What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2025-02-14 · 263 added, 249 removed, 183 unchanged (74% of the section changed)

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Forward-Looking Statements

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

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.

These 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;

statements regarding

our business plans, prospects, growth and operating strategies;

statements regarding the quality of our loan and investment portfolios;

and estimates of our risks and future costs and benefits.

Kentucky First Federal Bancorp’s actual results, performance

or achievements may materially differ from those expressed or implied in the forward-looking 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;

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 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;

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;

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 to pay dividends to shareholders;

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;

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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 impacts of tariffs, sanctions and other trade policies of the United States and its global trading counterparts;

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;

the ability to attract, develop and retain qualified

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

reorganization of First Federal of Hazard into a federal mutual holding company form of organization (the “Reorganization”).

On that date, Kentucky First Federal also completed its minority stock offering and its concurrent acquisition of Frankfort First Bancorp,

(“Frankfort First Bancorp”) and its wholly owned subsidiary, First Federal of Kentucky, Frankfort Kentucky (“First

Federal of Kentucky”) (the “Merger”).

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.

December 31, 2012, the Company acquired CKF Bancorp, Inc., a savings and loan holding company which operated three banking locations in

Boyle and Garrard Counties in Kentucky.

In accounting for the transaction, the assets and liabilities of CKF Bancorp were recorded on

the books of First Federal of Kentucky in accordance with accounting standard ASC 805, Business Combinations.

results of operations are dependent primarily on net interest income, which is the difference between the income earned on our loans and

securities and our cost of funds, consisting of the interest paid on deposits and borrowings.

Results of operations are also affected

by the provision for losses on loans and service charges and fees collected on our deposit accounts.

Our general, administrative, and

other expense primarily consists of employee compensation and benefits expense, occupancy and equipment expense, data processing expense,

other operating expenses and state and federal income taxes.

Results of operations are also significantly affected by general economic

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

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 and in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2024 and for the period

ended December 31, 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

The 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 reorganization of First Federal of Hazard into

a federal mutual holding company form of organization (the “Reorganization”).

On that date, Kentucky First Federal also completed

its minority stock offering and its concurrent acquisition of Frankfort First Bancorp, Inc.

(“Frankfort First Bancorp”) and

its wholly owned subsidiary, First Federal of Kentucky, Frankfort Kentucky (“First Federal of Kentucky”) (the “Merger”).

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, the Company acquired CKF

Bancorp, Inc., a savings and loan holding company which operated three banking locations in Boyle and Garrard Counties in Kentucky.

accounting for the transaction, the assets and liabilities of CKF Bancorp were recorded on the books of First Federal of Kentucky in accordance

with accounting standard ASC 805, Business Combinations.

Our results of operations are dependent primarily

on net interest income, which is the difference between the income earned on our loans and securities and our cost of funds, consisting

of the interest paid on deposits and borrowings.

Results of operations are also affected by the provision for losses on loans and service

charges and fees collected on our deposit accounts.

Our general, administrative, and other expense primarily consists of employee compensation

and benefits expense, occupancy and equipment expense, data processing expense, other operating expenses and state and federal income

Results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest

rates, government policies and actions of regulatory authorities.

Kentucky First Federal

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Regulatory Developments

Regarding First Federal of Kentucky

August 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.

On August 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.

§ 5.3, 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 least 9.0%.

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

§ 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

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 least 9.0%.

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:

create 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 actions;

3 unchanged sentences

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

Kentucky First Federal

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

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 Exhibit 10.1

to the Company Current Report on Form 8-K filed with the Securities and Exchange Commission on August 15, 2024 and 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 the Company’s Annual Report on Form 10-K filed with

the Securities and Exchange Commission on October 3, 2024.

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 Exhibit 10.1 to the Company Current Report on Form 8-K filed with the Securities and Exchange Commission on August 15,

2024 and 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 the Company’s Annual Report

on Form 10-K filed with the Securities and Exchange Commission on October 3, 2024.

Asset/Liability Management

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

General market participants believe that the

FOMC will now continue interest rate decreases.

Our March 31, 2025 EVE is anticipated to increase by approximately 5.9% and 3.2%

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

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 run-offs.

These computations should not be relied upon as indicative of actual

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.

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.

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 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.

Six Months Ended December 31,

sheets for the nine-month periods ended March 31, 2025 and 2024, along with the related calculations of tax-equivalent net interest income,

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

Nine Months Ended March 31,

(Dollars in thousands)

23 unchanged sentences

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,

Average Balance Sheets (continued)

The following table represents the average balance sheets for the three-month

periods ended March 31, 2025 and 2024, along with the related calculations of tax-equivalent net interest income, net interest margin

and net interest spread for the related periods.

Three Months Ended March 31,

(Dollars in thousands)

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Mortgage-backed securities

Other securities

Other interest-earning assets

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Discussion of Financial Condition Changes from

June 30, 2024 to December 31, 2024

June 30, 2024 to March 31, 2025

Financial Position and Results of Operations

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%.

At March 31, 2025 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%.

31, 2025, First Federal Savings Bank of Kentucky’s common equity tier 1 capital ratio was 16.72%, its tier 1 capital ratio was 16.72%,

its total capital ratio was 16.72%, and its leverage ratio was 10.13%.

At March 31, 2025, the

Company’s assets totaled $380.7 million, an increase of $5.8 million, or 1.5%, from total assets at June 30, 2024, due primarily

to the increase in cash and cash equivalents, as well as an increase in accrued interest receivable of $258,000 or 22.1%.

Cash and cash equivalents:

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.

Cash and cash equivalents overall increased $9.5 million or 51.8% to

$27.8 million at March 31, 2025.

Most of the Company’s cash and cash equivalents are held in fed funds sold that the company began

utilizing more in the quarter ended December 31, 2024.

Fed funds sold totaled $17.1 million at March 31, 2025, an increase of $16.4 million

compared to June 30, 2024.

Cash and due from financial institutions increased $666,000 or 34.8% while interest-bearing demand deposits

decreased $7.6 million on 48.3% compared to June 30, 2024.

Investment securities:

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compared to June 30, 2024.

Loans, net and loans

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

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

rates have become more favorable, the Company has had more success in selling mortgages into the secondary market, which has led to an

increase in loans held-for-sale.

Loans, net and

loans held-for-sale in the aggregate decreased $2.3 million or 0.7% and totaled $330.6 million and $272,000, respectively at March

Loans receivable, net, decreased by $2.5 million or 0.7% to $330.6 million at March 31, 2025.

Loans held-for-sale

increased by $162,000 at March 31, 2025.

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

Because market interest rates have become more favorable, the Company has had more success in selling mortgages into the

secondary market, which has led to an increase in loans held-for-sale.

Non-Performing and Classified Loans:

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 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

At March 31, 2025, the Company had non-performing loans (loans 90 or

more days past due or on nonaccrual status) of approximately $3.8 million, or 1.1% of total loans compared to $3.9 million or 1.2%, of

total loans at June 30, 2024.

The Company’s ACL totaled $2.2 million at March 31, 2025 and the ACL totaled $2.1 million at June

30, 2024, respectively.

The ACL at March 31, 2025, represented 56.9% of nonperforming loans and 0.6% of total loans, while at June 30,

2024, ACL represented 54.6% of nonperforming loans and 0.6% of total loans.

The Company had $6.0 million in assets classified

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

as substandard for regulatory purposes at March 31, 2025, including real estate owned (“REO”) of $10,000.

Classified loans

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

as a percentage of total loans (including loans acquired) was 1.8% and 2.1% at March 31, 2025 and June 30, 2024, respectively.

Of substandard

6 unchanged sentences

Total classified assets

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.

At March 31, 2025, 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 March 31, 2025 and June 30, 2024, respectively.

Kentucky First Federal Bancorp

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Discussion of Financial Condition Changes from

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

June 30, 2024 to March 31, 2025 (continued)

The following table presents the aggregate carrying

value of REO at the dates indicated:

December 31, 2024

March 31, 2025

June 30, 2024

One-to-four-family

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

At March 31, 2025 and June 30, 2024, the Company

had $681,000 and $797,000 of loans classified as special mention, respectively.

2 unchanged sentences

close attention.

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

$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.

Total liabilities increased

$5.6 million, or 1.7% to $332.6 million at March 31, 2025, as deposits increased $21.2 million or 8.3%.

Certificates of deposit increased

$22.1 million or 12.5% and totaled $198.6 million at March 31, 2025, of which $44.0 million were brokered deposits.

Demand deposit accounts

decreased $2.4 million or 7.5% and totaled $29.8 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.

Accrued interest payable increased $468,000 or 265.9%.

Federal Home Loan Bank advances decreased $15.6

million or 22.6% to $53.4 million at March 31, 2025 as the company continues to decrease reliance on Federal Home Loan Bank advances.

Shareholders’ Equity:

1 unchanged sentence

increase in shareholders’ equity was primarily associated with accumulated other comprehensive loss decreasing $150,000 or 44.6%

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

suspension of quarterly dividends indefinitely.

Holders of our common stock are only entitled to receive such dividends as our Board of

Directors may declare out of funds available for such payments under applicable law and regulatory guidance.

We cannot predict when or

whether the Company will be able to pay future common stock dividends and if so, the amount of any such common stock dividends.

to pay future dividends and if so at what level will also be dependent on numerous factors, including:

our ability to receive any required

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.

from a loss of $336,000 at June 30, 2024 to a loss of $186,000 at March 31, 2025.

On January 16, 2024, the Company announced the suspension of quarterly

dividends indefinitely.

Holders of our common stock are only entitled to receive such dividends as our Board of Directors may declare

out of funds available for such payments under applicable law and regulatory guidance.

We cannot predict when or whether the Company will

be able to pay future common stock dividends and if so, the amount of any such common stock dividends.

Our ability to pay future dividends

and if so at what level will also be dependent on numerous factors, including:

our ability to receive any required 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;

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 and

this Form 10-Q for additional discussion regarding dividends.

Kentucky First Federal Bancorp

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AND RESULTS OF OPERATIONS (continued)

Comparison of Operating Results for the Six-month

Periods Ended December 31, 2024 and 2023

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

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.

Comparison of Operating Results for the Nine-month

Periods Ended March 31, 2025 and 2024

Net income totaled $5,000 or $0.00 diluted earnings per share for the

nine months ended March 31, 2025, an increase of $648,000 from net loss of $643,000 or ($0.08) diluted earnings per share for the same

period in 2024.

The increase in net earnings for the nine-months ended March 31, 2025, was primarily attributable to increased net interest

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

Net Interest Income

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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.

$2.4 million or 20.4%, while interest expense increased $1.5 million or 21.8% to $8.2 million for the nine-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

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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 average rate earned on interest-earning assets increased 69 basis

points to 5.20% and was the primary reason for the increase in interest income, although average interest-earning assets also increased

$16.0 million or 4.6% to $365.5 million for the recently-ended nine months.

The increase in interest income was due primarily to an increase

of $2.2 million or 20.4% in interest income from loans, which totaled $13.2 million for the period.

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

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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

$10.9 million or 3.4% to $334.3 million for the nine months ended March 31, 2025, while the average rate increased 74 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

liabilities increased $17.8 million or 6.1% to $311.7 million for the nine months just ended, the average rate paid increased 45 basis

points to 3.51%.

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Net interest spread increased from 1.46% for the

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

prior year nine-month period to 1.69% for the nine-month period ended March 31, 2025.

Provision for Credit Losses

Management determined that a $36,000 provision

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

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

Kentucky First Federal Bancorp

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AND RESULTS OF OPERATIONS (continued)

Comparison of Operating Results for the Six-month

Periods Ended December 31, 2024 and 2023 (continued)

Comparison of Operating Results for the Nine-month

Periods Ended March 31, 2025 and 2024 (continued)

Non-interest Income

Non-interest income increased $190,000 or 95.5%

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

to $389,000 for the nine-months ended March 31, 2025 compared to the prior year period, primarily because of an increase in net gains

from sale of loans of $148,000 or 1057.1%.

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Non-interest expense increased $245,000 or 4.0%

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.

to $6.4 million for the nine-months ended Mach 31, 2025, primarily due to higher other non-interest expense due mostly to increased professional

The increase in professional fees is primarily attributable to corrective actions taken to address the provisions of the previously

disclosed agreement that First Federal Savings Bank of Kentucky entered into with the Office of the Comptroller of the Currency.

Income tax benefit decreased $194,000 or 97.0% to an income tax benefit

of $6,000 for the nine-months ended March 31, 2025, compared to the prior year period due to decreased losses.

The effective tax rates

for the nine-month periods ended March 31, 2025 and 2024 were -600.0% and -23.8%, respectively.

Included in net income is earnings of

$65,000 on bank-owned life insurance which is non-taxable.

Kentucky First Federal Bancorp

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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.

Periods Ended March 31, 2025 and 2024

Net income totaled $7,000 or $0.00 diluted earnings

per share for the three months ended March 31, 2025, an increase of $114,000 or 106.5% from net loss of $107,000 or $(0.01) diluted earnings

per share for the same period in 2024.

The increase in net earnings for the quarter ended March 31, 2025, was primarily attributable to

higher net interest income, which was partially offset by higher non-interest income.

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.

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.

Net interest income increased $366,000 or 20.7% to $2.1 million due

primarily to interest income increasing more than interest expense increased period to period.

Interest income increased $673,000 or 16.1%,

while interest expense increased $307,000 or 12.7% to $2.7 million for the recently-ended quarter.

During the 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

$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

$4.8 million or 1.5% to $333.2 million for the three months ended March 31, 2025, while the average rate increased 67 basis points to

The average balance of interest-bearing liabilities

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Net interest spread increased from 1.48% for the

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

prior year quarterly period to 1.85% for the three-month period ended March 31, 2025.

Provision for Credit Losses

Management determined that no provision for credit

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

Management determined that a provision for credit

loss of $21,000 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 December 31, 2024 and 2023 (continued)

Periods Ended March 31, 2025 and 2024 (continued)

Non-interest Income

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

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 income increased $3,000 or 3.8% to $81,000 for the recently-ended

quarter primarily due to increased net gain of sale on loans, increasing $14,000 or 175.0% for the three-months recently ended.

the market has become more conducive to the sale of fixed rate mortgages to the secondary market, although such activity slowed during

the winter months.

Non-interest Expense

Non-interest expense increased $160,000 or 7.9%

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.

and totaled $2.2 million for the three-months ended March 31, 2025, primarily due to increased outside service fees which increased $81,000

or 112.5% due to increased fees as well as engaging additional third party services.

Income tax expense increased $46,000 or 121.1% from a benefit of $38,000

for the three months ended March 31, 2024, to an expense of $8,000 for the recently-ended period.

The effective tax rates for the three-month

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

periods ended March 31, 2025 and 2024, were 53.3% and -26.2%, respectively.

Included in net income is earnings of $21,000 on bank-owned

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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