What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-15 compared with 2023-02-14 · 274 added, 229 removed, 61 unchanged (89% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements contained in this report that

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

When used herein, the terms

“anticipates,” “plans,” “expects,” “believes,” and similar expressions as they relate

to Kentucky First Federal Bancorp or its management are intended to identify such forward-looking statements.

Kentucky First Federal Bancorp’s

actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements.

and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions,

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

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

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

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

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

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

Forward-Looking

Certain statements contained in this report, as

well as other periodic reports filed with the Securities and Exchange Commission, that are not historical facts are considered “forward-looking

statements” under the Private Securities Litigation Reform Act of 1995, that are subject to certain risks and uncertainties.

forward-looking statements may be identified by the use of words such as “believe,” “expect,” “anticipate,”

“plan,” “estimate,” “intend” and “potential,” or words of similar meaning, or future or

conditional verbs such as “should,” “could,” or “may.” Forward-looking statements include statements

of our goals, intentions and expectations;

statements regarding our business plans, prospects, growth and operating strategies;

regarding the quality of our loan and investment portfolios;

and estimates of our risks and future costs and benefits.

Kentucky First

Federal Bancorp’s actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking

Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general

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

the financial services industry;

changes in the level of inflation;

changes in the demand for loans, deposits and other financial services

that we provide;

the possibility that future credit losses may be higher than currently expected;

the impact of the interest rate environment

on our business, financial condition and results of operations;

competitive pressures among financial services companies;

to attract, develop and retain qualified employees;

the ability to pay future dividends at currently expected rates;

our ability to maintain

the security of our data processing and information technology systems;

the outcome of pending or threatened litigation, or of matters

before regulatory agencies;

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.

Asset/Liability

and the boards of the subsidiary Banks are responsible for the asset/liability management issues that affect the individual Banks.

Bank may work with its sister Bank to mitigate potential asset/liability risks to the Banks and to the Company as a whole.

utilizes a third-party to perform interest rate risk (“IRR”) calculations for each of the Banks.

Management monitors and

considers methods of managing the rate sensitivity and repricing characteristics of each of the Bank’s balance sheet components

to maintain acceptable levels of change in the economic value of equity (“EVE”) as well as evaluating the impact on earnings

in the event of changes in prevailing market interest rates.

Interest rate sensitivity analysis is used to measure our interest rate

risk by computing estimated changes in EVE that are a result of changes in the net present value of its cash flows from assets, liabilities,

and off-balance sheet items.

These changes in cash flow are estimated based on hypothetical instantaneous and permanent increases and

decreases in market interest rates.

In March 2022 the Federal Open Market Committee

(“FOMC”) of the Federal Reserve Bank began raising the target range for the fed funds rate of interest and since that time

has raised the short-term interest rate by 500 basis points.

At March 31, 2023, we believe our risk associated with rising interest rates

was moderate.

Our IRR model indicated that at March 31, 2023, our EVE was approximately 16.5%, despite the historic interest rate increases

during the previous twelve months.

Although general market participants believe that the FOMC will now pause interest rate increases for

a period of time, our March 31, 2023 EVE is anticipated to be approximately 14.7% and 11.7% under sudden and sustained increase in prevailing

market interest rates of 100 basis points and 200 basis points, respectively.

Computations or prospective effects of hypothetical interest

rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments, and deposit run-offs.

These computations should not be relied upon as indicative of actual results.

Further, the computations do not contemplate any actions

the Banks may undertake in response to changes in interest rates.

Certain shortcomings are inherent in this method of computing EVE.

example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in differing degrees

to changes in market interest rates.

The interest rates on certain types of assets and liabilities may fluctuate in advance of changes

in market interest rates, while interest rates on other types may lag behind changes in market rates.

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 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.

Six Months Ended December 31,

Balance Sheets

following table represents the average balance sheets for the nine-month periods ended March 31, 2023 and 2022, 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)

8 unchanged sentences

Certificates of deposit

Total deposits

Total interest-bearing deposits

Total interest-bearing liabilities

7 unchanged sentences

Average interest-earning assets to average interest-bearing liabilities

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

Includes loan fees, immaterial

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

Also includes loans on nonaccrual status.

Kentucky First Federal Bancorp

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

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,

Balance Sheets

following table represents the average balance sheets for the three-month periods ended March 31, 2023 and 2022, 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,

(Dollars in thousands)

1 unchanged sentence

Mortgage-backed securities

Other securities

Other interest-earning assets

5 unchanged sentences

Certificates of deposit

Total deposits

Total interest-bearing deposits

Total interest-bearing liabilities

7 unchanged sentences

Average interest-earning assets to average interest-bearing liabilities

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

Includes loan fees, immaterial

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

Also includes loans on nonaccrual status.

Kentucky First Federal Bancorp

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Discussion of Financial Condition Changes from

June 30, 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 increases in loans, net, and investment securities.

Cash and cash equivalents:

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

equivalents are held in interest-bearing demand deposits.

Investment securities:

31, 2022, our securities portfolio, which consisted of mortgage-backed securities, increased $3.0 million or 28.0% and totaled $13.8 million,

compared to June 30, 2022.

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

of Financial Condition Changes from June 30, 2022 to March 31, 2023

Position and Results of Operations

March 31, 2023 the Company and the Banks were considered well-capitalized with capital ratios in excess of regulatory requirements.

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 March 31, 2023, the Company’s assets totaled $342.9 million, an increase of $14.8 million, or 4.5%, from total assets

at June 30, 2022.

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

and cash equivalents:

Cash and cash equivalents decreased $17.7 million or 68.7% to $8.1 million at March 31, 2023.

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

At March 31, 2023, our securities portfolio, which consisted of mortgage-backed securities, increased $2.3 million

or 21.6% and totaled $13.2 million, compared to June 30, 2022.

Loans, net increased $32.4 million or 11.8% and totaled $307.0 million at March 31, 2023.

Residential real estate loans comprise

86.2% of our loan portfolio at March 31, 2023, and approximately 86.6% of those loans have adjustable rates, although newly-originated

loans have a period of time during which no rate adjustments can occur.

After the initial period the applicable interest rates can change

annually within limits and all such loans have ceiling rates.

One- to four-family, multi-family and construction loans increased $20.4

million, $5.6 million and $7.9 million from June 30, 2022, respectively.

Equity lines of credit, which have interest rates that can change

monthly with the prime rate of interest, totaled $8.7 million at March 31, 2023.

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:

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 $1.7 million and $1.5 million at December 31, 2022 and June 30, 2022, respectively.

The allowance for

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 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

our assets classified for regulatory purposes at the dates indicated:

Non-Performing

and Classified Loans:

At March 31, 2023, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual

status) of approximately $5.9 million, or 1.9% 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 March 31, 2023 and June

30, 2022, respectively.

The allowance for loan losses at March 31, 2023, represented 27.8% of nonperforming loans and 0.5% 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.

Company had $7.6 million in assets classified as substandard for regulatory purposes at March 31, 2023, and real estate owned (“REO”)

Classified loans as a percentage of total loans (including loans acquired) was 2.5% and 2.7% at March 31, 2023 and June 30,

2022, respectively.

Of substandard loans, 99.0% were secured by real estate on which the Banks have priority lien position.

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

(dollars in thousands)

2 unchanged sentences

Total classified assets

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.

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 December 31, 2022 and June 30, 2022, respectively.

Kentucky First Federal Bancorp

March 31, 2023, the Company’s real estate acquired through foreclosure represented 0.9% 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 March 31, 2023 and June 30, 2022, respectively.

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

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

of Operating Results for the Nine-month Periods Ended March 31, 2023 and 2022

income totaled $891,000 or $0.11 diluted earnings per share for the nine months ended March 31, 2023, a decrease of $493,000 or 35.6%

from net income of $1.4 million or $0.17 diluted earnings per share for the same period in 2022.

The decrease in net income on a nine-month

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

decreased net interest income.

Interest Income

interest income before provision for loan losses decreased $51,000 or 0.7% to $6.9 million for the nine-month period just ended, as interest

expense increased by $961,000, or 71.7%, to $2.3 million, while interest income increased $910,000 or 10.9% to $9.2 million for the nine

months ended March 31, 2023.

increase in interest expense period-to-period was due primarily to a 49 basis points increase in the average rate paid on interest-bearing

liabilities, which increased to 1.16% for the recently-ended nine-month period compared to the prior year period despite a decrease in

the average balance of interest-bearing liabilities by $3.2 million or 1.2% to $265.4 million for the nine months ended March 31, 2023.

Deposits and FHLB advances are the primary funding sources utilized by the Company and interest expense on those funds increased in response

to the 500 basis point increase in the discount rate implemented by the Federal Open Market Committee of the Federal Reserve Bank (“FOMC”)

beginning March 2022.

Although the yield on the Company’s assets generally changes in response to interest rate changes, those

assets do not reprice as quickly as funding sources reprice.

As such, interest expense on borrowings increased $908,000 or 318.6% to

$1.2 million for the nine months just ended, while interest expense on deposits increased $53,000 or 5.0% to $1.1 million.

Deposit balances

decreased in the first two quarters of the fiscal year as general interest rates in the market rose and customers sought higher yields

on their interest-bearing funds.

Many financial institutions experienced an outflow of deposit balances in 2022 after balance sheets

swelled during the COVID-19 pandemic due to government stimulus funding and limited spending opportunities for customers.

balances decreased approximately $13.6 million and $17.0 million for the quarterly periods ended September 30, and December 31, 2022,

respectively, but increased approximately $8,000 for the recently-ended quarter.

Unlike some financial institutions which have struggled

with high levels of uninsured bank deposits on their books, our Banks maintain a relatively low 13% of deposits which are not insured

by the Federal Deposit Insurance Corporation (“FDIC”).

If the FOMC continues to increase, management expects net earnings

to be negatively impacted as the cost of funding is expected to increase faster than the yield on assets increases.

The extent of any

such negative impact will be largely dependent on whether and how much the FOMC continues to escalate interest rates.

The fed funds futures

market at this time indicates a general belief that the FOMC is finished increasing rates for the time being, which is anticipated to

benefit our Company by allowing assets to continue repricing while the repricing of deposits slows.

Interest income increased year over year for all

components of interest-earning assets due primarily to reallocation of the assets and an increase in the average rate earned on those

assets, which increased 44 basis points to 3.82%.

Although the average balance decreased $6.2 million or 1.9% to $321.7 million for the

nine-month period ended March 31, 2023, we were able to redirect $26.8 million or 67.0% of our other interest-earning assets into loans

and investments, which were able to earn higher yields.

Interest income from loans increased $332,000 or 4.1% to $8.5 million, due chiefly

to a $7.3 million or 2.5% increase in average balances, which totaled $294.7 million for the recently-ended period, while the average

yield earned increased six basis points to 3.86%.

Interest income from mortgage-backed securities increased $337,000 to $345,000 primarily

due to an increase in average balance maintained during the period, which totaled $13.8 million for the current year period compared to

$445,000 in the prior year and a 94 basis points increase in the average rate earned, which totaled 3.34% for the nine months just ended.

Interest income on interest-bearing deposits and other increased $241,000 and totaled $359,000 for the nine months just ended due to an

increase in the average rate earned on those assets, which totaled 3.61% for the nine months ended March 31, 2023, compared to 39 basis

points for the prior year period.

interest spread decreased from 2.71% for the prior year period to 2.66% for the nine-month period ended March 31, 2023.

for Losses on Loans

determined that a $113,000 provision for loan loss was appropriate in light of the relatively large increase in the loan portfolio during

Loans, net, increased $32.4 million or 11.8% and totaled $307.0 million at March 31, 2023, 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 $5.6 million or 39.3% and totaled $19.9 million at March 31, 2023.

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

First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

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

of Operating Results for the Nine-month Periods Ended March 31, 2023 and 2022 (continued)

income decreased $186,000 or 44.1% to $236,000 for the nine months ended March 31, 2023, compared to the prior year period, primarily

due to decreased net gains on sales of loans.

Net gain on sales of loans decreased $225,000 to $6,000 for the recently-ended nine-month

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.

expense increased $128,000 or 2.2% to $5.9 million for the nine months ended March 31, 2023, primarily due to higher auditing and accounting

costs and outside service fees.

Auditing and accounting costs increased $84,000 or 65.6% to $212,000

for the recently-ended period due to increased internal and external audit expenses.

Outside service fees increased $48,000 or 36.1% to

$181,000 for the nine months just ended as we incurred additional costs across our banking business including loan review, computer technology

services, and interest rate monitoring, as well as general business expenses associated with public company operation and operation of

employee benefits.

non-interest expense increased $40,000 or 9.3% to $468,000 for the nine months ended March 31, 2023 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 area.

tax expense decreased $91,000 or 24.3% to $283,000 for the nine months ended March 31, 2023, compared to the prior year period.

The effective

tax rates for the nine-month periods ended March 31, 2023 and 2022, were 24.1% and 21.3%, respectively.

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 December 31, 2022 and 2021

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

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 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.

of Operating Results for the Three-month Periods Ended March 31, 2023 and 2022

income totaled $144,000 or $0.02 diluted earnings per share for the three months ended March 31, 2023, a decrease of $190,000 or 56.9%

from net income of $334,000 or $0.04 diluted earnings per share for the same period in 2022.

The decrease in net earnings for the quarter

ended was primarily attributable to provision for losses on loans and lower net interest income.

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

The Company recorded no provision for loan losses

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

Kentucky First Federal Bancorp

interest income before provision for losses on loans decreased $93,000 or 4.4% to $2.0 million for the three-month period just ended,

as interest expense increased at a faster pace than interest income.

Interest expense increased by $742,000, or 175.4%, to $1.2 million,

while interest income increased $649,000 or 25.3% to $3.2 million for the three months ended March 31, 2023.

increase in interest income period-to-period was led by an increase in interest income on loans and was strongly supported by increases

in interest income on mortgage-backed securities.

Interest income on loans increased $470,000 or 18.7% to $3.0 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 $29.8 million or 10.9% to $304.0 million for the period, while the average balance earned on those assets increased

26 basis points to 3.93%.

Interest income on mortgage-backed securities increased $114,000 to $116,000 for the three months ended March

31, 2023, and was due primarily to an increase in the average balance, which increased $13.1 million to $13.5 million for the quarter

just ended, while the average rate increased 48 basis points to 3.44% for the period.

Interest income on interest-bearing deposits and

other increased $65,000 and totaled $111,000 for the quarter just ended due to a 4.29% increase in the average rate earned on those assets,

which totaled 4.64% for the period.

The average balance of other interest-earning assets decreased $42.0 million or 81.4% to $9.6 million

for the recently-ended quarter, as we redeployed assets primarily into loans.

increase in interest expense was attributed primarily to an increase in interest expense on borrowings, which increased $624,000 to $711,000

for the recently-ended quarterly period, while interest expense on deposits increased $118,000 or 35.1% to $454,000.

Interest expense

on borrowings increased chiefly due to an increase in the average rate paid on those funds, which increased 293 basis points to 3.70%

for the three months just ended, while the average balance increased $31.6 million or 67.7% to $76.9 million.

Advances were used to replace

deposits, whose average balance decreased $25.5 million or 11.5% to $195.9 million for the three months just ended due to deposit decreases

occurring in the first two quarters of this fiscal year, as described above.

The average rate paid on interest-bearing deposits increased

32 basis points to 0.93% for the recently ended period.

interest spread decreased 29 basis points from 2.51% for the prior year quarterly period to 2.22% for the three-month period ended March

for Losses on Loans

Company recorded no provision for loan losses for the three-month period ended March 31, 2023, while a negative provision of $106,000

was made for the three-month period ended March 31, 2022.

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 December 31, 2022 and 2021 (continued)

Non-interest Income

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

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

of Operating Results for the Three-month Periods Ended March 31, 2023 and 2022 (continued)

income decreased $25,000 or 26.6% to $69,000 for the recently ended quarter due primarily to decreased net gains on sales of loans.

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 increased $45,000 or 2.4%

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 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

Quantitative and Qualitative Disclosures

About Market Risk

This item is not applicable as the Company is

a smaller reporting company.

to $1.9 million for the quarter ended March 31, 2023, due primarily to higher outside service fees.

Outside service fees increased $46,000

or 148.4% to $77,000 for the three months just ended as we incurred additional costs across our banking business including loan review,

computer technology services, and interest rate monitoring, as well as general business expenses associated with public company operation

and operation of employee benefits.

Management expects these higher costs to continue at the higher levels and, although in some cases

these costs are related to expanded services, the primary cause of the higher costs was general inflation.

tax expense decreased $79,000 or 59.4% to $54,000 for the three months ended March 31, 2023, compared to the prior year period.

The effective

tax rates for the three-month periods ended March 31, 2023 and 2022 were 27.3% and 28.5%, respectively.

First Federal Bancorp

Quantitative and Qualitative Disclosures About Market Risk

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis