What changed in this filing

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Item 1A. Risk Factors

2025-09-30 compared with 2024-10-03 · 231 added, 229 removed, 327 unchanged (58% of the section changed)

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Board’s Open Market Committee (“FOMC”) started raising interest rates to combat elevated inflation and a strong labor

Rates continued to increase through August 2023.

The increase in interest rates has caused our net interest income to

Net interest income decreased $1.8 million or 20.3% compared to the fiscal year ended June 30, 2023 primarily due to an increase

in interest expense of $5.4 million or 137.9%, offset somewhat by an increase in interest income $3.5 million or 27.6%.

Our funding sources

repriced more quickly during the interest rate increases than our assets.

Consequently, the increase in our interest expense was attributed

primarily to higher average rates paid on both deposits and FHLB advances, while the increase in our interest income was a combination

of both higher average balances and higher rates earned on those assets.

In September 2024, the FOMC decided to lower the target range

for the federal funds rate by 50 basis points to 4 3/4 to 5 percent.

Nevertheless, if interest rates rise in the future, our

net interest income may decline in the short term since, due to the generally shorter terms of interest-bearing liabilities, interest

expense paid on interest-bearing liabilities, increases more quickly than interest income earned on interest-earning assets, such as loans

and investments.

In addition, rising interest rates may hurt our income because of reduced demand for new loans and refinancing loans

may in turn result in reduced interest and fee income earned on new loans and loan refinancings.

Rates continued to increase through August 2023 which caused significant deterioration in our profits and asset values.

income in the year ended June 30, 2024 decreased $1.8 million or 20.3% compared to the fiscal year ended June 30, 2023.

2024, the FOMC began to lower the target range for the federal funds rate by 50 basis points and has subsequently lowered rates by another

75 basis points, as of September 17, 2025.

This has caused improvement in the company’s net interest income from $6.9 million in

the year ended June 30, 2024 to $8.3 million in the year ended June 30, 2025.

This was primarily the result of higher returns on assets

while the cost of funds continued to increase in the earlier part of the year before beginning to decline.

Nevertheless, if interest rates rise in the future,

our net interest income may decline in the short term since, due to the generally shorter terms of interest-bearing liabilities, interest

expense paid on interest-bearing liabilities, increases more quickly than interest income earned on interest-earning assets, such as

loans and investments.

In addition, rising interest rates may hurt our income because of reduced demand for new loans and refinancing

loans may in turn result in reduced interest and fee income earned on new loans and loan refinancings.

While we believe that modest interest

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rate spread until such time as our loans and investments reprice to higher levels.

Changes in interest rates also affect the value of our interest-earning

assets, and in particular our securities portfolio.

Generally, the value of fixed-rate securities fluctuates inversely with changes in

interest rates.

Unrealized gains and losses on securities available for sale are reported as separate components of equity.

in the fair value of securities available for sale resulting from increases in interest rates therefore could have an adverse effect on

stockholders’ equity.

At June 30, 2024, this decrease in fair value of the securities, otherwise known as Accumulated other comprehensive

loss totaled $336,000 or 3.4% of our securities portfolio.

Changes in interest rates also affect the value

of our interest-earning assets, and in particular our securities portfolio.

Generally, the value of fixed-rate securities fluctuates

inversely with changes in interest rates.

Unrealized gains and losses on securities available for sale are reported as separate components

Decreases in the fair value of securities available for sale resulting from increases in interest rates therefore could have

an adverse effect on stockholders’ equity.

At June 30, 2025, this decrease in fair value of the securities, otherwise known as

Accumulated other comprehensive loss totaled $145,000 or 1.5% of our securities portfolio.

Rising interest rates may adversely affect

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five- or seven-year initial fixed period.

At June 30, 2024, 83.3% of our residential real estate loan portfolio were adjustable-rate loans.

Rising interest rates could have a negative impact on our results of operations by reducing the ability of borrowers to repay their current

loan obligations as interest rates rise, the borrower’s payments rise, increasing the potential for delinquencies and defaults.

At June 30, 2025, 93.8% of our residential real estate loan portfolio was adjustable-rate

Rising interest rates could have a negative impact on our results of operations by reducing the ability of borrowers to repay

their current loan obligations as interest rates rise, the borrower’s payments rise, increasing the potential for delinquencies

and defaults.

Risks Related to Our Lending Activities

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could lead to increased costs to our customers, making it more difficult for them to repay their loans or other obligations.

High interest

rates may be needed to tame persistent inflationary price pressures, which could also push down asset prices and weaken economic activity.

A deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing

assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely

affect our business, financial condition and results of operations.

While interest

rates have declined since September 2024, higher interest rates may be needed to tame persistent inflationary price pressures, which

could also push down asset prices and weaken economic activity.

A deterioration in economic conditions in the United States and our markets

could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand

for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.

If our allowance for credit losses is not

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by real estate and disruptions in the real estate market may result in losses and hurt our earnings.

Approximately 96.1% of our loan portfolio at June 30, 2024 was comprised

of loans collateralized by real estate.

Disruptions in the real estate market could significantly impair the value of our collateral and

our ability to sell the collateral upon foreclosure.

The real estate collateral in each case provides an alternate source of repayment

in the event of default by the borrower and may deteriorate in value during the time the credit is extended.

If real estate values decline,

it will become more likely that we would be required to increase our allowance for loan losses.

If during a period of reduced real estate

values, we are required to liquidate the collateral securing a loan to satisfy the debt or to increase our allowance for credit losses,

it could materially reduce our profitability and adversely affect our financial condition.

Approximately 99.3% of our loan portfolio at

June 30, 2025 was comprised of loans collateralized by real estate.

Disruptions in the real estate market could significantly impair

the value of our collateral and our ability to sell the collateral upon foreclosure.

The real estate collateral in each case provides

an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended.

If real estate values decline, it will become more likely that we would be required to increase our allowance for loan losses.

a period of reduced real estate values, we are required to liquidate the collateral securing a loan to satisfy the debt or to increase

our allowance for credit losses, it could materially reduce our profitability and adversely affect our financial condition.

Our concentration of residential mortgage

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to increase and the value of our mortgage servicing rights usually tends to decline, also with some offsetting revenue effect.

the fiscal year ended June 30, 2024, non-interest income decreased $51,000 or 16.9% and totaled $251,000, primarily due to decreased

participation and service fee income.

the fiscal year ended June 30, 2025, non-interest income increased $249,000 or 99.2% and totaled $500,000, primarily due to increased

net gains on sales of loans of $187,000.

In addition, our results of operations are affected

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growth and prospects.

require sufficient liquidity to fund loan commitments, satisfy depositor withdrawal requests, make payments on our debt obligations as

they become due, and meet other cash commitments.

Liquidity risk is the potential that we will be unable to meet our obligations as they

become due because of an inability to liquidate assets or obtain adequate funding at a reasonable cost, in a timely manner and without

adverse conditions or consequences.

Our sources of liquidity consist primarily of cash, assets readily convertible to cash (such as investment

securities), increases in deposits, advances, as needed, from the FHLB, borrowings, as needed, from the Federal Reserve Bank of Cleveland

and other borrowings.

Our access to funding sources in amounts adequate to finance our activities or on acceptable terms could be impaired

by factors that affect our organization specifically or the financial services industry or economy in general.

Any substantial, unexpected,

and/or prolonged change in the level or cost of liquidity, or any liquidity related requirements imposed by our regulators, could impair

our ability to fund operations, pay dividends on outstanding shares of stock, enact stock repurchases, and meet our obligations as they

become due and could have a material adverse effect on our business, financial condition and results of operations.

We require sufficient liquidity to fund loan

commitments, satisfy depositor withdrawal requests, make payments on our debt obligations as they become due, and meet other cash commitments.

Liquidity risk is the potential that we will be unable to meet our obligations as they become due because of an inability to liquidate

assets or obtain adequate funding at a reasonable cost, in a timely manner and without adverse conditions or consequences.

of liquidity consist primarily of cash, assets readily convertible to cash (such as investment securities), increases in deposits, advances,

as needed, from the FHLB, borrowings, as needed, from the Federal Reserve Bank of Cleveland and other borrowings.

Our access to funding

sources in amounts adequate to finance our activities or on acceptable terms could be impaired by factors that affect our organization

specifically or the financial services industry or economy in general.

Any substantial, unexpected, and/or prolonged change in the level

or cost of liquidity, or any liquidity related requirements imposed by our regulators, could impair our ability to fund operations, pay

dividends on outstanding shares of stock, enact stock repurchases, and meet our obligations as they become due and could have a material

adverse effect on our business, financial condition and results of operations.

On January 16, 2024, the Company announced

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market price of our common stock.

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

Although we have historically declared cash dividends on our common stock, we are not required to do so, and on January 16,

2024, the Company announced the suspension of quarterly dividends indefinitely.

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.

The suspension of our common stock

dividend could adversely affect the market price of our common stock.

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 to our shareholders;

our ability to receive

regulatory approval or non-objection 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;

our ability to fully and timely address the

deficiencies that resulted in the formal Agreement that First Federal Savings Bank of Kentucky entered into with the OCC on August 13,

2024, or any other deficiencies identified by the OCC or the Federal Reserve Bank of Cleveland;

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;

and First Federal Savings Bank of Kentucky’s ability to satisfy the IMCR’s imposed by the OCC, which

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 June 30, 2025, our common equity

tier 1 capital ratio was 16.83%, its tier 1 capital ratio was 16.83%, its total capital ratio was 16.83%, and its leverage ratio was 9.97%.

For additional information on the formal Agreement that First Federal Savings Bank of Kentucky has entered into with the OCC and the IMCR’s

imposed on First Federal Savings Bank of Kentucky by the OCC, please see “Management’s Discussion and Analysis-Regulatory

Developments Regarding First Federal of Kentucky.”

As the mutual holding company and majority

shareholder of Kentucky First Federal Bancorp, First Federal MHC must receive the approval of the Federal Reserve Board and the members

of First Federal MHC in order to waive the receipt of any dividends declared and paid by Kentucky First Federal Bancorp to its shareholders.

While Kentucky First Federal has previously received such approvals, those approvals have expired.

The inability to receive those approvals

in the future would adversely impact Kentucky First Federal’s ability to pay dividends to its shareholders in the future.

In previous years, First Federal MHC has received Federal Reserve Board approval to waive quarterly dividends otherwise payable by the

Company totaling $0.40 per share annually beginning with the dividend paid on September 28, 2012 and continuing through the dividend payable

in the third quarter of 2024.

However, First Federal MHC did not seek to obtain regulatory approval to waive dividends for periods after

the third quarter of 2024, and the prior Federal Reserve Boad approval to waive the payment of quarterly dividends that would otherwise

be payable to First Federal MHC has expired.

To the extent the Company resumes the payment of dividends in future periods, it is expected

that First Federal MHC will again 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.

We cannot predict whether members will continue to approve annual dividend

waiver requests or whether the Federal Reserve Board will grant future dividend waiver requests and, if granted, there can be no assurance

as to the conditions, if any, the Federal Reserve Board will place on future dividend waiver requests by grandfathered mutual holding

companies such as First Federal MHC.

If First Federal MHC is unable to waive the receipt of dividends, the Company’s ability to

pay dividends to our stockholders may be substantially impaired and the amounts of any such dividends may be significantly reduced.

Risks Related to Our Business and Industry

Our FDIC deposit insurance premiums and

assessments may increase, which would reduce our profitability.

On March 12, 2023, the Department of the Treasury,

the Federal Reserve and the FDIC issued a joint statement relating to the resolution of Silicon Valley Bank and Signature Bank that stated

that losses to support uninsured deposits of those banks would be recovered via a special assessment on banks.

On May 11, 2023 the FDIC

Board of Directors approved a notice of proposed rulemaking, which would implement a special assessment to recover the cost associated

with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank.

In general, large banks with large

amounts of uninsured deposits benefitted most from the protection of uninsured depositors.

Banking organizations with total assets over

$50 billion would pay more than 95 percent of the special assessment and banking organizations with total assets under $5 billion would

not be subject to the special assessment.

Under the current provisions of this notice of proposed rulemaking, we believe that we would

not be impacted by the special assessment associated with the most recent banking organization closures.

Strong competition within our market areas

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entered into a formal written agreement (the “Agreement”) with the OCC, which became effective as of the same date.

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 formal written Agreement, the OCC has also imposed individual minimum capital requirements (“IMCRs”) on

First Federal of Kentucky.

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

In addition to the formal written 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%.

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%.

30, 2025, First Federal of Kentucky exceeded the requirements of the IMCRs as its common equity tier 1 capital ratio was 16.83%, its

tier 1 capital ratio was 16.83%, its total capital ratio was 16.83%, and its leverage ratio was 9.97%.

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;

● submit 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;

● submit 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

● adopt 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;

● adopt a revised written interest rate risk program

that includes risk management systems to identify, measure, monitor, and control interest rate risk.

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

submit 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;

submit 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;

adopt 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;

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

deficiencies that resulted in the Agreement.

The Agreement will remain in effect until it is

amended by First Federal of Kentucky and the OCC, or the OCC modifies, waives or terminates the Agreement.

While First Federal of Kentucky

is subject to the Agreement, we expect that the Board and management will be required to focus considerable time and attention on taking

corrective actions to comply with its terms.

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.

The Agreement will remain in effect until it

is amended by First Federal of Kentucky and the OCC, or the OCC modifies, waives or terminates the Agreement.

While First Federal of

Kentucky is subject to the Agreement, we expect that the Board and management will be required to focus considerable time and attention

on taking corrective actions to comply with its terms.

First Federal of Kentucky’s Board and management

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If the OCC were to determine that First Federal

of Kentucky was not in compliance with the Agreement, it would have available various remedies, including among others, the power to enjoin

“unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice,

to direct an increase in capital, to restrict the growth of First Federal of Kentucky, to remove officers and/or directors, to assess

civil monetary penalties, and to impose limitations on our business at First Federal of Kentucky, any of which could negatively affect

our ability to implement our business plan and pay dividends on or our common stock, and may negatively affect the value of our common

stock as well as our financial condition and results of operations.

of Kentucky was not in compliance with the Agreement, it would have available various remedies, including among others, the power to

enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation

or practice, to direct an increase in capital, to restrict the growth of First Federal of Kentucky, to remove officers and/or directors,

to assess civil monetary penalties, and to impose limitations on our business at First Federal of Kentucky, any of which could negatively

affect our ability to implement our business plan and pay dividends on or our common stock, and may negatively affect the value of our

common stock as well as our financial condition and results of operations.

Changes in laws and regulations and the

cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.

The Banks are subject to extensive regulation, supervision and examination

The Company is subject to extensive regulation, supervision and examination by the Federal Reserve Board.

Such regulation

and supervision govern the activities in which an institution and its holding company may engage and is intended primarily for the protection

of the federal deposit insurance fund and the depositors of the Banks rather than the protection of the Company’s stockholders.

Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions

on our operations, the classification of our assets and determination of the adequacy of the level of our allowance for credit losses.

These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations,

control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial

reporting and disclosures.

Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation

or supervisory action, may have a material impact on our operations.

Further, changes in accounting standards can be both difficult to

predict and involve judgment and discretion in their interpretation by us and our independent accounting firm.

These changes could materially

impact, potentially even retroactively, how we report our financial condition and results of operations.

The Banks are subject to extensive regulation,

supervision and examination by the OCC.

The Company is subject to extensive regulation, supervision and examination by the Federal Reserve

Such regulation and supervision govern the activities in which an institution and its holding company may engage and is intended

primarily for the protection of the federal deposit insurance fund and the depositors of the Banks rather than the protection of the

Company’s stockholders.

Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including

the imposition of restrictions on our operations, the classification of our assets and determination of the adequacy of the level of

our allowance for credit losses.

These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules,

standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives

and tax compliance, and govern financial reporting and disclosures.

Any change in such regulation and oversight, whether in the form

of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.

Further, changes

in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent

accounting firm.

These changes could materially impact, potentially even retroactively, how we report our financial condition and results

of operations.

Non-compliance with the USA PATRIOT Act,

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tax laws and regulations.

Changes in tax laws contained in the Tax Cuts

and Jobs Act, which was enacted in December 2017, include a number of provisions that will have an impact on the banking industry,

borrowers and the market for residential real estate.

Changes in tax laws contained in the Tax Cuts and Jobs Act, which was enacted in December 2017, and the legislation commonly known as

the “One Big Beautiful Bill Act” signed into law on July 4, 2025, include a number of provisions that will have an impact

on the banking industry, borrowers and the market for residential real estate.

Included in this legislation were:

(i) a lower limit on the deductibility

of mortgage interest on single-family residential mortgage loans, (ii) the elimination of interest deductions for home equity loans,

(iii) a limitation on the deductibility of business interest expense and (iv) a limitation on the deductibility of property taxes and

state and local income taxes.

The recent changes in the tax laws may have an

adverse effect on the market for, and valuation of, residential properties, and on the demand for such loans in the future, and could

make it harder for borrowers to make their loan payments.

If home ownership becomes less attractive, demand for mortgage loans could

The value of the properties securing loans in our loan portfolio may be adversely impacted as a result of the changing economics

of home ownership, which could require an increase in our provision for loan losses, which would reduce our profitability and could materially

adversely affect our business, financial condition and results of operations.

We may be subject to more stringent

capital requirements which could result in lower returns on equity, require the raising of additional capital, and limit our ability

to pay dividends or repurchase shares of our common stock.

(i) a lower limit on

the deductibility of mortgage interest on single-family residential mortgage loans, (ii) the elimination of interest deductions for home

equity loans, (iii) a limitation on the deductibility of business interest expense and (iv) a limitation on the deductibility of property

taxes and state and local income taxes.

The changes in the tax laws may have an adverse effect on the market for, and valuation of, residential properties, and on the demand

for such loans in the future, and could make it harder for borrowers to make their loan payments.

If home ownership becomes less attractive,

demand for mortgage loans could decrease.

The value of the properties securing loans in our loan portfolio may be adversely impacted as

a result of the changing economics of home ownership, which could require an increase in our provision for loan losses, which would reduce

our profitability and could materially adversely affect our business, financial condition and results of operations.

We may be subject to more stringent capital

requirements which could result in lower returns on equity, require the raising of additional capital, and limit our ability to pay dividends

or repurchase shares of our common stock.

Federal regulations establish minimum capital

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and (iii) a total capital ratio of 10.5%.

The new capital conservation buffer requirement was phased in beginning in January 2016 at 0.625%

of risk-weighted assets and increased 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.

The new capital conservation buffer requirement was phased in beginning in January 2016

at 0.625% of risk-weighted assets and increased 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.

These limitations will establish a maximum percentage of eligible retained income that can be utilized for such actions.

As of June 30,

2024, the capital levels of First Federal of Hazard and First Federal of Kentucky exceed the required capital amounts according to the

Community Bank Leverage Ratio regulations and we believe they also meet the fully-phased in minimum capital requirements.

As previously

discussed, in August 2024, First Federal of Kentucky entered into an Agreement with the OCC.

The OCC has also imposed 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 framework.

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

At June 30, 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% See Note K-Stockholders’

Equity and Regulatory Capital of Notes to Consolidated Financial Statements.

application of more stringent capital requirements for us could among other things, result in lower returns on equity, require the raising

of additional capital, and result in regulatory actions constraining us from paying dividends or repurchasing shares if we were unable

to comply with such requirements.

See “Regulation and Supervision—Regulation of Federal Savings Associations—Capital

Requirements.”

As of June 30, 2025, the capital levels of First Federal of Hazard and First Federal of Kentucky exceed the required capital amounts

according to the Community Bank Leverage Ratio regulations and we believe they also meet the fully-phased in minimum capital requirements.

As previously discussed, in August 2024, First Federal of Kentucky entered into an Agreement with the OCC.

The OCC has also imposed 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 framework.

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%.

At June 30, 2025, First Federal of Kentucky exceeded the requirements of the IMCRs as its common equity tier

1 capital ratio was 16.83%, its tier 1 capital ratio was 16.83%, its total capital ratio was 16.83%, and its leverage ratio was 9.97%.

See Note K-Stockholders’ Equity and Regulatory Capital of Notes to Consolidated Financial Statements.

The application of more stringent capital requirements

for us could among other things, result in lower returns on equity, require the raising of additional capital, and result in regulatory

actions constraining us from paying dividends or repurchasing shares if we were unable to comply with such requirements.

See “Regulation

and Supervision—Regulation of Federal Savings Associations—Capital Requirements.”

The Federal Reserve Board may require us to commit capital resources

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Risks Related to Accounting Matters

Changes in management’s estimates and assumptions may

have a material impact on our consolidated financial statements and our financial condition or operating results.

Changes in management’s estimates

and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results.

In preparing the periodic reports and consolidated

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some cases, we could be required to apply new or revised guidance retroactively.

If we are required to impair our goodwill,

intangibles, or other long-lived assets, our financial condition and results of operations would be adversely affected.

Pursuant to Accounting Standards Codification

(“ASC”) 350, Intangibles - Goodwill and Other and ASC 360, Property, Plant and Equipment, we are required to perform an annual

impairment review of goodwill, intangibles and other long-lived assets which could result in an impairment charge if it is determined

that the carrying value of the assets are in excess of the fair value.

We perform the impairment test annually during our fourth fiscal

Goodwill, intangibles and other long-lived assets are also tested more frequently if changes in circumstances or the occurrence

of events indicates that a potential impairment exists.

When changes in circumstances, such as changes in the variables associated with

the judgments, assumptions and estimates made in assessing the appropriate fair value indicate the carrying amount of certain assets

may not be recoverable, the assets are evaluated for impairment.

If actual operating results differ from these assumptions, it may result

in an asset impairment.

As of June 30, 2020, management early adopted ASU 2017-04, Intangibles-Goodwill and Other (Topic 350):

the Test for Goodwill Impairment, which simplifies the required method for estimating the fair value of the Company.

Future write-downs

of intangibles and other long-lived assets could affect certain of the financial covenants under our debt agreements, could restrict

our financial flexibility, and would impact our results of operations.

In the period ended June 30, 2024, the Company recorded a goodwill

impairment charge, which had no tax impact, of $947,000, which represents 100.0% of goodwill previously reported.

Risks Related to Operational Matters

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transactions you may like or a second-step conversion by First Federal MHC.

First Federal MHC owns a majority of our common stock and, through

its Board of Directors, is able to exercise voting control over most matters put to a vote of stockholders.

As a federally chartered mutual

holding company, the board of directors of First Federal MHC must ensure that the interests of depositors of First Federal of Hazard are

represented and considered in matters put to a vote of stockholders of Kentucky First.

Therefore, the votes cast by First Federal MHC

may not be in your personal best interests as a stockholder.

For example, First Federal MHC may exercise its voting control to prevent

a sale or merger transaction in which stockholders could receive a premium for their shares, prevent a second-step conversion transaction

by First Federal MHC or defeat a stockholder nominee for election to the Board of Directors of Kentucky First Federal.

However, implementation

of a stock-based incentive plan will require approval of Kentucky First Federal’s stockholders other than First Federal MHC.

Reserve Board regulations would likely prevent an acquisition of Kentucky First other than by another mutual holding company or a mutual

Our ability to pay future dividends is subject

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

waiver of dividends by First Federal MHC.

On January 16, 2024, we announced that the Board had determined to suspend the payment of dividends

indefinitely.

First Federal MHC owns a majority of our common

stock and, through its Board of Directors, is able to exercise voting control over most matters put to a vote of stockholders.

As a federally

chartered mutual holding company, the board of directors of First Federal MHC must ensure that the interests of depositors of First Federal

of Hazard are represented and considered in matters put to a vote of stockholders of Kentucky First.

Therefore, the votes cast by First

Federal MHC may not be in your personal best interests as a stockholder.

For example, First Federal MHC may exercise its voting control

to prevent a sale or merger transaction in which stockholders could receive a premium for their shares, prevent a second-step conversion

transaction by First Federal MHC or defeat a stockholder nominee for election to the Board of Directors of Kentucky First Federal.

implementation of a stock-based incentive plan will require approval of Kentucky First Federal’s stockholders other than First

Federal Reserve Board regulations would likely prevent an acquisition of Kentucky First other than by another mutual holding

company or a mutual institution.

Our ability to pay future dividends is

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

and the waiver of dividends by First Federal MHC.

On January 16, 2024, we announced that the Board had determined to suspend the payment

of dividends indefinitely.

Our long-term ability to pay dividends to our

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in future periods.

First Federal MHC is required to obtain a waiver from the Federal Reserve Board allowing it to waive its right to dividends.

First Federal MHC is required to obtain a waiver from the Federal Reserve Board allowing it to waive its right to

The Federal Reserve Board in 2011 issued regulations

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Under Section 239.8(d) of the Federal Reserve Board’s Regulation MM governing dividend waivers, a mutual holding company

may waive its right to dividends on shares of its subsidiary if the mutual holding company gives written notice of the waiver to the Federal

Reserve Board and the Federal Reserve Board does not object.

For a company such as First Federal MHC that waived dividends prior to December

1, 2009, the Federal Reserve Board may not object to a dividend waiver if such waiver would not be detrimental to the safety and soundness

of the savings association subsidiary and the board of directors of the mutual holding company expressly determines that such dividend

waiver is consistent with the board’s fiduciary duties to the members of the mutual holding company.

may waive its right to dividends on shares of its subsidiary if the mutual holding company gives written notice of the waiver to the

Federal Reserve Board and the Federal Reserve Board does not object.

For a company such as First Federal MHC that waived dividends prior

to December 1, 2009, the Federal Reserve Board may not object to a dividend waiver if such waiver would not be detrimental to the safety

and soundness of the savings association subsidiary and the board of directors of the mutual holding company expressly determines that

such dividend waiver is consistent with the board’s fiduciary duties to the members of the mutual holding company.

To address concerns with respect to the conflict

of interest created by dividend waivers, Regulation MM requires the board of directors of the mutual holding company to adopt a resolution

that describes the conflict of interest that exists because of a director’s ownership of stock in the subsidiary declaring the dividends

and any actions the mutual holding company board have taken to eliminate the conflict of interest, such as the directors’ waiving

their right to receive dividends.

Also, the resolution must contain an affirmation that a majority of the mutual members eligible to vote

have, within the 12 months prior to the declaration date of the dividend, voted to approve the waiver of dividends.

that describes the conflict of interest that exists because of a director’s ownership of stock in the subsidiary declaring the

dividends and any actions the mutual holding company board have taken to eliminate the conflict of interest, such as the directors’

waiving their right to receive dividends.

Also, the resolution must contain an affirmation that a majority of the mutual members eligible

to vote have, within the 12 months prior to the declaration date of the dividend, voted to approve the waiver of dividends.

First Federal MHC has received Federal Reserve

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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-K

Item 1A. Risk Factors