What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-14 compared with 2024-11-14 · 228 added, 146 removed, 204 unchanged (65% of the section changed)

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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;

our ability to receive any required regulatory approval or non-objection to pay dividends to shareholder;

ability to pay dividends from First Federal Savings and Loan Association of Hazard and First Federal Savings Bank of Kentucky to the Company

in order for the Company to pay dividends 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 for the year ended June 30, 2024.

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.

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;

competitive 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;

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 for the year ended June 30, 2024 and in this Form 10-Q.

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.

Company was incorporated as a mid-tier holding company under the laws of the United States on March 2, 2005, upon the completion of the

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and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities.

Kentucky First Federal Bancorp

Kentucky First Federal

Regulatory Developments

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

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

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.

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changes in cash flow are estimated based on hypothetical instantaneous and permanent increases and decreases in market interest rates.

In March 2022 the Federal Open Market Committee (“FOMC”)

of the Federal Reserve Bank began raising the target range for the fed funds rate of interest and since that time has raised the short-term

interest rate by 500 basis points.

At September 30, 2023, we believe our risk associated with rising interest rates was moderate.

IRR model indicated that at June 30, 2023, our EVE was approximately 16.5%, despite the historic interest rate increases during the previous

twelve months.

Although general market participants believe that the FOMC will now pause interest rate increases for a period of time,

our June 30, 2023 EVE is anticipated to be approximately 14.6% and 11.9% under sudden and sustained increase in prevailing market interest

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

Computations or prospective effects of hypothetical interest rate changes

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

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

Further, the computations do not contemplate any actions the

Banks may undertake in response to changes in interest rates.

Certain shortcomings are inherent in this method of computing EVE.

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

to changes in market interest rates.

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

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

General market participants believe that the FOMC

will now continue interest rate decreases.

Our December 31, 2024 EVE is anticipated to increase by approximately 6.4% and 4.8% under sudden

and sustained decrease in prevailing market interest rates of 100 basis points and 200 basis points, respectively.

The company continues

to strive for acceptable EVE in both increasing and decreasing interest rate environments.

Computations or prospective effects of hypothetical

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

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

Further, the computations do not contemplate any

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

Certain shortcomings are inherent in this method of computing

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

degrees to changes in market interest rates.

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

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

Kentucky First Federal Bancorp

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The following table represents the average balance

sheets for the three-month periods ended September 30, 2024 and 2023, along with the related calculations of tax-equivalent net interest

sheets for the six-month periods ended December 31, 2024 and 2023, along with the related calculations of tax-equivalent net interest

income, net interest margin and net interest spread for the related periods.

Three Months Ended September 30,

Six Months Ended December 31,

(Dollars in thousands)

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Total interest-earning assets

Allowance for loan losses

Allowance for credit losses

Non-interest-earning assets

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Average interest-earning assets to average interest-bearing liabilities

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

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

Also includes loans on nonaccrual status.

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AND RESULTS OF OPERATIONS (continued)

Average Balance Sheets

The following table represents the average balance

sheets for the three-month periods ended December 31, 2024 and 2023, along with the related calculations of tax-equivalent net interest

income, net interest margin and net interest spread for the related periods.

Three Months Ended December 31,

(Dollars in thousands)

Interest-earning assets:

Mortgage-backed securities

Other securities

Other interest-earning assets

Total interest-earning assets

Allowance for credit losses

Non-interest-earning assets

Interest-bearing liabilities:

Demand deposits

Certificates of deposit

Total deposits

Total interest-bearing liabilities

Noninterest-bearing demand deposits

Noninterest-bearing liabilities

Total liabilities

Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest spread

Net interest margin

Average interest-earning assets to average interest-bearing liabilities

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

Also includes loans on nonaccrual status.

Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Discussion of Financial Condition Changes from

June 30, 2024 to September 30, 2024

June 30, 2024 to December 31, 2024

Financial Position and Results of Operations

At September 30, 2024 the Company and the Banks were considered well-capitalized

with capital ratios in excess of regulatory requirements.

However, an extended economic recession could adversely impact the Company’s

and the Banks’ capital position and Company in its Current Report on Form 8-K filed on August 15, 2024, in addition to the formal

written Agreement, the OCC has also imposed individual minimum capital requirements (“IMCRs”) on First Federal Savings Bank

The IMCRs require First Federal Savings Bank 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 least 9.0%.

As of September

30, 2024, First Federal Savings Bank of Kentucky’s common equity tier 1 capital ratio was 16.11%, its tier 1 capital ratio was 16.11%,

its total capital ratio was 16.11%, and its leverage ratio was 10.07%.

At September 30, 2024, the

Company’s assets totaled $375.7 million, an increase of $682,000, or 0.2%, from total assets at June 30, 2024, due primarily to

the increase in loans held for sale, as well as an increase in cash and due from financial institutions of $963,000 or 50.3%.

At December 31, 2024 the Company and the Banks

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

However, an extended economic recession could

adversely impact the Company’s and the Banks’ capital position and Company in its Current Report on Form 8-K filed on August

15, 2024, in addition to the formal written Agreement, the OCC has also imposed individual minimum capital requirements (“IMCRs”)

on First Federal Savings Bank of Kentucky.

The IMCRs require First Federal Savings Bank 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 least 9.0%.

As of December 31, 2024, First Federal Savings Bank of Kentucky’s common equity tier 1 capital ratio was

16.92%, its tier 1 capital ratio was 16.92%, its total capital ratio was 16.92%, and its leverage ratio was 10.13%.

At December 31, 2024, the

Company’s assets totaled $374.2 million, a decrease of $760,000, or 0.2%, from total assets at June 30, 2024, due primarily to the

decrease in loans, as well as a decrease in securities available-for-sale of $1.0 million or 10.6%.

Cash and cash equivalents:

and cash equivalents overall decreased $1.0 million or 5.6% to $17.3 million at September 30, 2024.

Most of the Company’s cash and

cash equivalents are held in interest-bearing demand deposits.

and cash equivalents overall increased $2.7 million or 14.7% to $21.0 million at December 31, 2024.

Most of the company’s cash

and cash equivalents are held in interest-bearing demand deposits, although the company began utilizing fed funds sold more in the quarter

ended December 31, 2024.

Fed funds sold totaled $6.9 million at December 31, 2024, an increase of $6.2 million or 885.5%, compared to

June 30, 2024.

Investment securities:

30, 2024, our securities portfolio, which consisted of mortgage-backed securities, decreased $246,000 or 2.5% and totaled $9.6 million,

31, 2024, our securities portfolio, which consisted of mortgage-backed securities, decreased $1.0 million or 10.6% and totaled $8.8 million,

compared to June 30, 2024.

Loans, net and loans

held-for-sale in the aggregate increased $1.5 million or 0.5% and totaled $333.2 million and $1.5 million, respectively at September 30,

Loans receivable, net, increased by $150,000 or 0.1% to $333.2 million at September 30, 2024.

held-for-sale in the aggregate decreased $2.8 million or 0.8% and totaled $330.2 million and $116,000, respectively at December 31, 2024.

Loans receivable, net, decreased by $2.8 million or 0.7% to $330.2 million at December 31, 2024.

Loans held-for-sale increased to $116,000

million at September 30, 2024.

Management continues to look for high-quality loans to add to its portfolio and will continue to emphasize

loan originations to the extent that it is profitable, prudent and consistent with our interest rate risk strategies.

at December 31, 2024.

Management continues to look for high-quality loans to add to its portfolio and will continue to emphasize loan

originations to the extent that it is profitable, prudent and consistent with our interest rate risk strategies.

Because market interest

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Non-Performing and Classified Loans:

September 30, 2024, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of approximately $4.3

December 31, 2024, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of approximately $3.0

million, or 0.9% of total loans compared to $3.9 million or 1.2%, of total loans at June 30, 2024.

The Company’s ACL totaled $2.1

million at September 30, 2024 and the ACL totaled $2.1 million at June 30, 2024, respectively.

The ACL at September 30, 2024, represented

million at December 31, 2024 and the ACL totaled $2.1 million at June 30, 2024, respectively.

The ACL at December 31, 2024, represented

70.9% of nonperforming loans and 0.6% of total loans, while at June 30, 2024, ALLL represented 54.6% of nonperforming loans and 0.6% of

The Company had $5.2 million in assets classified

as substandard for regulatory purposes at September 30, 2024, including real estate owned (“REO”) of $10,000.

as substandard for regulatory purposes at December 31, 2024, including real estate owned (“REO”) of $10,000.

Classified loans

as a percentage of total loans (including loans acquired) was 2.0% and 2.1% at September 30, 2024 and June 30, 2024, respectively.

substandard loans, 100.0% were secured by real estate on which the Banks have priority lien position.

as a percentage of total loans (including loans acquired) was 1.6% and 2.1% at December 31, 2024 and June 30, 2024, respectively.

Of substandard

loans, 100.0% were secured by real estate on which the Banks have priority lien position.

The table below shows the aggregate amounts of

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(dollars in thousands)

September 30,

Substandard assets

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Total classified assets

At September 30, 2024, the Company’s real

estate acquired through foreclosure represented 0.2% of substandard assets compared to 0.1% at June 30, 2024.

During the period presented

the Company made no loans to facilitate the purchase of its other real estate owned by qualified buyers.

Loans to facilitate the sale

of other real estate owned, which were included in substandard loans, totaled $0 and $0 at September 30, 2024 and June 30, 2024, respectively.

At December 31, 2024, the Company’s real estate acquired through

foreclosure represented 0.2% of substandard assets compared to 0.1% at June 30, 2024.

During the period presented the Company made no

loans to facilitate the purchase of its other real estate owned by qualified buyers.

Loans to facilitate the sale of other real estate

owned, which were included in substandard loans, totaled $0 at December 31, 2024 and June 30, 2024, respectively.

Kentucky First Federal Bancorp

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Discussion of Financial Condition Changes from

June 30, 2024 to September 30, 2024 (continued)

June 30, 2024 to December 31, 2024 (continued)

The following table presents the aggregate carrying

value of REO at the dates indicated:

September 30, 2024

December 31, 2024

June 30, 2024

One-to-four-family

At September 30, 2024 and June 30, 2024, the Company

At December 31, 2024 and June 30, 2024, the Company

had $696,000 and $797,000 of loans classified as special mention, respectively.

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close attention.

Total liabilities

increased $456,000, or 0.1% to $327.4 million at September 30, 2024, as Federal Home Loan Bank advances increased $1.1 million or 1.5%

to $70.1 million and advances to borrowers for taxes and insurance increased $333,000 or 36.6%.

Certificates of deposit decreased $350,000 or

0.2% and totaled $176.2 million at September 30, 2024, of which $46.0 million were brokered deposits.

Total liabilities decreased

$818,000, or 0.3% to $326.2 million at December 31, 2024, as Federal Home Loan Bank advances decreased $7.2 million or 10.4% to $61.8

million and advances to borrowers for taxes and insurance decreased $703,000 or 77.3%.

Certificates of deposit increased $10.3 million

or 5.9% and totaled $186.9 million at December 31, 2024, of which $44.0 million were brokered deposits.

Demand deposit accounts decreased

$753,000 or 2.3% and totaled $31.4 million at quarter end.

Savings accounts decreased $121,000 or 0.3% and totaled $47.3 million at the

end of the current period.

The cost of liabilities has been increasing rapidly due to higher costs of both wholesale and retail funding.

Continued increases in liability costs, especially for wholesale funds, will primarily be driven by future increases in market rates by

the Federal Reserve.

It is believed that we are near the peak of this rate cycle which, if so, will likely slow the increasing costs

of our liabilities.

$5.0 million or 15.7% and totaled $27.1 million at quarter end.

Savings accounts increased $1.6 million or 3.4% and totaled $49.0 million

at the end of the current period.

Total deposits increased $6.9 million as the Company attempts to reduce reliance on FHLB advances.

Shareholders’ Equity:

30, 2024, the Company’s shareholders’ equity totaled $48.2 million, a, increase of $226,000 or 0.5% from the June 30, 2024.

The increase in shareholders’ equity was primarily associated with accumulated other comprehensive loss decreasing $226,000 or 71.7%

from a loss of $336,000 at June 30, 2024 to a loss of $95,000 at September 30, 2024.

31, 2024, the Company’s shareholders’ equity totaled $48.1 million, an increase of $58,000 or 0.1% from June 30, 2024.

increase in shareholders’ equity was primarily associated with accumulated other comprehensive loss decreasing $60,000 or 17.9%

from a loss of $336,000 at June 30, 2024 to a loss of $276,000 at December 31, 2024.

On January 16, 2024, the Company announced the

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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;

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 OCC;

First Federal Savings Bank of

Kentucky’s ability to satisfy the IMCR’s imposed by the OCC;

the ability of First Federal MHC to receive approval of its members

to waive the payment of any Company dividends to First Federal MHC;

and our ability to successfully execute our strategy to increase earnings

and core deposits, reduce reliance on higher cost funding sources and shift more of our loan portfolio towards higher-earning loans.

“Risk Factors” in Part II, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended June 30, 2024 for

additional discussion regarding dividends.

regulatory approval or non-objection to pay dividends or 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;

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 OCC;

Federal Savings Bank of Kentucky’s ability to satisfy the IMCR’s imposed by the OCC;

the ability of First Federal MHC to receive

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

and our ability to successfully execute our

strategy to increase earnings and core deposits, reduce reliance on higher cost funding sources and shift more of our loan portfolio towards

higher-earning loans.

See “Risk Factors” in Part II, Item 1A, of the Company’s Annual Report on Form 10-K for the year

ended June 30, 2024 for additional discussion regarding dividends.

Kentucky First Federal Bancorp

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AND RESULTS OF OPERATIONS (continued)

Comparison of Operating Results for the Three-month

Periods Ended September 30, 2024 and 2023

Comparison of Operating Results for the Six-month

Periods Ended December 31, 2024 and 2023

Net loss totaled $2,000 or ($0.00) diluted earnings

per share for the three months ended September 30, 2024, an increase of $160,000 or 91.4% from net loss of $175,000 or ($0.02) diluted

earnings per share for the same period in 2023.

The decrease in net loss for the quarter ended September 30, 2024, was primarily attributable

per share for the six months ended December 31, 2024, an increase of $534,000 or 99.6% from net loss of $536,000 or ($0.07) diluted earnings

per share for the same period in 2023.

The increase in net earnings for the six-months ended December 31, 2024, was primarily attributable

to increased net interest income, and higher non-interest income, which were partially offset by lower income tax benefit.

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Interest income increased

$1.7 million or 22.7%, while interest expense increased $1.2 million or 26.8% to $5.5 million for the six-months recently ended.

the last two years, the repricing of many of our assets has been slowed by contractual limits on rate changes, whereas the cost of most

liabilities did not have this constraint.

As market rates have steadied and even fallen slightly, the increase in cost of liabilities

has slowed while we have begun to see our increase in interest income be greater than our increase in interest expense.

The average rate earned on interest-earning assets

increased 74 basis points to 5.17% and was the primary reason for the increase in interest income, although average interest-earning assets

also increased $17.6 million or 5.1% to $363.7 million for the recently-ended six months.

The increase in interest income was due primarily

to an increase of $1.6 million or 22.8% in interest income from loans, which totaled $8.7 million for the period.

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

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

The average balance of loans increased

$13.5 million or 4.2% to $334.6 million for the six months ended December 31, 2024, while the average rate increased 79 basis points to

Although the average balance of interest-bearing

liabilities increased $20.1 million or 6.9% to $310.4 million for the six months just ended, the average rate paid increased 56 basis

points to 3.54%.

The cost of liabilities increased rapidly due to higher costs of both wholesale and retail funding.

decrease in interest rates have allowed our liabilities to decline as well.

Net interest spread increased from 1.44% for the

prior year six-month period to 1.63% for the six-month period ended December 31, 2024.

Provision for Credit Losses

Management determined that a $15,000 provision

for credit loss was prudent during the recently-ended six-month period.

Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Comparison of Operating Results for the Six-month

Periods Ended December 31, 2024 and 2023 (continued)

Non-interest Income

Non-interest income increased $187,000 or 154.5%

to $308,000 for the six-months ended December 31, 2024 compared to the prior year period, primarily because of an increase in net gains

from sale of loans of $135,000 or 2250.0%.

Recently, the market has become more conducive to the sale of fixed rate mortgages to the secondary

Non-interest Expense

Non-interest expense increased $83,000 or 2.0%

to $4.22 million for the six months ended December 31, 2024, primarily due to higher other non-interest expense due mostly to increased

legal expenses.

Income tax benefit decreased $149,000 or 92.0%

to an income tax benefit of $2,000 for the six months ended December 31, 2024, compared to the prior year period due to decreased losses.

The effective tax rates for the six-month periods ended December 31, 2024 and 2023 were 86.7% and 23.2%, respectively.

Included in net

income is earnings of $43,000 on bank-owned life insurance which is non-taxable.

Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Comparison of Operating Results for the Three-month

Periods Ended December 31, 2024 and 2023

Net income totaled $13,000 or $0.00 diluted earnings per share for

the three months ended December 31, 2024, an increase of $374,000 or 103.6% from net loss of $361,000 or $(0.05) diluted earnings per

share for the same period in 2023.

The increase in net earnings for the quarter ended December 31, 2024, was primarily attributable to

higher net interest income, and higher non-interest income, which were partially offset by lower income taxes.

Net Interest Income

Net interest income increased $381,000 or 23.0%

to $2.0 million due primarily to interest income increasing more than interest expense increased period to period.

Interest income increased

$857,000 or 21.8%, while interest expense increased $476,000 or 21.0% to $2.7 million for the recently-ended quarter.

Over the last two

years, the repricing of many of our assets has been slowed by contractual limits on rate changes, whereas the cost of most liabilities

did not have this constraint.

As market rates have steadied and even fallen slightly, the increase in cost of liabilities has slowed while

we have begun to see our increase in interest income be greater than our increase in interest expense.

During the unprecedented

interest rate increases seen in the market starting March 2022, our funding sources repriced more quickly than our assets repriced, due

to being liability sensitive and restrictions on maximum asset repricing amounts.

As rates have begun to plateau or even decrease, our

assets have started to reprice more quickly than our liabilities.

The average rate earned on interest-earning assets

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The average balance of loans increased

$17.4 million or 5.5% to $336.0 million for the three months ended September 30, 2024, while the average rate increased 73 basis points

Although the average balance of interest-bearing

liabilities increased $22.3 million or 7.8% to $309.5 million for the quarter just ended, the average rate paid increased 68 basis points

$9.5 million or 2.9% to $333.8 million for the three months ended December 31, 2024, while the average rate increased 84 basis points

The average balance of interest-bearing liabilities

increased $17.3 million or 5.9% to $311.1 million for the quarter just ended, and the average rate paid increased 44 basis points to 3.53%.

The cost of liabilities increased rapidly due to higher costs of both wholesale and retail funding.

We have seen interest

rate changes slow and even decrease, allowing the repricing of our liabilities to do the same.

Net interest spread increased from 1.39% for the

prior year quarterly period to 1.50% for the three-month period ended September 30, 2024.

prior year quarterly period to 1.75% for the three-month period ended December 31, 2024.

Provision for Credit Losses

Management determined that a $15,000 provision

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

Management determined that no provision for credit

loss was prudent due to our current expected credit loss analysis performed during the recently-ended quarter.

Kentucky First Federal Bancorp

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Comparison of Operating Results for the Three-month

Periods Ended September 30, 2024 and 2023 (continued)

Periods Ended December 31, 2024 and 2023 (continued)

Non-interest Income

Non-interest income increased $125,000 or 271.7%

to $137,000 for the three months ended September 30, 2024, compared to the prior year period, primarily because of an increase in net

gains on sales of loans as the demand for fixed rate loans has increased in the quarter recently ended.

to $171,000 for the recently ended quarter primarily due to increased net gain of sale on loans, increasing $74,000 or 1057.1% for the

three months recently ended.

Recently, the market has become more conducive to the sale of fixed rate mortgages to the secondary market.

Non-interest Expense

Non-interest expense increased $54,000 or 2.5%

and totaled $2.0 million for the three months ended September 30, 2024, primarily due to increased data processing charges and increased

FDIC insurance premiums.

Data processing costs increased $31,000 or 23.3%

and totaled $164,000 due to higher fees associated with expanded technology services offered to customers.

FDIC insurance premiums increased $28,000 or 80.0%

and totaled $63,000 due to overall higher rates.

First Federal Savings Bank of Kentucky also expects higher FDIC insurance costs due to

the Agreement with the OCC.

The continued use of brokered deposits will also cause increased FDIC insurance costs.

Income Tax Benefit

Income tax benefit decreased $63,000 or 91.3% from a benefit of $69,000

for the three months ended September 30, 2023, to a benefit of $6,000 for the recently-ended period.

and totaled $2.2 million for the three months ended December 31, 2024, primarily due to increased other non-interest expense increasing

$123,000 due to increased legal expense.

Income taxes benefit decreased $87,000 or 92.6% from a benefit of $94,000

for the three months ended December 31, 2023, to a benefit of $7,000 for the recently-ended period.

The effective tax rates for the three-month

periods ended September 30, 2024 and 2023 were 28.6% and 28.3%, respectively.

periods ended December 31, 2024 and 2023, were -116.7% and 20.7%, respectively.

Included in net income is earnings of $22,000 on bank-owned

life insurance which is non-taxable.

Kentucky First Federal Bancorp

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis