What changed in this filing

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Item 1. Business

2024-10-03 compared with 2023-09-28 · 559 added, 473 removed, 623 unchanged (62% of the section changed)

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

changes in 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

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 ability to fully and timely address the deficiencies that resulted

in the Agreement that First Federal Savings Bank of Kentucky has entered into with the Office of the Comptroller of the Currency (“OCC”);

First Federal Savings Bank of Kentucky’s ability to satisfy the Individual Minimum Capital Requirements imposed by the OCC;

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

statements regarding the quality of our loan and investment

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 statements.

Risks and uncertainties that

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

prices for real estate

in the Company’s market areas;

the interest rate environment and the impact of the interest rate environment on our business, financial

condition and results of operations;

competitive pressures among financial services companies;

the ability 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), 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 this Annual Report on Form 10-K.

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.

Accordingly, actual results may differ from those expressed in the forward-looking statements, and the making of such statements should

not be regarded as a representation by the Company or any other person that results expressed therein will be achieved.

our ability to successfully execute our strategy to increase earnings, increase core deposits, reduce

reliance on higher cost funding sources and shift more of our loan portfolio towards higher-earning loans;

our ability to pay future dividends

and if so at what level;

our ability to receive any required regulatory approval or non-objection for the payment of dividends from First

Federal Savings and Loan Association of Hazard and First Federal Savings Bank of Kentucky to the Company or from the Company to shareholders;

the ability of First Federal MHC to receive approval of its members to waive the payment of any Company dividends to First Federal MHC

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;

pressures among financial services companies;

the ability to attract, develop and retain qualified employees;

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,

and the other matters mentioned in Item 1A of the Company’s Annual Report on Form 10-K.

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.

References in this Annual Report on Form 10-K

to “we,” “us” and “our” refer to Kentucky First, and where appropriate, collectively to Kentucky First,

First Federal of Hazard and First Federal of Kentucky.

to “we,” “us” and “our” refer to Kentucky First, and where appropriate, collectively to Kentucky

First, First Federal of Hazard and First Federal of Kentucky.

Kentucky First Federal Bancorp.

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Following the Reorganization and Merger, the Company has operated

First Federal of Hazard and First Federal of Kentucky (collectively, the “Banks”) as two independent, community-oriented savings

institutions.

On December 31, 2012, Kentucky First Federal acquired

CFK Bancorp, Inc., the savings and loan holding company for Central Kentucky Federal Savings Bank, a federally chartered savings bank

located in Danville, Kentucky.

Central Kentucky Federal Savings Bank was merged into First Federal of Kentucky and now operates as a division

of First Federal of Kentucky under the name “Central Kentucky Federal Savings Bank” through its two offices in Danville, Kentucky

and its Lancaster, Kentucky branch.

With the acquisition, the Company expanded its customer base in the central Kentucky area with an

institution that shared its community banking orientation and thrift heritage and enjoyed a favorable reputation within the new Danville-Lancaster

First Federal of Hazard and First Federal of Kentucky (collectively, the “Banks”) as two independent, community-oriented

savings institutions.

On December 31, 2012, Kentucky First Federal

acquired CFK Bancorp, Inc., the savings and loan holding company for Central Kentucky Federal Savings Bank, a federally chartered savings

bank located in Danville, Kentucky.

Central Kentucky Federal Savings Bank was merged into First Federal of Kentucky and now operates

as a division of First Federal of Kentucky under the name “Central Kentucky Federal Savings Bank” through its two offices

in Danville, Kentucky and its Lancaster, Kentucky branch.

With the acquisition, the Company expanded its customer base in the central

Kentucky area with an institution that shared its community banking orientation and thrift heritage and enjoyed a favorable reputation

within the new Danville-Lancaster market area.

Kentucky First’s and First Federal of Hazard’s

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consist primarily of operating the Banks and investing funds retained in the Reorganization.

First Federal of Hazard and First Federal of Kentucky

are subject to examination and comprehensive regulation by the Office of the Comptroller of the Currency and their deposits are insured

up to applicable limits by the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation.

Banks are members of the Federal Home Loan Bank of Cincinnati, which is one of the 11 regional banks in the FHLB System.

See “ Regulation

and Supervision .”

First Federal of Hazard and First Federal of

Kentucky are subject to examination and comprehensive regulation by the Office of the Comptroller of the Currency and their deposits

are insured up to applicable limits by the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation.

Both of the Banks are members of the Federal Home Loan Bank of Cincinnati, which is one of the 11 regional banks in the FHLB System.

See “ Regulation and Supervision .”

First Federal Savings and Loan Association

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To the extent there is insufficient loan

demand in its market area, and where appropriate under its investment policies, First Federal of Hazard has historically invested in mortgage-backed

and investment securities, although since the reorganization, First Federal of Hazard has been purchasing whole loans and participations

in loans originated at First Federal of Kentucky.

At June 30, 2023, First Federal of Hazard had total assets of $89.1 million, net loans

of $81.0 million, total mortgage-backed and other securities of $4.3 million, deposits of $45.5 million and total capital of $18.0 million.

demand in its market area, and where appropriate under its investment policies, First Federal of Hazard has historically invested in

mortgage-backed and investment securities, although since the reorganization, First Federal of Hazard has been purchasing whole loans

and participations in loans originated at First Federal of Kentucky.

At June 30, 2024, First Federal of Hazard had total assets of $89.8

million, net loans of $81.1 million, total mortgage-backed and other securities of $3.4 million, deposits of $54.4 million and total

capital of $18.0 million.

First Federal Savings Bank of Kentucky.

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First Federal of Hazard and First Federal of Kentucky

operate in three distinct market areas.

operate in four market areas.

First Federal of Hazard’s market area consists

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However, as a regional economic center, Hazard tends to draw consumers and workers who commute from surrounding counties.

in the market area, particularly in Perry County, consists service sector (50.4%), retail trade (23.6%), public administration (7.0%),

and finance, insurance and real estate (6.8%).

During the last five years, the unemployment rate (not seasonally adjusted) has been higher

than most regions, and in July 2023, was 6.6%, compared to 3.8% in Kentucky and 3.8% in the United States.

in the market area, particularly in Perry County, is led by healthcare, followed by retail, education, and public administration.

the last five years, the unemployment rate (not seasonally adjusted) has been higher than most regions, and in July 2024, was 7.0%, compared

to 5.1% in Kentucky and 4.2% in the United States.

First Federal of Kentucky’s primary lending

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52,000, of which approximately 27,000 live within the city of Frankfort, which serves as the capital of Kentucky.

The services sector

employs about 33.4% of the workforce followed by public administration (31.0%), followed by the retail (11.4%), and construction (7.8%.).

The unemployment rate was 4.1% for July 2023.

The primary sources

of employment are public administration, education, other services, and health care.

The median household income in Franklin County is

The unemployment rate is 4.20%

Boyle County has a population of approximately

The services sector employs about 43.6% of the work force, while retail trade represents the next largest job counts with approximately

18.6% of the workforce.

The transportation and communications sector and the manufacturing sector represent approximately 10.8% and 10.6%

of the workforces, respectively.

Centre College is one of the larger employers in the community.

The unemployment rate was 5.1% in July

The primary sources of employment are health care, retail, information services, and manufacturing.

The unemployment rate is 5.0%

while the median household income in Boyle County is $60,218.

Garrard County has a population of approximately

The primary sources of employment are education, health care, retail, and construction.

There is a 4.5% unemployment rate and

$62,546 median household income.

Lending Activities

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Residential Mortgage Loans .

primary lending activity is the origination of mortgage loans to enable borrowers to purchase or refinance existing homes in the Banks’

respective market areas.

At June 30, 2023, residential mortgage loans including construction loans and multi-family totaled $271.4 million,

or 85.9%, of our total loan portfolio.

We offer a mix of adjustable-rate and fixed-rate mortgage loans with terms up to 30 years.

Adjustable-rate

loans have an initial fixed term of one, three, five or seven years.

After the initial term, the rate adjustments on most of our adjustable-rate

loans are indexed to the MIRS Transition Index, formerly known as PMMS+ Index.

The interest rates on these mortgages are adjusted once

a year, with limitations on adjustments generally of one percentage point per adjustment period, and a lifetime cap of five percentage

We determine loan fees charged, interest rates and other provisions of mortgage loans on the basis of our own pricing criteria

and competitive market conditions.

Some loans originated by the Banks have an additional advance clause which allows the borrower to obtain

additional funds at prevailing interest rates, subject to managements’ approval.

At June 30, 2023, the Company’s loan portfolio

included $237.4 million in adjustable-rate residential mortgage loans, or 87.5% of the Company’s residential mortgage loan portfolio.

Historically, our primary lending activity is the origination of mortgage

loans to enable borrowers to purchase or refinance existing homes in the Banks’ respective market areas.

At June 30, 2024, residential

mortgage loans including construction loans and multi-family totaled $285.8 million, or 85.3%, of our total loan portfolio.

mix of adjustable-rate and fixed-rate mortgage loans with terms up to 30 years.

Adjustable-rate loans have an initial fixed term of one,

three, five or seven years.

After the initial term, the rate adjustments on most of our adjustable-rate loans are indexed to the MIRS

Transition Index, formerly known as PMMS+ Index.

The interest rates on these mortgages are adjusted once a year, with limitations on adjustments

generally of one percentage point per adjustment period, and a lifetime cap of five percentage points.

We determine loan fees charged,

interest rates and other provisions of mortgage loans on the basis of our own pricing criteria and competitive market conditions.

loans originated by the Banks have an additional advance clause which allows the borrower to obtain additional funds at prevailing interest

rates, subject to managements’ approval.

At June 30, 2024, the Company’s loan portfolio included $252.6

million in adjustable-rate residential mortgage loans, or 88.4% of the Company’s residential mortgage loan portfolio.

The retention of adjustable-rate loans in the

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resulting in reduced net income.

In recent months, the Company has attempted to shift direction from adjustable-rate loans secured by

owner-occupied homes.

The Company is well-positioned to originate fixed-rate loans secured by owner-occupied homes for sale into the secondary

Doing so will free capital and liquidity for potential investment in higher-yielding types of assets.

While one- to four-family residential real estate

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rates and the interest rates payable on outstanding loans.

As interest rates declined and remained low over the past few years, we have

experienced high levels of loan repayments and refinancings.

The Banks offer various programs for the purchase

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Construction Loans.

loans for a term of one year or less to individuals to finance the construction of residential dwellings for personal use or for use as

rental property.

loans for a term of one year or less to individuals to finance the construction of residential dwellings for personal use or for use

as rental property.

On a case-by-case basis we consider construction loans on other than owner-occupied, residential property.

2023, construction loans totaled $12.3 million, or 3.9%, of our total loan portfolio.

Our construction loans generally provide for the

payment of interest only during the construction phase, which is usually less than one year.

Loans generally can be made with a maximum

loan to value ratio of 80% of the appraised value.

Funds are disbursed as progress is made toward completion of the construction based

on site inspections by qualified bank staff.

Construction financing is generally considered to involve a higher

degree of risk of loss than long-term financing on improved, occupied real estate.

Risk of loss on a construction loan depends largely

upon the accuracy of the initial estimate of the property’s value at completion of construction or development and the estimated

cost (including interest) of construction.

During the construction phase, a number of factors could result in delays and cost overruns.

If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed

to permit completion of the development.

If the estimate of value proves to be inaccurate, we may be confronted, at or before the maturity

of the loan, with a project having a value which is insufficient to assure full repayment.

As a result of the foregoing, construction

lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project

rather than the ability of the borrower or guarantor to repay principal and interest.

If we are forced to foreclose on a project before

or at completion due to a default, there can be no assurance that we will be able to recover the unpaid balance and accrued interest on

the loan, as well as related foreclosure and holding costs.

demand in our local markets, we have also increased lending to borrowers who are building homes to sell.

These tend to be established

borrowers building one or a few moderately-priced homes.

At June 30, 2024 construction loans totaled $13.8 million, or 4.1%, of our total

loan portfolio.

Our construction loans generally provide for the payment of interest only during the construction phase, which is usually

less than one year.

Loans generally can be made with a maximum loan to value ratio of 80% of the appraised value.

Funds are disbursed

as progress is made toward completion of the construction based on site inspections by qualified bank staff.

Construction financing is generally considered

to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate.

Risk of loss on a construction

loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development

and the estimated cost (including interest) of construction.

During the construction phase, a number of factors could result in delays

and cost overruns.

If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount

originally committed to permit completion of the development.

If the estimate of value proves to be inaccurate, we may be confronted,

at or before the maturity of the loan, with a project having a value which is insufficient to assure full repayment.

As a result of the

foregoing, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success

of the ultimate project rather than the ability of the borrower or guarantor to repay principal and interest.

If we are forced to foreclose

on a project before or at completion due to a default, there can be no assurance that we will be able to recover the unpaid balance and

accrued interest on the loan, as well as related foreclosure and holding costs.

Multi-Family Loans .

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real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential mortgage loans.

primary concern in multi-family and nonresidential real estate lending is the borrower’s creditworthiness and the feasibility and

cash flow potential of the project.

Of primary concern in multi-family and nonresidential real estate lending is the borrower’s creditworthiness and the feasibility

and cash flow potential of the project.

Payments on loans secured by income properties often depend on successful operation and management

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to provide annual financial statements on larger multi-family and commercial real estate loans.

In reaching a decision on whether to make

a multi-family or nonresidential real estate loan, we consider the net cash flow of the project, the borrower’s expertise, credit

history and the value of the underlying property.

In reaching a decision on whether to

make a multi-family or nonresidential real estate loan, we consider the net cash flow of the project, the borrower’s expertise,

credit history and the value of the underlying property.

Commercial Non-mortgage Loans .

June 30, 2023, commercial non-mortgage loans totaled $1.2 million, or 0.4%, of our total loan portfolio.

We do not emphasize commercial

non-mortgage loans, which may be secured by vehicles used in business or by inventory and equipment of the business or may be unsecured,

although we do originate such loans on a limited basis and generally require a pre-existing relationship with the Bank.

These loans are

made only to businesses in our local market and we generally require personal guarantees of well-established individuals for these loans.

Commercial loans involve an even greater degree of risk than real estate loans.

June 30, 2024, commercial non-mortgage loans totaled $700,000, or 0.2%, of our total loan portfolio.

We do not emphasize commercial non-mortgage

loans, which may be secured by vehicles used in business or by inventory and equipment of the business or may be unsecured, although

we do originate such loans on a limited basis and generally require a pre-existing relationship with the Bank.

These loans are made only

to businesses in our local market and we generally require personal guarantees of well-established individuals for these loans.

loans involve an even greater degree of risk than real estate loans.

Consumer Lending.

Our consumer loans

include home equity lines of credit, loans secured by savings deposits, automobile loans and unsecured or personal loans.

2023, our consumer loan balance totaled $10.8 million, or 3.5%, of our total loan portfolio.

Of the consumer loan balance at June 30,

2023, $9.2 million were home equity loans, $855,000 were loans secured by savings deposits and $715,000 were automobile or unsecured loans.

Our home equity loans are made on the security of residential real estate and have terms of up to 15 years.

Most of our home equity loans

are second mortgages subordinate only to first mortgages also held by the bank and do not exceed 80% of the estimated value of the property,

less the outstanding principal of the first mortgage, although we do offer home equity loans up to 90% of the value less the balance of

the first mortgage at a premium rate to qualified borrowers.

Our consumer loans include home equity lines of credit, loans secured

by savings deposits, automobile loans and unsecured or personal loans.

At June 30, 2024, our consumer loan balance totaled $12.2 million,

or 3.6%, of our total loan portfolio.

Of the consumer loan balance at June 30, 2024, $10.6 million were home equity loans, $819,000 were

loans secured by savings deposits and $117,000 were automobile or unsecured loans.

Our home equity loans are made on the security of residential

real estate and have terms of up to 15 years.

Most of our home equity loans are second mortgages subordinate only to first mortgages also

held by the bank and do not exceed 80% of the estimated value of the property, less the outstanding principal of the first mortgage, although

we do offer home equity loans up to 90% of the value less the balance of the first mortgage at a premium rate to qualified borrowers.

These loans are not secured by private mortgage insurance.

Our home equity

loans require the monthly payment of 1.0% to 2.0% of the unpaid principal until maturity, when the remaining unpaid principal, if any,

Home equity loans bear variable rates of interest indexed to the prime rate for loans with 80% or less loan-to-value ratio, and

2% above the prime rate for loans with a loan-to-value ratio in excess of 80%.

Our home equity loans require the monthly payment of 1.0% to 2.0% of the unpaid

principal until maturity, when the remaining unpaid principal, if any, is due.

Home equity loans bear variable rates of interest indexed

to the prime rate for loans with 80% or less loan-to-value ratio, and 2% above the prime rate for loans with a loan-to-value ratio in

excess of 80%.

Interest rates on these loans can be adjusted monthly.

At June 30, 2023, the total outstanding home equity loans amounted to 2.9% of the Company’s total loan portfolio.

At June 30, 2024, the total outstanding home equity loans amounted

to 3.2% of the Company’s total loan portfolio.

Loans secured by savings are originated for up

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the Company’s total loan portfolio.

Consumer loans generally entail greater risk than

do residential mortgage loans, particularly in the case of consumer loans which are unsecured or secured by rapidly depreciable assets.

Consumer loans generally entail greater risk

than do residential mortgage loans, particularly in the case of consumer loans which are unsecured or secured by rapidly depreciable

Automobile and unsecured loans at June 30, 2024, totaled 0.2% of the Company’s total loan portfolio.

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Loan originations come from a number of sources.

The primary source of loan originations are our in-house loan originators, and to a lesser

extent, advertising and referrals from customers and real estate agents.

First Federal of Kentucky sells fixed-rate loans with longer

maturities to the Federal Home Loan Bank of Cincinnati (“FHLB-Cincinnati”).

We earn income on the loans sold through fees

we charge on the origination, interest spread premiums earned when we sell the loans, and loan servicing fees on an on-going basis, because

servicing rights are retained on such loans.

At June 30, 2023, $21.7 million in loans were being serviced by First Federal of Kentucky

for the FHLB-Cincinnati.

The primary source of loan originations are our in-house loan originators, and to

a lesser extent, advertising and referrals from customers and real estate agents.

First Federal of Kentucky sells fixed-rate loans with

longer maturities to the Federal Home Loan Bank of Cincinnati (“FHLB-Cincinnati”).

We earn income on the loans sold through

fees we charge on the origination, interest spread premiums earned when we sell the loans, and loan servicing fees on an on-going basis,

because servicing rights are retained on such loans.

At June 30, 2024, $20.4 million in loans were being serviced by First Federal of

Kentucky for the FHLB-Cincinnati.

Loan Approval Procedures and Authority .

Our lending activities follow written, nondiscriminatory, underwriting standards and loan origination procedures established by each Bank’s

Board of Directors and management.

Each Bank’s loan committee can approve or deny loans on one- to four-family properties totaling

$500,000 or less.

First Federal of Hazard’s loan committee consists of its two senior officers, while First Federal of Kentucky’s

loan approval process allows for various combinations of experienced bank officers to approve or deny loans which are one- to four-family

Loans that do not conform to this criteria must be submitted to the Board of Directors or Loan Committee composed of at least

three directors, for approval.

It is the Company’s practice to record a

lien on the real estate securing a loan.

The Banks generally do not require title insurance, although it may be required for loans made

in certain programs.

Our lending activities follow written, nondiscriminatory, underwriting

standards and loan origination procedures established by each Bank’s Board of Directors and management.

Each Bank’s loan staff

can approve or deny loans totaling $500,000 or less.

First Federal of Hazard’s loan committee consists of its two senior officers,

while First Federal of Kentucky’s loan approval process allows for various combinations of experienced bank officers to approve

or deny loans.

Loans that do not conform to this criteria must be submitted to the Board of Directors or Loan Committee composed of at

least three directors, for approval.

It is the Company’s practice to record

a lien on the real estate securing a loan.

The Banks generally do not require title insurance, although it may be required for loans

made in certain programs.

The Banks do require fire and casualty insurance on all security properties and flood insurance when the collateral

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Loans to One Borrower .

amount either Bank may lend to one borrower and the borrower’s related entities is limited, by regulation, to generally 15% of that

Bank’s stated capital and the allowance for loan losses.

amount either Bank may lend to one borrower and the borrower’s related entities is limited, by regulation, to generally 15% of

that Bank’s stated capital and the allowance for loan losses.

At June 30, 2024, the regulatory limit on loans to one borrower was

$2.8 million for First Federal of Hazard and $4.7 million for First Federal of Kentucky.

Neither of the Banks had lending relationships in

excess of their respective lending limits.

However, loans or participations in loans may be sold among the Banks, which may allow a borrower’s

total loans with the Company to exceed the limit of either individual bank.

Neither of the Banks had lending relationships

in excess of their respective lending limits.

However, loans or participations in loans may be sold among the Banks, which may allow

a borrower’s total loans with the Company to exceed the limit of either individual bank.

Loan Commitments .

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change the rates and terms of the loan at that time.

If conditions exist whereby either Bank experiences

a significant increase in loans outstanding or commits to originate loans that are riskier than a typical one- to four-family mortgage,

management and the boards will consider reflecting the anticipated loss exposure in a separate liability.

As residential loans are approved

in the normal course of business, and those loans are underwritten to the standards of the Banks, management does not believe alteration

of the allowance for loan losses is warranted.

At June 30, 2023, no commitment losses were reflected in a separate liability.

If conditions exist whereby either Bank experiences a significant increase

in loans outstanding or commits to originate loans that are riskier than a typical one- to four-family mortgage, management and the boards

will consider reflecting the anticipated loss exposure in a separate liability.

Upon implementation of ASU 2016-13 or the current expected

credit loss (CECL) model at July 1, 2023, the Banks began to utilize a separate liability to reflect anticipated credit losses on loan

At June 30, 2024, this amount totaled $60,000.

Both Banks offer construction loans that either

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These factors are in turn affected by general economic conditions, the monetary policies of the federal

government, including the Board of Governors of the Federal Reserve System, the general supply of money in the economy, tax policies and

governmental budget matters.

government, including the Board of Governors of the Federal Reserve System, the general supply of money in the economy, tax policies

and governmental budget matters.

We receive fees in connection with late payments

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Delinquencies .

When a borrower fails

to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status.

When a borrower

fails to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current

We make initial contact with the borrower when the loan becomes 15 days past due.

Subsequently, bank staff, under the direct supervision

of senior management and with consultation by the Banks’ attorneys, attempt to contact the borrower and determine their status and

plans for resolving the delinquency.

However, once a delinquency reaches 90 days, management considers foreclosure and, if the borrower

has not provided a reasonable plan (such as selling the collateral, securing a commitment from another lender to refinance the loan or

submitting a plan to repay the delinquent principal, interest, escrow, and late charges) the foreclosure suit may be initiated.

cases, management may delay initiating the foreclosure suit if, in management’s opinion, the Banks’ chance of loss is minimal

(such as with loans where the estimated value of the property greatly exceeds the amount of the loan) or if the original borrower is deceased

or incapacitated.

If a foreclosure action is initiated and the loan is not brought current, paid in full, or refinanced with another lender

before the foreclosure sale, the real property securing the loan is sold at foreclosure.

The Banks are represented at the foreclosure

sale and in most cases will bid an amount equal to the Banks’ investment (including interest, advances for taxes and insurance,

foreclosure costs, and attorney’s fees).

If another bidder outbids the Bank, the Bank’s investment is received in full.

another bidder does not outbid the Banks, the Banks acquire the property and attempt to sell it to recover their investment.

A borrower’s filing for bankruptcy can alter

the methods available to the Banks to seek collection.

In such cases, the Banks work closely with legal counsel to resolve the delinquency

as quickly as possible.

Subsequently, bank staff, under the direct

supervision of senior management and with consultation by the Banks’ attorneys, attempt to contact the borrower and determine their

status and plans for resolving the delinquency.

However, once a delinquency reaches 90 days, management considers foreclosure and, if

the borrower has not provided a reasonable plan (such as selling the collateral, securing a commitment from another lender to refinance

the loan or submitting a plan to repay the delinquent principal, interest, escrow, and late charges) the foreclosure suit may be initiated.

In some cases, management may delay initiating the foreclosure suit if, in management’s opinion, the Banks’ chance of loss

is minimal (such as with loans where the estimated value of the property greatly exceeds the amount of the loan) or if the original borrower

is deceased or incapacitated.

If a foreclosure action is initiated and the loan is not brought current, paid in full, or refinanced with

another lender before the foreclosure sale, the real property securing the loan is sold at foreclosure.

The Banks are represented at

the foreclosure sale and in most cases will bid an amount equal to the Banks’ investment (including interest, advances for taxes

and insurance, foreclosure costs, and attorney’s fees).

If another bidder outbids the Bank, the Bank’s investment is received

If another bidder does not outbid the Banks, the Banks acquire the property and attempt to sell it to recover their investment.

A borrower’s filing for bankruptcy can

alter the methods available to the Banks to seek collection.

In such cases, the Banks work closely with legal counsel to resolve the

delinquency as quickly as possible.

We may consider loan workout arrangements with

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Investment Activities

We have legal authority to invest in various types

of liquid assets, including U.S.

Treasury obligations, securities of various federal agencies and state and municipal governments, mortgage-backed

securities and certificates of deposit of federally insured institutions.

We also are required to maintain an investment in FHLB-Cincinnati

stock, the level of which is largely dependent on our level of borrowings from the FHLB.

We have legal authority to invest in various

types of liquid assets, including U.S.

Treasury obligations, securities of various federal agencies and state and municipal governments,

mortgage-backed securities and certificates of deposit of federally insured institutions.

We also are required to maintain an investment

in FHLB-Cincinnati stock, the level of which is largely dependent on our level of borrowings from the FHLB.

At June 30, 2024, our investment portfolio consisted

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to market interest rates, or that this type of plan will no longer be permitted by First Federal of Kentucky’s regulators.

asset is considered illiquid because, although First Federal of Kentucky may terminate the policies and receive the original premium plus

all earnings, such an action would require the payment of federal income taxes on all earnings since the policies’ inception.

asset is considered illiquid because, although First Federal of Kentucky may terminate the policies and receive the original premium

plus all earnings, such an action would require the payment of federal income taxes on all earnings since the policies’ inception.

Deposit Activities and Other Sources of Funds

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its own interest rate and range of maturities.

Depending on the program, limitations on the amount of advances are based either on a fixed

percentage of an institution’s net worth or on the Federal Home Loan Bank’s assessment of the institution’s creditworthiness.

Depending on the program, limitations on the amount of advances are based either on a

fixed percentage of an institution’s net worth or on the Federal Home Loan Bank’s assessment of the institution’s creditworthiness.

Subsidiary Activities

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Frankfort First Bancorp has one subsidiary, First Federal of Kentucky.

As federally chartered savings institutions, the

Banks are permitted to invest an amount equal to 2% of assets in subsidiaries, with an additional investment of 1% of assets where such

investment serves primarily community, inner-city and community-development purposes.

Under such limitations, as of June 30, 2023, First

Federal of Hazard and First Federal of Kentucky were authorized to invest up to $1.8 million and $5.2 million, respectively, in the stock

of or loans to subsidiaries, including the additional 1% investment for community, inner-city and community development purposes.

As federally chartered savings institutions,

the Banks are permitted to invest an amount equal to 2% of assets in subsidiaries, with an additional investment of 1% of assets where

such investment serves primarily community, inner-city and community-development purposes.

Under such limitations, as of June 30, 2023,

First Federal of Hazard and First Federal of Kentucky were authorized to invest up to $1.8 million and $5.7 million, respectively, in

the stock of or loans to subsidiaries, including the additional 1% investment for community, inner-city and community development purposes.

We face significant competition for the attraction

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competitors are significantly larger than us and, therefore, have significantly greater resources.

We expect competition to increase in

the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial

We expect competition to increase

in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial

services industry.

Technological advances, for example, have lowered the barriers to enter new market areas, allowed banks to expand their

geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services

that traditionally have been provided by banks.

Changes in federal law permit affiliation among banks, securities firms and insurance

companies, which promotes a competitive environment in the financial services industry.

Competition for deposits and the origination of

loans could limit our growth in the future.

Technological advances, for example, have lowered the barriers to enter new market areas, allowed banks to expand

their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products

and services that traditionally have been provided by banks.

Changes in federal law permit affiliation among banks, securities firms

and insurance companies, which promotes a competitive environment in the financial services industry.

Competition for deposits and the

origination of loans could limit our growth in the future.

According to the Federal Deposit Insurance Corporation

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securities companies and specialty finance companies.

First Federal of Kentucky’s principal competitors

for deposits in its market area are other banking institutions, such as commercial banks and credit unions, as well as mutual funds and

other investments.

First Federal of Kentucky principally competes for deposits by offering a variety of deposit accounts, convenient business

hours and branch locations, customer service and a well-trained staff.

According to the FDIC, at June 30, 2022, First Federal of Kentucky

had deposit market share of 8.2%, 7.0% and 16.9% for the Kentucky counties of Franklin, Boyle and Garrard.

Its largest competitors for

depositors are the Boyle Bancorp, Inc.

First Federal of Kentucky’s principal competitors for deposits

in its market area are other banking institutions, such as commercial banks and credit unions, as well as mutual funds and other investments.

First Federal of Kentucky principally competes for deposits by offering a variety of deposit accounts, convenient business hours and branch

locations, customer service and a well-trained staff.

According to the FDIC, at June 30, 2024, First Federal of Kentucky had deposit market

share of 7.0%, 7.1% and 13.6% for the Kentucky counties of Franklin, Boyle and Garrard.

Its largest competitors for depositors are the

Boyle Bancorp, Inc.

(The Farmers National Bank of Danville) at 28.1%, Wesbanco Bank, Inc.

(Wesbanco) at 17.3% and Community

Trust Bancorp, Inc., (Community Trust Bank) at 6.8% market share in the three-county area.

Wesbanco Bank, Inc., Boyle Bancorp, Inc., and

Community Trust Bancorp, Inc.

had assets at June 30, 2023, of $17.4 billion, $921.0 million and $5.5 billion, respectively.

The Bank also

faces considerable competition from credit unions including the Commonwealth Credit Union ($1.8 billion in assets) and the Expree Credit

Union ($92.0 million in assets).

First Federal of Kentucky competes for loans with other depository institutions, as well as specialty

mortgage lenders and brokers and consumer finance companies.

First Federal of Kentucky principally competes for loans on the basis of

interest rates and the loan fees it charges, the types of loans it originates and the convenience and service it provides to borrowers.

In addition, First Federal of Kentucky believes it has developed strong relationships with the businesses, real estate agents, builders

and general public in its market area.

(Wesbanco) at 15.5% and Community Trust Bancorp,

Inc., (Community Trust Bank) at 8.3% market share in the three-county area.

Boyle Bancorp, Wesbanco, Inc., and Community Trust Bancorp,

had assets at June 30, 2024, of $940.3 million, $18.1 billion, and $5.8 billion, respectively.

The Bank also faces considerable competition

from credit unions including the Commonwealth Credit Union ($2.3 billion in assets) and the Expree Credit Union ($102.1 million in assets).

First Federal of Kentucky competes for loans with other depository institutions, as well as specialty mortgage lenders and brokers and

consumer finance companies.

First Federal of Kentucky principally competes for loans on the basis of interest rates and the loan fees

it charges, the types of loans it originates and the convenience and service it provides to borrowers.

In addition, First Federal of Kentucky

believes it has developed strong relationships with the businesses, real estate agents, builders and general public in its market area.

At June 30, 2024, we had 56 full-time employees

and two part-time employees, none of whom was represented by a collective bargaining unit.

and three part-time employees, none of whom was represented by a collective bargaining unit.

We believe our relationship with our employees

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Currency (OCC), as their primary federal regulator, and the Federal Deposit Insurance Corporation (FDIC), as insurer of deposits.

Federal of Hazard and First Federal of Kentucky are each members of the Federal Home Loan Bank System and their deposit accounts are insured

up to applicable limits by the Deposit Insurance Fund (DIF) of the FDIC.

First Federal of Hazard and First Federal of Kentucky must each

file reports with the OCC and the FDIC concerning their activities and financial condition in addition to obtaining regulatory approvals

before entering into certain transactions such as mergers with, or acquisitions of, other financial institutions.

There are periodic examinations

by the OCC and, under certain circumstances, the FDIC to evaluate First Federal of Hazard’s and First Federal of Kentucky’s

safety and soundness and compliance with various regulatory requirements.

The Board of Governors of the Federal Reserve System (Federal

Reserve Board), the agency that regulates and supervises bank and savings and loan holding companies, supervises and regulates Kentucky

First and First Federal MHC.

Kentucky First and First Federal MHC, as savings and loan holding companies, are required to file certain

reports with, and are subject to examination by, and otherwise are required to comply with the rules and regulations of the Federal Reserve

Federal of Hazard and First Federal of Kentucky are each members of the Federal Home Loan Bank System and their deposit accounts are

insured up to applicable limits by the Deposit Insurance Fund (DIF) of the FDIC.

First Federal of Hazard and First Federal of Kentucky

must each file reports with the OCC and the FDIC concerning their activities and financial condition in addition to obtaining regulatory

approvals before entering into certain transactions such as mergers with, or acquisitions of, other financial institutions.

periodic examinations by the OCC and, under certain circumstances, the FDIC to evaluate First Federal of Hazard’s and First Federal

of Kentucky’s safety and soundness and compliance with various regulatory requirements.

The Board of Governors of the Federal Reserve

System (Federal Reserve Board), the agency that regulates and supervises bank and savings and loan holding companies, supervises and

regulates Kentucky First and First Federal MHC.

Kentucky First and First Federal MHC, as savings and loan holding companies, are required

to file certain reports with, and are subject to examination by, and otherwise are required to comply with the rules and regulations

of the Federal Reserve Board.

This regulatory structure is intended primarily for the protection of the DIF and depositors.

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modifications to the “qualified mortgage” criteria under the “ability to repay” rules for certain mortgages that

are held and maintained on the Bank’s retained portfolio as well as relief from certain capital requirements with the creation of

a “community bank leverage ratio.” See “Federal Savings Association Regulation – Capital Requirements.”

are held and maintained on the Bank’s retained portfolio as well as relief from certain capital requirements with the creation

of a “community bank leverage ratio.” See “Federal Savings Association Regulation – Capital Requirements.”

Certain of the regulatory requirements that are

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Congress or the regulatory agencies as applicable.

Agreements with Regulators .

13, 2024, First Federal of Kentucky entered into a formal written agreement (the “Agreement”) with the OCC, which became effective

as of the same date.

The Agreement will remain effective until it is amended by First Federal of Kentucky and the OCC, or the OCC modifies,

waives or terminates the Agreement.

As a result of the Agreement, pursuant to 12 C.F.R.

§ 5.51(c)(7)(ii), First Federal of Kentucky

is in “troubled condition,” and is not an “eligible savings association” for purposes of 12 C.F.R.

unless otherwise informed in writing by the OCC.

In addition to the Agreement, the OCC has also imposed individual minimum capital requirements

(“IMCRs”) on First Federal of Kentucky.

The IMCRs require First Federal of Kentucky to maintain a common equity tier 1 capital

ratio of at least 9.0%, a tier 1 capital ratio of at least 11.0%, a total capital ratio of at least 12.0%, and a leverage ratio of at

Under the terms of the Agreement, First Federal

of Kentucky is required to take the following actions within the time frames specified in the Agreement:

a compliance committee composed of at least three of First Federal of Kentucky’s directors to monitor and oversee First Federal

of Kentucky’s compliance with the provisions of the Agreement and submit quarterly evaluation reports to First Federal of Kentucky’s

board of directors regarding actions First Federal of Kentucky has taken to comply with the Agreement and the results and status of such

to the OCC, adopt and implement an acceptable revised written three-year strategic plan establishing objectives for First Federal of

Kentucky’s overall risk profile, balance sheet mix, funding structure, interest rate risk, liquidity and capital adequacy, earnings

performance, and asset and core deposit growth, together with strategies to achieve those objectives;

to the OCC, adopt and implement an acceptable revised written succession plan for First Federal of Kentucky that is designed to promote

adequate staffing and continuity of capable management;

a revised written liquidity risk management program for First Federal of Kentucky that provides for the identification, measurement,

monitoring, and control of First Federal of Kentucky’s liquidity risk exposure, and that emphasizes the importance of cash flow

projections, diversified funding sources, a cushion of highly liquid assets, robust liquidity stress testing scenario analyses, and a

formal, well-developed contingency funding plan as primary tools for measuring and managing liquidity risk;

a revised written interest rate risk program that includes risk management systems to identify, measure, monitor, and control interest

The Agreement requires First Federal of Kentucky’s Board to (i)

ensure that First Federal of Kentucky timely adopts and implements all corrective actions required by the Agreement and (ii) verify that

First Federal of Kentucky adheres to the corrective actions and that they are effective in addressing First Federal of Kentucky’s

deficiencies that resulted in the Agreement.

First Federal of Kentucky’s Board and management are committed to fully addressing

the provisions of the Agreement within the required time frames.

As of the date of this filing, First Federal of Kentucky’s Board

and management believe that First Federal of Kentucky has made progress toward addressing the deficiencies that resulted in the Agreement

and intends to satisfy the Agreement’s requirements as expeditiously as possible.

For additional information, see Item 1A, “Risk

Factors - We are required to comply with the terms of a formal written agreement and IMCRs issued by the OCC, and lack of compliance

could result in monetary penalties and /or additional regulatory actions ” and Note K - Stockholders’ Equity and Regulatory

Capital of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Regulation of Federal Savings Associations

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0.625% of risk-weighted assets and increased by that amount each year until fully implemented in January 2019.

An institution will be subject

to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the

buffer amount.

An institution will be

subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls

below the buffer amount.

Tier 1 capital is generally defined as common

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9% beginning on January 1, 2022.

The CARES Act directed the federal banking agencies to issue an interim rule temporarily lowering the CBLR

ratio to 8% which the agencies did with a transition back to 9% by year-ended 2021.

The Banks elected to use the CBLR framework effective

for the quarter ended March 31, 2020.

As of June 30, 2023, the capital levels of First Federal of Hazard and First Federal of Kentucky

exceed the minimum required capital amounts for capital adequacy.

See Note K-Stockholders’ Equity and Regulatory Capital in notes

to financial statements.

The CARES Act directed the federal banking agencies to issue an interim rule temporarily lowering the

CBLR ratio to 8% which the agencies did with a transition back to 9% by year-ended 2021.

The Banks elected to use the CBLR framework

effective for the quarter ended March 31, 2020.

As of June 30, 2024, the capital levels of First Federal of Hazard and First Federal

of Kentucky exceed the minimum required capital amounts for capital adequacy.

See Note K-Stockholders’ Equity and Regulatory Capital

in notes to financial statements.

In August 2024, First Federal of Kentucky entered into an Agreement

with the OCC.

The OCC has also imposed individual minimum capital requirements (“IMCRs”) which require First Federal of Kentucky

to achieve and maintain capital levels in excess of the minimum capital standards required under OCC’s Prompt Corrective Action

Under the IMCRs, First Federal of Kentucky must achieve and maintain a common equity tier 1 capital ratio of at least 9.0%,

a tier 1 capital ratio of at least 11.0%, a total capital ratio of at least 12.0%, and a leverage ratio of at least 9.0%.

2024, First Federal of Kentucky exceeded the requirements of the IMCRs as its common equity tier 1 capital ratio was 16.25%, its tier

1 capital ratio was 16.25%, its total capital ratio was 16.25%, and its leverage ratio was 10.24%.

For additional information, see Item

1A, “Risk Factors - We are required to comply with the terms of a formal written agreement and IMCRs issued by the OCC, and lack

of compliance could result in monetary penalties and /or additional regulatory actions ” and Note K - Stockholders’ Equity

and Regulatory Capital of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Prompt Corrective Regulatory Action .

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An institution is “undercapitalized” if it has a total risk-based

capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity

Tier 1 ratio of less than 4.5%.

An institution is deemed to be “significantly undercapitalized” if it has a total risk-based

capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity

Tier 1 ratio of less than 3.0%.

An institution is considered to be “critically undercapitalized” if it has a ratio of tangible

equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.

capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common

equity Tier 1 ratio of less than 4.5%.

An institution is deemed to be “significantly undercapitalized” if it has a total

risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or

a common equity Tier 1 ratio of less than 3.0%.

An institution is considered to be “critically undercapitalized” if it has

a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.

If less than adequately capitalized, regulatory

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The OCC could also take any one of a number

of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and

of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers

and directors.

Significantly and undercapitalized associations are subject to additional mandatory and discretionary measures.

Loans to One Borrower.

provides that federal savings associations are generally subject to the limits on loans to one borrower applicable to national banks.

law provides that federal savings associations are generally subject to the limits on loans to one borrower applicable to national banks.

Subject to certain exceptions, a federal savings association may not make a loan or extend credit to a single or related group of borrowers

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Act ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the

amount of retained net income for the preceding two years, the federal savings association is directly or indirectly controlled by a mutual

savings and loan holding company or the distribution would otherwise be contrary to a statute, regulation or agreement with the.

the federal savings association must provide 30 days prior notice to the Federal Reserve Board of the capital distribution if, like First

Federal of Hazard and First Federal of Kentucky, it is a subsidiary of a holding company.

If First Federal of Hazard’s or First

Federal of Kentucky’s capital were ever to fall below its regulatory requirements or the OCC notified it that it was in need of

increased supervision, its ability to make capital distributions could be restricted.

In addition, the OCC could prohibit a proposed capital

distribution that would otherwise be permitted by the regulation, if the agency determines that such distribution would constitute an

unsafe or unsound practice.

amount of retained net income for the preceding two years, the federal savings association is directly or indirectly controlled by a

mutual savings and loan holding company or the distribution would otherwise be contrary to a statute, regulation or agreement with the.

In addition, the federal savings association must provide 30 days prior notice to the Federal Reserve Board of the capital distribution

if, like First Federal of Hazard and First Federal of Kentucky, it is a subsidiary of a holding company.

If First Federal of Hazard’s

or First Federal of Kentucky’s capital were ever to fall below its regulatory requirements or the OCC notified it that it was in

need of increased supervision, its ability to make capital distributions could be restricted.

In addition, the OCC could prohibit a proposed

capital distribution that would otherwise be permitted by the regulation, if the agency determines that such distribution would constitute

an unsafe or unsound practice.

As a result of the Agreement with the OCC, pursuant to 12 C.F.R.

5.51(c)(7)(ii), First Federal of Kentucky is in “troubled condition,” and is not an “eligible savings association”

for purposes of 12 C.F.R.

§ 5.3, unless otherwise informed in writing by the OCC.

Qualified Thrift Lender Test.

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Under the test, a federal savings association is required

to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65% of

its “portfolio assets” (total assets less:

to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65%

of its “portfolio assets” (total assets less:

(i) specified liquid assets up to 20% of total assets;

(ii) intangibles, including

and (iii) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential

mortgages and related investments, including certain mortgage-backed securities, education loans, credit card loans and small business

loans) in at least 9 months out of each 12-month period.

and (iii) the value of property used to conduct business) in certain “qualified thrift investments” (primarily

residential mortgages and related investments, including certain mortgage-backed securities, education loans, credit card loans and small

business loans) in at least 9 months out of each 12-month period.

A savings association that fails the qualified

thrift lender test is immediately subject to certain operating restrictions, including restrictions on new activities, branching and the

payment of dividends.

The Dodd-Frank Act also specifies that failing the qualified thrift lender test is a violation of law that could

result in an enforcement action.

Failure to correct the violation within 12 months will cause the association’s savings and loan

holding company to register as and be deemed a bank holding company.

At June 30, 2023, First Federal of Hazard and First Federal of Kentucky

were in compliance with the qualified thrift lender test in each of the prior 12 months.

thrift lender test is immediately subject to certain operating restrictions, including restrictions on new activities, branching and

the payment of dividends.

The Dodd-Frank Act also specifies that failing the qualified thrift lender test is a violation of law that

could result in an enforcement action.

Failure to correct the violation within 12 months will cause the association’s savings and

loan holding company to register as and be deemed a bank holding company.

At June 30, 2024, First Federal of Hazard and First Federal

of Kentucky were in compliance with the qualified thrift lender test in each of the prior 12 months.

Transactions with Related Parties.

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, any company that controls or is under

common control with an insured depository institution, including Kentucky First, First Federal MHC and their non-savings institution subsidiaries).

The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus of the savings

The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings association’s capital

Loans and other specified transactions with affiliates are required to be secured by collateral in an amount and of a type

described in federal law.

common control with an insured depository institution, including Kentucky First, First Federal MHC and their non-savings institution

subsidiaries).

The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus

of the savings association.

The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings association’s

capital and surplus.

Loans and other specified transactions with affiliates are required to be secured by collateral in an amount and

of a type described in federal law.

The purchase of low-quality assets from affiliates is generally prohibited.

Transactions with affiliates must

be on terms and under circumstances that are at least as favorable to the association as those prevailing at the time for comparable transactions

with non-affiliated companies.

In addition, savings associations are prohibited from lending to any affiliate that is engaged in activities

that are not permissible for bank holding companies and no federal savings association may purchase the securities of any affiliate other

than a subsidiary.

Transactions between sister depository institutions that are 80% or more owned by the same holding company are exempt

from the quantitative limits and collateral requirements.

Transactions with affiliates

must be on terms and under circumstances that are at least as favorable to the association as those prevailing at the time for comparable

transactions with non-affiliated companies.

In addition, savings associations are prohibited from lending to any affiliate that is engaged

in activities that are not permissible for bank holding companies and no federal savings association may purchase the securities of any

affiliate other than a subsidiary.

Transactions between sister depository institutions that are 80% or more owned by the same holding

company are exempt from the quantitative limits and collateral requirements.

The Sarbanes-Oxley Act of 2002 generally prohibits

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The law restricts both the individual and aggregate amount of loans First Federal

of Hazard and First Federal of Kentucky may make to insiders based, in part, on First Federal of Hazard’s and First Federal of Kentucky’s

respective capital positions and requires certain board approval procedures to be followed.

Such loans must be made on terms, including

rates and collateral, substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing

for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or any other unfavorable

of Hazard and First Federal of Kentucky may make to insiders based, in part, on First Federal of Hazard’s and First Federal of

Kentucky’s respective capital positions and requires certain board approval procedures to be followed.

Such loans must be made

on terms, including rates and collateral, substantially the same as, and follow credit underwriting procedures that are not less stringent

than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment

or any other unfavorable features.

There are additional restrictions applicable to loans to executive officers.

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total assets, including consolidated subsidiaries, its financial condition and the complexity of its portfolio.

During the current year,

our assessments totaled $81,000 and are expected to increase in the fiscal year ended June 30, 2025.

Insurance of Deposit Accounts.

deposits of both First Federal of Hazard and First Federal of Kentucky are insured up to applicable limits by the DIF administered by

The deposits of both First Federal of Hazard and First Federal of Kentucky are insured up to applicable limits by the DIF administered

Deposit insurance per account owner is currently $250,000.

Under the FDIC’s risk-based assessment system, insured depository

are assigned a risk category based on supervisory evaluations, regulatory capital levels and certain other factors.

Under the FDIC’s risk-based assessment system, insured

depository are assigned a risk category based on supervisory evaluations, regulatory capital levels and certain other factors.

An institution’s

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Assessment rates currently range from 1.5 to 30 basis points of total average assets (excluding PPP loans) less average tangible

The FDIC has authority to increase insurance assessments.

A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of

The FDIC has authority to increase insurance

A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of

operations of the Banks.

Management cannot predict what insurance assessment rates will be in the future.

Federal Home Loan Bank System.

Federal of Hazard and First Federal of Kentucky are members of the Federal Home Loan Bank System, which consists of 12 regional Federal

Home Loan Banks.

First Federal of Hazard and First Federal of Kentucky are members of the Federal Home Loan Bank System, which consists of 12 regional

Federal Home Loan Banks.

The Federal Home Loan Bank provides a central credit facility primarily for member institutions.

As members of the Federal

Home Loan Bank of Cincinnati, First Federal of Hazard and First Federal of Kentucky are each required to acquire and hold shares of capital

stock in that Federal Home Loan Bank.

First Federal of Hazard and First Federal of Kentucky were in compliance with this requirement with

investments in Federal Home Loan Bank of Cincinnati stock at June 30, 2023, of $1.3 million and $3.4 million, respectively.

of the Federal Home Loan Bank of Cincinnati, First Federal of Hazard and First Federal of Kentucky are each required to acquire and hold

shares of capital stock in that Federal Home Loan Bank.

First Federal of Hazard and First Federal of Kentucky were in compliance with

this requirement with investments in Federal Home Loan Bank of Cincinnati stock at June 30, 2024, of $960,000 million and $3.3 million,

respectively.

Reserve Requirements.

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(primary interest-bearing and regular checking accounts).

Required reserves must be in the form of vault cash and if vault cash does not

fully satisfy the required reserves, requirements may be satisfied in the form of a balance maintained with the appropriate Federal Reserve

The Federal Reserve Board generally makes annual adjustments to the tiered cash reserve requirements, however, effective March 26,

2020, the reserve requirement was set to zero for all depository institutions.

Required reserves must be in the form of vault cash and if vault cash does

not fully satisfy the required reserves, requirements may be satisfied in the form of a balance maintained with the appropriate Federal

Reserve Bank.

The Federal Reserve Board generally makes annual adjustments to the tiered cash reserve requirements, however, effective

March 26, 2020, the reserve requirement was set to zero for all depository institutions.

Community Reinvestment Act.

insured depository institutions, including federal savings associations have a continuing and affirmative obligation consistent with safe

and sound operation to help meet the credit needs of their entire community, including low and moderate income neighborhoods.

The Community

Reinvestment Act does not establish specific lending requirements or programs, nor does it limit an institution’s discretion to

develop the types of products and services that it believes are best suited to its particular community consistent with the Community

insured depository institutions, including federal savings associations have a continuing and affirmative obligation consistent with

safe and sound operation to help meet the credit needs of their entire community, including low and moderate income neighborhoods.

Community Reinvestment Act does not establish specific lending requirements or programs, nor does it limit an institution’s discretion

to develop the types of products and services that it believes are best suited to its particular community consistent with the Community

Reinvestment Act.

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The Community Reinvestment Act requires public

disclosure of an institution’s rating and requires the OCC to provide a written evaluation of an institution’s Community Reinvestment

Act performance utilizing a four-tiered descriptive rating system.

First Federal of Hazard and First Federal of Kentucky each received

a “Satisfactory” rating as a result of their most recent Community Reinvestment Act assessments.

disclosure of an institution’s rating and requires the OCC to provide a written evaluation of an institution’s Community

Reinvestment Act performance utilizing a four-tiered descriptive rating system.

First Federal of Hazard and First Federal of Kentucky

each received a “Satisfactory” rating as a result of their most recent Community Reinvestment Act assessments.

Privacy Standards.

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to customers at the time of establishing the customer relationship and annually thereafter.

The regulations also require each of the Banks

to provide its customers with initial notices that accurately reflect its privacy policies and practices, to make its privacy policies

The regulations also require each of the

Banks to provide its customers with initial notices that accurately reflect its privacy policies and practices, to make its privacy policies

available to customers through its website, and to provide its customers with the ability to “opt-out” of having the Bank

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Financial institutions

must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious

transactions.

Law enforcement authorities have been granted increased access to financial information maintained by financial institutions.

Bank regulators routinely examine institutions for compliance with these obligations and they consider an institution’s compliance

in connection with the regulatory review of applications, including applications for banking mergers and acquisitions.

of the Treasury’s Office of Foreign Assets Control, or “OFAC,” is responsible for helping to insure that U.S.

do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress.

OFAC publishes

lists of persons, organizations, and countries suspected of aiding, harboring or engaging in terrorist acts, known as Specially Designated

Nationals and Blocked Persons.

If the Bank finds a name on any transaction, account or wire transfer that is on an OFAC list, the Bank

must freeze or block such account or transaction, file a suspicious activity report and notify the appropriate authorities.

Department’s Financial Crises Enforcement Network rules include customer due diligence requirements for banks, including a requirement

to identify and verify the identity of beneficial owners of customers that are legal entities, subject to certain exclusions and exemptions.

must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any

suspicious transactions.

Law enforcement authorities have been granted increased access to financial information maintained by financial

institutions.

Bank regulators routinely examine institutions for compliance with these obligations and they consider an institution’s

compliance in connection with the regulatory review of applications, including applications for banking mergers and acquisitions.

Department of the Treasury’s Office of Foreign Assets Control, or “OFAC,” is responsible for helping to insure

entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of

OFAC publishes lists of persons, organizations, and countries suspected of aiding, harboring or engaging in terrorist acts,

known as Specially Designated Nationals and Blocked Persons.

If the Bank finds a name on any transaction, account or wire transfer that

is on an OFAC list, the Bank must freeze or block such account or transaction, file a suspicious activity report and notify the appropriate

Treasury Department’s Financial Crises Enforcement Network rules include customer due diligence requirements

for banks, including a requirement to identify and verify the identity of beneficial owners of customers that are legal entities, subject

to certain exclusions and exemptions.

Against Tying Arrangements .

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Act, governing disclosures of credit terms to consumer borrowers;

Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine

whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

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MHC and their non-savings association subsidiaries.

Among other things, this authority permits the Federal Reserve Board to restrict or

prohibit activities that are determined to be a serious risk to First Federal of Hazard and/or First Federal of Kentucky.

Among other things, this authority permits the Federal Reserve Board to restrict

or prohibit activities that are determined to be a serious risk to First Federal of Hazard and/or First Federal of Kentucky.

Restrictions Applicable to Mutual Holding

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the savings and loan holding company;

(6) holding or managing properties used or occupied by a savings association subsidiary of the savings

and loan holding company;

(6) holding or managing properties used or occupied by a savings association subsidiary of the

savings and loan holding company;

(7) acting as trustee under deed of trust;

(8) any activity permitted for multiple savings and loan holding

companies by Federal Reserve Board regulations and;

(9) any activity permitted by the Federal Reserve Board for bank holding companies

and financial holding companies

(8) any activity permitted for multiple savings and loan

holding companies by Federal Reserve Board regulations and;

(9) any activity permitted by the Federal Reserve Board for bank holding

companies and financial holding companies

Federal law prohibits a savings and loan holding

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than 5% of the voting stock of another savings association, or its holding company, without prior written approval of the Federal Reserve

Federal law also prohibits a savings and loan holding company from acquiring or retaining control of a depository institution that

is not insured by the FDIC.

In evaluating applications by holding companies to acquire savings associations, the Federal Reserve Board

must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition

on the risk to the insurance funds, the convenience and needs of the community and competitive factors.

The Federal Reserve Board is prohibited from approving

any acquisition that would result in a multiple savings and loan holding company controlling savings associations in more than one state,

(1) the approval of interstate supervisory acquisitions by savings and loan holding companies, and (2) the acquisition

of a savings institution in another state if the laws of the state of the target savings association specifically permit such acquisitions.

Federal law also prohibits a savings and loan holding company from acquiring or retaining control of a depository institution

that is not insured by the FDIC.

In evaluating applications by holding companies to acquire savings associations, the Federal Reserve

Board must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of

the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.

The Federal Reserve Board is prohibited from

approving any acquisition that would result in a multiple savings and loan holding company controlling savings associations in more than

one state, except:

(1) the approval of interstate supervisory acquisitions by savings and loan holding companies, and (2) the

acquisition of a savings institution in another state if the laws of the state of the target savings association specifically permit

such acquisitions.

The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

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Consequently, savings and loan holding companies of less

than $3.0 billion of assets, such as First Federal, MHC and Kentucky First, are exempt from consolidated capital requirements unless otherwise

directed by the Federal Reserve Board in individual.

than $3.0 billion of assets, such as First Federal, MHC and Kentucky First, are exempt from consolidated capital requirements unless

otherwise directed by the Federal Reserve Board in individual.

Source of Strength.

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position to provide such resources.

The Federal Reserve Board

has issued a policy statement on the payment of cash dividends by bank holding companies, which expressed the Federal Reserve Board’s

The Federal Reserve

Board has issued a policy statement on the payment of cash dividends by bank holding companies, which expressed the Federal Reserve Board’s

view that a bank holding company should pay cash dividends only to the extent that the company’s net income for the past year is

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asset quality and overall financial condition.

The Federal Reserve Board also indicated that it would be inappropriate for a company experiencing

serious financial problems to borrow funds to pay dividends.

Furthermore, under the prompt correction action regulations, the Federal

Reserve Board may prohibit a bank holding company from paying any dividends if the holding company’s insured depository institution

subsidiary is classified as “undercapitalized.” See “Federal Savings Association Regulation – Prompt Corrective

Regulatory Action.”

The Federal Reserve Board also indicated that it would be inappropriate for a company

experiencing serious financial problems to borrow funds to pay dividends.

Furthermore, under the prompt correction action regulations,

the Federal Reserve Board may prohibit a bank holding company from paying any dividends if the holding company’s insured depository

institution subsidiary is classified as “undercapitalized.” See “Federal Savings Association Regulation –

Prompt Corrective Regulatory Action.”

Stock Holding Company Subsidiary Regulation.

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Waivers of Dividends by First Federal MHC .

Federal Reserve Board regulations require First Federal MHC to notify the Federal Reserve Board if it proposes to waive the right

to receive dividends declared by Kentucky First.

The Dodd-Frank Act specified that dividends may be waived if certain conditions are met,

including that the Federal Reserve Board does not object after being given written notice of the dividend and proposed waiver.

Reserve Board may not object to such a waiver (i) if the mutual holding company involved has, prior to December 1, 2009, reorganized into

a mutual holding company structure, engaged in a minority stock offering and waived dividends it had a right to receive;

(ii) the board

of directors of the mutual holding company expressly determines that a waiver of the dividend is consistent with its fiduciary duties

to members and (iii) the waiver would not be detrimental to the safe and sound operation of the savings association subsidiaries of the

holding company.

Beginning with the dividend paid in September 2012, First Federal MHC has annually sought member approval to obtain Federal

Reserve Board approval to waive the MHC’s dividends from the Company.

This effort has been successful each year, including an approval

in 2023, which will cover quarterly dividends of $0.10 per common share through May 2024.

It is expected that First Federal MHC will continue

to waive future dividends, except to the extent dividends are needed to fund First Federal MHC’s continuing operations, subject

to the ability of First Federal MHC to obtain regulatory approval of its requests to waive dividends and to its ability to obtain member

approval of dividend waivers.

For more information, see Item 1A, “Risk Factors – Our ability to pay dividends is subject

to the ability of First Federal of Hazard and First Federal of Kentucky to make capital distributions to Kentucky First and the waiver

of dividends by First Federal MHC.”

Federal Reserve Board regulations require First Federal MHC to notify

the Federal Reserve Board if it proposes to waive the right to receive dividends declared by Kentucky First.

The Dodd-Frank Act specified

that dividends may be waived if certain conditions are met, including that the Federal Reserve Board does not object after being given

written notice of the dividend and proposed waiver.

The Federal Reserve Board may not object to such a waiver (i) if the mutual holding

company involved has, prior to December 1, 2009, reorganized into a mutual holding company structure, engaged in a minority stock offering

and waived dividends it had a right to receive;

(ii) the board of directors of the mutual holding company expressly determines that a

waiver of the dividend is consistent with its fiduciary duties to members and (iii) the waiver would not be detrimental to the safe and

sound operation of the savings association subsidiaries of the holding company.

Beginning with the dividend paid in September 2012, First

Federal MHC has annually sought member approval to obtain Federal Reserve Board approval to waive the MHC’s dividends from the Company.

In January 2024, the board announced that due to low income at the banks, the dividend to shareholders would be suspended indefinitely,

and First Federal MHC suspended efforts to seek member approval to obtain the dividend waiver in the coming year.

If at such time as Kentucky

First has sufficient income and liquidity to pay future dividends, it is expected that that First Federal MHC will once again solicit

member approval of the dividend waiver.

For more information, see Item 1A, “Risk Factors – Our ability to pay dividends

is subject to the ability of First Federal of Hazard and First Federal of Kentucky to make capital distributions to Kentucky First and

the waiver of dividends by First Federal MHC.”

Conversion of First Federal MHC to Stock

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in us immediately before conversion.

Under Federal Reserve Board regulations, stockholders other than First Federal MHC would not be diluted

because of any dividends waived by First Federal MHC (and waived dividends would not be considered in determining an appropriate exchange

ratio, provided that the mutual holding company involved was formed, engaged in a minority offering and waived dividends prior to December

1, 2009), in the event First Federal MHC converts to stock form.

First Federal MHC was formed, engaged in a minority stock offering and

waived dividends prior to December 1, 2009.

The total number of shares held by stockholders other than First Federal MHC after a conversion

transaction also would be increased by any purchases by stockholders other than First Federal MHC in the stock offering conducted as part

of the conversion transaction.

Under Federal Reserve Board regulations, stockholders other than First Federal MHC would not be

diluted because of any dividends waived by First Federal MHC (and waived dividends would not be considered in determining an appropriate

exchange ratio, provided that the mutual holding company involved was formed, engaged in a minority offering and waived dividends prior

to December 1, 2009), in the event First Federal MHC converts to stock form.

First Federal MHC was formed, engaged in a minority stock

offering and waived dividends prior to December 1, 2009.

The total number of shares held by stockholders other than First Federal MHC

after a conversion transaction also would be increased by any purchases by stockholders other than First Federal MHC in the stock offering

conducted as part of the conversion transaction.

Acquisition of Control.

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state legislatures may introduce legislation that will impact the financial services industry.

In addition, federal banking agencies may

introduce regulatory initiatives that are likely to impact the financial services industry, generally.

Such initiatives may include proposals

to expand or contract the powers of savings and loan holding companies and/or depository institutions or proposals to substantially change

the financial institution regulatory system.

Such legislation could change banking statutes and the operating environment of the Company

in substantial and unpredictable ways.

If enacted, such legislation could increase or decrease the cost of doing business, limit or expand

permissible activities, or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions.

The Company cannot predict whether any such legislation will be enacted, or, if enacted, the effect that it or any implementing regulations

would have on the financial condition or results of operations of the Company.

A change in statutes, regulations, or regulatory policies

applicable to Kentucky First or any of its subsidiaries could have a material effect on the business of the Company.

In addition, federal banking agencies

may introduce regulatory initiatives that are likely to impact the financial services industry, generally.

Such initiatives may include

proposals to expand or contract the powers of savings and loan holding companies and/or depository institutions or proposals to substantially

change the financial institution regulatory system.

Such legislation could change banking statutes and the operating environment of the

Company in substantial and unpredictable ways.

If enacted, such legislation could increase or decrease the cost of doing business, limit

or expand permissible activities, or affect the competitive balance among banks, savings associations, credit unions, and other financial

institutions.

The Company cannot predict whether any such legislation will be enacted, or, if enacted, the effect that it or any implementing

regulations would have on the financial condition or results of operations of the Company.

A change in statutes, regulations, or regulatory

policies applicable to Kentucky First or any of its subsidiaries could have a material effect on the business of the Company.

Federal and State Taxation

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The Tax Cuts and Jobs Act also added limitations on the deductibility of business interest expense.

While this limitation should not impact

the deductibility of the Company’s interest expense, the limitation could impact our commercial borrowers.

The Tax Cuts and Jobs

Act also includes changes to personal income taxes, including:

(i) a lower limit on the deductibility of mortgage interest on single-family

residential mortgages;

While this limitation should not

impact the deductibility of the Company’s interest expense, the limitation could impact our commercial borrowers.

and Jobs Act also includes changes to personal income taxes, including:

(i) a lower limit on the deductibility of mortgage interest

on single-family residential mortgages;

(ii) the elimination of interest deductions for home equity loans;

and (iii) a limitation on the deductibility

of property taxes and state and local income taxes.

and (iii) a limitation on

the deductibility of property taxes and state and local income taxes.

For fiscal years beginning before June 30,

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amount distributed, but not more than the amount of those reserves, will be included in First Federal of Kentucky’s taxable income.

Non-dividend distributions include distributions in excess of First Federal of Kentucky’s current and accumulated earnings and profits,

as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation.

Dividends paid out of First Federal of Kentucky’s current or accumulated earnings and profits will not be so included in First Federal

of Kentucky’s taxable income.

Non-dividend distributions include distributions in excess of First Federal of Kentucky’s current and accumulated earnings and

profits, as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete

Dividends paid out of First Federal of Kentucky’s current or accumulated earnings and profits will not be so included

in First Federal of Kentucky’s taxable income.

The amount of additional taxable income triggered

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State Taxation.

Although First Federal

MHC and Kentucky First are subject to the Kentucky corporation income tax and state corporation license tax (franchise tax), the corporation

license tax is repealed effective for tax periods ending on or after December 31, 2005.

Gross income of corporations subject to Kentucky

income tax is similar to income reported for federal income tax purposes except that dividend income, among other income items, is exempt

from taxation.

For First Federal MHC and Kentucky First tax years beginning July 1, 2005, the corporations are subject to an alternative

minimum income tax.

Although First

Federal MHC and Kentucky First are subject to the Kentucky corporation income tax and state corporation license tax (franchise tax),

the corporation license tax is repealed effective for tax periods ending on or after December 31, 2005.

Gross income of corporations

subject to Kentucky income tax is similar to income reported for federal income tax purposes except that dividend income, among other

income items, is exempt from taxation.

For First Federal MHC and Kentucky First tax years beginning July 1, 2005, the corporations are

subject to an alternative minimum income tax.

Corporations must pay the greater of the income tax, the alternative tax or $175.

The corporations can choose between

two methods to calculate the alternative minimum;

9.5 cents per $100 of the corporation’s gross receipts, or 75 cents per $100 of

the corporation’s Kentucky gross profits.

Kentucky gross profits means Kentucky gross receipts reduced by returns and allowances

attributable to Kentucky gross receipts, less Kentucky cost of goods sold.

The corporations, in their capacity as holding companies for

financial institutions, do not have a material amount of cost of goods sold.

Although the corporate license tax rate is 0.21% of total

capital employed in Kentucky, a bank holding company, as defined in Kentucky Revised Statutes 287.900, is allowed to deduct from its taxable

capital, the book value of its investment in the stock or securities of subsidiaries that are subject to the bank franchise tax.

First Federal of Hazard and First Federal of Kentucky

are subject to both the Kentucky corporation income tax and corporation license tax.

On March 26, 2019, HB 354 was enacted which sunsets

the Savings and Loan Tax after 2020 and subjects financial institutions to the corporate income tax beginning January 1, 2021.

January 1, 2021, the Savings and Loan Tax no longer applies to financial institutions.

The corporations

can choose between two methods to calculate the alternative minimum;

9.5 cents per $100 of the corporation’s gross receipts, or

75 cents per $100 of the corporation’s Kentucky gross profits.

Kentucky gross profits means Kentucky gross receipts reduced by

returns and allowances attributable to Kentucky gross receipts, less Kentucky cost of goods sold.

The corporations, in their capacity

as holding companies for financial institutions, do not have a material amount of cost of goods sold.

Although the corporate license

tax rate is 0.21% of total capital employed in Kentucky, a bank holding company, as defined in Kentucky Revised Statutes 287.900, is

allowed to deduct from its taxable capital, the book value of its investment in the stock or securities of subsidiaries that are subject

to the bank franchise tax.

First Federal of Hazard and First Federal of

Kentucky are subject to both the Kentucky corporation income tax and corporation license tax.

On March 26, 2019, HB 354 was enacted which

sunsets the Savings and Loan Tax after 2020 and subjects financial institutions to the corporate income tax beginning January 1, 2021.

Effective January 1, 2021, the Savings and Loan Tax no longer applies to financial institutions.

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-K

Item 1. Business