What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-02-14 compared with 2022-11-14 · 192 added, 258 removed, 98 unchanged (82% of the section changed)

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

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

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The following table represents the average balance

sheets for the three-month periods ended September 30, 2022 and 2021, along with the related calculations of tax-equivalent net interest

sheets for the six-month periods ended December 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 September 30,

Six Months Ended December 31,

(Dollars in thousands)

1 unchanged sentence

Mortgage-backed securities

Other securities

Other interest-earning assets

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Average interest-earning assets to average interest-bearing liabilities

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

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

Also includes loans on nonaccrual status.

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AND RESULTS OF OPERATIONS (continued)

Discussion of Financial Condition Changes from

June 30, 2022 to September 30, 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.

the impact is contingent upon the duration and severity of the economic downturn, management cannot determine or estimate the magnitude

of the impact at this time.

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

with consistent levels of consumer transactions and loan originations.

The potential for a deterioration in asset quality remains, but

actual asset quality has improved.

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

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

Approximately

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

Business Continuity, Processes and Controls

In response to the COVID-19 pandemic the Banks

are considered essential businesses and have remained open for business.

We implemented our pandemic preparedness plan and generally

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

banking applications.

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

mandates and surface cleaning protocols.

Our staff is practicing recommended personal hygiene protocols and social distancing while

working on premises.

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

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

We have not identified any material operational or internal

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

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

Financial Position and Results of Operations

Bank regulators have issued guidance and are encouraging

banks to work with customers affected by COVID-19.

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

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

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

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

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

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

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

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

At September 30, 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 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.

Average Balance Sheets

The following table represents the average balance

sheets for the three-month periods ended December 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 December 31,

(Dollars in thousands)

Interest-earning assets:

Mortgage-backed securities

Other securities

Other interest-earning assets

Total interest-earning assets

Allowance for loan losses

Non-interest-earning assets

Interest-bearing liabilities:

Demand deposits

Certificates of deposit

Total deposits

Total interest-bearing liabilities

Noninterest-bearing demand deposits

Noninterest-bearing liabilities

Total liabilities

Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest spread

Net interest margin

Average interest-earning assets to average interest-bearing liabilities

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

Also includes loans on nonaccrual status.

Kentucky First Federal Bancorp

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Discussion of Financial Condition Changes from

June 30, 2022 to September 30, 2022 (continued)

The CARES Act and subsequent Consolidated Appropriations

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

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 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.

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.

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

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

of COVID-19 are prolonged.

At September 30, 2022, the

June 30, 2022 to December 31, 2022

Financial Position and Results of Operations

At December 31, 2022 the Company and the Banks

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

However, an extended economic recession could

adversely impact the Company’s and the Banks’ capital position and regulatory capital ratios due to a potential increase in

credit losses.

At December 31, 2022, the

Company’s assets totaled $335.4 million, an increase of $7.3 million, or 2.2%, 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.

was attributed primarily to increases in loans, net, and investment securities.

Cash and cash equivalents:

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

and cash equivalents decreased $18.2 million or 70.4% to $7.7 million at December 31, 2022.

Most of the Company’s cash and cash

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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.

Loans, net increased

$24.4 million or 8.9% and totaled $299.0 million at December 31, 2022, as a significant amount of residential real estate loans, which

represent the core of the Company’s business were added to the portfolio.

One- to four-family, multi-family and construction loans

increased $15.2 million, $5.9 million and $4.3 million from June 30, 2022, respectively.

Management continues to look for high-quality

loans to add to its portfolio and will continue to emphasize loan originations to the extent that it is profitable, prudent and consistent

with our interest rate risk strategies.

Non-Performing and Classified Loans:

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

December 31, 2022, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of approximately $6.1

million, or 2.0% 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 $1.6 million and $1.5 million at September 30, 2022 and June 30, 2022, respectively.

allowance for loan losses totaled $1.7 million and $1.5 million at December 31, 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.

loan losses at December 31, 2022, represented 27.2% 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 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.

as substandard for regulatory purposes at December 31, 2022, 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 December 31, 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

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(dollars in thousands)

September 30,

Substandard assets

1 unchanged sentence

Total classified assets

At September 30, 2022, the Company’s real

At December 31, 2022, the Company’s real

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

2 unchanged sentences

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.

of other real estate owned, which were included in substandard loans, totaled $0 and $0 at December 31, 2022 and June 30, 2022, respectively.

Kentucky First Federal Bancorp

1 unchanged sentence

AND RESULTS OF OPERATIONS (continued)

Discussion of Financial Condition Changes from

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 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 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:

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.

Comparison of Operating Results for the Six-month

Periods Ended December 31, 2022 and 2021

Net income totaled $747,000 or $0.09 diluted earnings

per share for the six months ended December 31, 2022, a decrease of $303,000 or 28.9% from net income of $1.1 million or $0.13 diluted

earnings per share for the same period in 2021.

The decrease in net income on a six-month basis was primarily attributable to lower non-interest

income, increased provision for loan losses, and higher non-interest expense.

Net Interest Income

Net interest income before provision for loan

losses increased $42,000 or 0.9% to $4.9 million for the six-month period just ended.

Interest income increased by $261,000, or 4.5%,

to $6.0 million, while interest expense increased $219,000 or 23.9% to $1.1 million for the six months ended December 31, 2022.

The increase in interest income period-to-period

was due primarily to an increased average rate earned on interest-earning assets, which increased 27 basis points to 3.77% for the recently-ended

six-month period compared to the prior year period.

The average balance of interest-earning assets decreased $9.7 million or 3.0% to $319.3

million for the six months ended December 31, 2022.

Interest income on loans decreased $138,000 or

2.4% to $5.5 million, due primarily to a decrease in the average rate earned on the loan portfolio, which decreased five basis points

to 3.82%, while the average balance decreased $3.5 million or 1.2% to $290.1 million for the six-month period ended December 31, 2022.

Interest income from mortgage-backed securities increased $223,000 $229,000 for the six months just ended due to increases in the average

balance and average rate earned on those assets.

The average balance increased $13.5 million to $14.0 million for the period, while the

average rate earned increased 71 basis points to 3.28% for the recently-ended period.

Interest income from interest-bearing deposits and

other increased $176,000 to $248,000 for the six months just ended due to an increase in the average rate earned, which increased 2.84%

to 3.25% for the recently-ended period.

Interest expense increased $219,000 or 23.9% to

$1.1 million for the six months ended December 31, 2022, primarily due to increased average rate paid on funding sources, which increased

19 basis points to 0.87% for the recently-ended period.

Interest expense on borrowings increased $284,000 or 143.4% to $482,000 for the

six-month period just ended compared to the prior year period due chiefly to higher average rates paid on those funds, which increased

1.17% to 1.93%.

The average balance of borrowings outstanding decreased $2.5 million or 4.9% to $49.9 million for the recently ended six-month

Interest expense on deposits decreased $65,000 or 9.0% to $654,000 for the six months just ended, while the average balance of

deposits decreased $6.6 million or 3.0% to $212.5 million.

Interest expense on certificates of deposit decreased $104,000 or 18.4% to

$461,000, for the six months just ended primarily due to a decrease in the average cost, which decreased by 10 bps to 0.79%.

Net interest spread increased from 2.82% for the

prior year semiannual period to 2.90% for the six-month period ended December 31, 2022.

Provision for Losses on Loans

Management determined that a $113,000 provision

for loan loss was appropriate in light of the relatively large increase in the loan portfolio during the period.

Loans, net, increased

$24.4 million or 8.9% and totaled $299.0 million at December 31, 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 $5.9 million or 41.2% and totaled $20.1 million at December 31, 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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AND RESULTS OF OPERATIONS (continued)

Comparison of Operating Results for the Six-month

Periods Ended December 31, 2022 and 2021 (continued)

Non-interest Income

Non-interest income decreased $161,000 or 49.1%

to $167,000 for the six months ended December 31, 2022, compared to the prior year period, primarily due to decreased net gains on sales

Net gain on sales of loans decreased $202,000 to $6,000 for the recently-ended six-month period.

Interest rates in the general

market have risen significantly since March 2022, which has resulted in a reduced demand for long-term fixed rate loans.

The Company routinely

sells long-term, fixed rate loans to the FHLB of Cincinnati after they are originated.

Non-interest Expense

Non-interest expense increased $83,000 or 2.1%

to $4.0 million for the six months ended December 31, 2022, primarily due to higher auditing and accounting costs, as well as higher other

non-interest expenses.

Auditing and accounting costs increased $96,000

or 120.0% to $176,000 for the recently-ended period due increased internal and external audit expenses.

Other non-interest expense increased $41,000 or

14.3% to $327,000 for the semi-annual period just ended due primarily to costs associated with various administrative expenses including

employee training, bank logistics and contributions to aid those who suffered historic flash flooding in our easternmost bank service

Income Tax Expense

Income tax expense decreased $12,000 or 5.0% to

$229,000 for the six months ended December 31, 2022, compared to the prior year period.

The effective tax rates for the six-month periods

ended December 31, 2022 and 2021, were 23.5% and 18.7%, respectively.

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 September 30, 2022 and 2021

Periods Ended December 31, 2022 and 2021

Net income totaled $374,000 or $0.04 diluted earnings

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.

per share for the three months ended December 31, 2022, a decrease of $108,000 or 22.4% from net income of $482,000 or $0.06 diluted earnings

per share for the same period in 2021.

The decrease in net earnings for the quarter ended December 31, 2022 was primarily attributable

to higher non-interest expense, higher income taxes, and lower non-interest income, which were partially offset by increased net interest

Net Interest Income

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.

Net interest income increased $115,000 or 4.9%

to $2.4 million for the three-month period just ended, as interest income increased at a faster pace than interest expense.

Interest income

increased by $350,000, or 12.6%, to $3.1 million, while interest expense increased $235,000 or 52.5% to $683,000 for the three months

ended December 31, 2022.

The increase in interest income period-to-period

was led by an increase in interest income on loans but was strongly supported by increases in interest income on mortgage-backed securities

and interest-bearing deposits and other.

Interest income on loans increased $152,000 or 5.5% to $2.9 million for the quarterly period

just ended due to both increased average balance of loans in the portfolio and increased average rate earned.

The average balance of loans,

net increased $8.2 million or 2.8% to $297.6 million for the period, while the average balance earned on those assets increased 10 basis

points to 3.89%.

Interest income on mortgage-backed securities increased $112,000 to $115,000 for the three months ended December 31,

2022, and was due primarily to an increase in the average balance, which increased $13.6 million to $14.0 million for the quarter just

ended, while the average rate increased 63 basis points to 3.27% for the period.

Interest income on interest-bearing deposits and other

increased $86,000 and totaled $121,000 for the quarter just ended due to increased average rate earned on those assets.

The average rate

earned increased 3.97% to 4.34%, which was attributed to the rise in short-term interest rates orchestrated by the FOMC during the previous

The average balance of other interest-earning assets decreased $27.2 million or 70.9% to $11.2 million for the recently-ended

The increase in interest expense was attributed

primarily to an increase in interest expense on borrowings, which increased $282,000 to $379,000 for the recently-ended quarterly period.

Interest expense on deposits decreased $47,000 or 13.4% to $304,000 for the period.

Interest expense on borrowings was chiefly attributed

to an increase in the average rate, which increased 1.67% to 2.45% for the three months just ended, while the average balance increased

$12.0 million or 24.0% to $62.0 million.

Advances were used to replace deposits, whose average balance decreased $14.9 million or 6.8%

to $205.7 million for the three months just ended.

The average rate paid on interest-bearing deposits decreased 5 basis points to 0.59%

for the recently ended period.

Net interest spread increased 13 basis points

from 2.84% for the prior year quarterly period to 2.83% for the three-month period ended December 31, 2022.

Provision for Losses on 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.

The Company recorded no provision for loan losses

for the three-month periods ended December 31, 2022, and 2021.

Kentucky First Federal Bancorp

2 unchanged sentences

Comparison of Operating Results for the Three-month

Periods Ended September 30, 2022 and 2021 (continued)

Periods Ended December 31, 2022 and 2021 (continued)

Non-interest Income

Non-interest income decreased $31,000 or 31.0%

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 $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.

to $69,000 for the recently ended quarter due primarily to decreased net gains on sales of loans.

Interest rates have risen significantly

since March 2022, which has resulted in a reduced demand for 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 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.

Non-interest expense increased $136,000 or 7.2%

to $2.0 million for the quarter ended December 31, 2022, due primarily to higher employee compensation and benefits, as well as higher

auditing and accounting costs.

Employee compensation and benefits costs increased quarter to quarter chiefly due to general salary increases

as well as lower expense in the prior year quarter related to the defined benefit pension plan.

Income Tax Expense

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.

Income tax expense increased $56,000 to $113,000

for the three months ended December 31, 2022, compared to the prior year period.

The effective tax rates for the three-month periods ended

December 31, 2022 and 2021 were 23.2% and 10.6%, 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