes up the greatest portion of the Company’s loan portfolio.

Kentucky First Federal Bancorp

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Comparison of Operating Results for the Three-month

Periods Ended March 31, 2022 and 2021 (continued)

Periods Ended September 30, 2022 and 2021 (continued)

Non-interest Income

Non-interest income decreased $130,000 or 57.0%

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

to $98,000 for the three months ended September 30, 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

Net gain on sales of loans decreased $155,000 or 95.7% to $7,000 for the recently-ended three-month period.

rates have risen significantly since March 2022, which has resulted in a reduced number of customers interested in long-term fixed rate

loans which the Company routinely sells to the FHLB of Cincinnati after they are originated.

Non-interest Expense

Non-interest expense decreased $53,000 or 2.7%

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.

and totaled $1.9 million for the three months ended September 30, 2022, primarily due to decreased employee compensation and benefits

and was somewhat offset by increased outside service fees as well as increased accounting and auditing expense.

Employee compensation and benefits expense decreased

$148,000 or 11.0% and totaled $1.2 million for the quarterly period just ended, as pension-related costs decreased year over year.

contributions to the Company’s defined benefit pension plan (DB plan) decreased by $135,000 due to favorable funding levels, while

ESOP expense decreased by $35,000 as the employee stock ownership plan is scheduled to release fewer shares this calendar year.

Auditing and accounting expense increased $27,000

or 50.0% and totaled $81,000 as the Banks incurred additional outside costs associated with internal controls testing.

Although some of

the work had been performed in-house previously, time constraints made outsourcing necessary at the time.

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.

Income tax expense decreased $68,000 or 37.0%

to $116,000 for the three months ended September 30, 2022, compared to the prior year period.

The effective tax rates for the three-month

periods ended September 30, 2022 and 2021, were 23.7% and 24.5%, respectively.

Kentucky First Federal Bancorp

4 unchanged sentences

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