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Item 2. Management’s Discussion and Analysis

2026-02-13 compared with 2025-11-14 · 330 added, 252 removed, 127 unchanged (82% of the section changed)

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 the regulatory approvals necessary for the Company’s and First Federal Savings Bank

of Kentucky’s management transition and the success of our restructured management team following the receipt of such regulatory

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

our ability to pay

dividends from First Federal Savings and Loan Association of Hazard and First Federal Savings Bank of Kentucky to the Company in order

for the Company to pay dividends to shareholders;

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

of any Company dividends to First Federal MHC;

competitive conditions in the financial services industry;

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;

the success of our recently restructured management team;

our ability to receive any required regulatory approval or non-objection

to pay dividends to shareholders;

our ability to pay dividends from First Federal Savings and Loan Association of Hazard and First Federal

Savings Bank of Kentucky to the Company in order for the Company to pay dividends to shareholders;

the ability of First Federal MHC to

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

competitive conditions in the financial

services industry;

changes in the level of inflation;

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

government shutdown;

the impacts of tariffs, sanctions and other trade policies of the United States

and its global trading counterparts;

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 possibility

that future credit losses may be higher than currently expected;

competitive pressures among financial services companies;

the ability to attract,

develop and retain qualified employees;

our ability to maintain the security of our data processing and information technology systems;

to attract, develop and retain qualified employees;

our ability to maintain the security of our data processing and information technology

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, 2025 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.

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, 2025.

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.

The Company was incorporated as a mid-tier holding

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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.

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.

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.

Our results of operations are dependent primarily

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rates, government policies and actions of regulatory authorities.

Kentucky First Federal

Management Transition

On October 2, 2025, the

Boards of Kentucky First Federal Bancorp and First Federal Savings Bank of Kentucky, an indirect wholly-owned bank subsidiary of the Company

(“First Federal of Kentucky”), appointed R.

Clay Hulette as Chief Executive Officer of the Company and as President and Chief

Executive Officer of First Federal of Kentucky, respectively.

Such appointments remain subject to regulatory approval.

Pending regulatory

approval, Mr.

Hulette will serve as interim President and Chief Executive Officer of First Federal of Kentucky.

In connection with this

transition, Don D.

Jennings has been appointed Director of Operations of First Federal of Kentucky and will continue to serve as President

of the Company and Chairman of the Board of Directors of First Federal of Kentucky.

Boards of Kentucky First Federal Bancorp and First Federal Savings Bank of Kentucky, an indirect wholly-owned bank subsidiary of the

Company (“First Federal of Kentucky”), appointed R.

Clay Hulette as Chief Executive Officer of the Company and as President

and Chief Executive Officer of First Federal of Kentucky, respectively.

Such appointments were subject to regulatory approval.

10, 2025, the Company and First Federal of Kentucky received final regulatory non-objection, effective immediately, to these appointments.

In connection with this transition, Don D.

Jennings was appointed Director of Operations of First Federal of Kentucky and continues to

serve as President of the Company and Chairman of the Board of Directors of First Federal of Kentucky.

Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Regulatory Developments

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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.

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

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:

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

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

unless otherwise informed in writing by the OCC.

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

requirements (“IMCRs”) on First Federal of Kentucky.

The IMCRs require First Federal of Kentucky to maintain a common

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

a leverage ratio of at least 9.0%.

As of December 31, 2025, First Federal Savings Bank of Kentucky’s common equity tier 1

capital ratio was 13.99%, its tier 1 capital ratio was 13.99%, its total capital ratio was 14.76%, and its leverage ratio was

As First Federal of Kentucky has not been designated as “less than well capitalized” and has maintained capital

levels in excess of the IMCRs, there have been no restrictions or waiver requirements imposed on First Federal of Kentucky for

rolling brokered deposits or other types of wholesale deposits.

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.

The Agreement requires First Federal of Kentucky’s

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

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

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

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

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

deficiencies that resulted in the Agreement.

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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 September 30, 2025.

and management believe that First Federal of Kentucky has addressed the deficiencies that resulted in the Agreement.

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 September 30, 2025.

Asset/Liability Management

3 unchanged sentences

to mitigate potential asset/liability risks to the Banks and to the Company as a whole.

Management utilizes a third-party to perform

interest rate risk (“IRR”) calculations for each of the Banks.

Management monitors and considers methods of managing the

rate sensitivity and repricing characteristics of each of the Bank’s balance sheet components to maintain acceptable levels of

change in the economic value of equity (“EVE”) as well as evaluating the impact on earnings in the event of changes in prevailing

market interest rates.

Interest rate sensitivity analysis is used to measure our interest rate risk by computing estimated changes in

EVE that are a result of changes in the net present value of its cash flows from assets, liabilities, and off-balance sheet items.

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 June 30, 2025 EVE is anticipated to increase by approximately 4.1% and 0.9% 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 run-offs.

These computations

should not be relied upon as indicative of actual results.

Further, the computations do not contemplate any actions the Banks may undertake

in response to changes in interest rates.

Management utilizes a third-party to perform interest

rate risk (“IRR”) calculations for each of the Banks.

Management monitors and considers methods of managing the rate sensitivity

and repricing characteristics of each of the Bank’s balance sheet components to maintain acceptable levels of change in the economic

value of equity (“EVE”) as well as evaluating the impact on earnings in the event of changes in prevailing market interest

Interest rate sensitivity analysis is used to measure our interest rate risk by computing estimated changes in EVE that are a result

of changes in the net present value of its cash flows from assets, liabilities, and off-balance sheet items.

These changes in cash flow

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

General market participants believe that the FOMC

will continue interest rate decreases.

Our December 31, 2025 EVE is anticipated to increase by approximately 4.1 %

and 0.6 % 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 run-offs.

These computations should not be relied upon

as indicative of actual results.

Further, the computations do not contemplate any actions the Banks may undertake in response to changes

in interest rates.

Certain shortcomings are inherent in this method of computing EVE.

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

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.

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

3 unchanged sentences

The following table represents the average balance

sheets for the three-month periods ended September 30, 2025 and 2024, along with the related calculations of tax-equivalent net interest

sheets for the six-month periods ended December 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 September 30,

Six Months Ended December 31,

(Dollars in thousands)

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AND RESULTS OF OPERATIONS (continued)

Average Balance Sheets (continued)

The following table represents the average balance

sheets for the three-month periods ended December 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 December 31,

(Dollars in thousands)

Interest-earning assets:

Mortgage-backed securities

Other interest-earning assets

Total interest-earning assets

Allowance for credit losses

Non-interest-earning assets

Interest-bearing liabilities:

Demand deposits

Certificates of deposit

Total deposits

Total interest-bearing liabilities

Noninterest-bearing demand deposits

Noninterest-bearing liabilities

Total liabilities

Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest spread

Net interest margin

Average interest-earning assets to average interest-bearing liabilities

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

Also includes loans on nonaccrual status.

Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Discussion of Financial Condition Changes from

June 30, 2025 to September 30, 2025

June 30, 2025 to December 31, 2025

Financial Position and Results of Operations

At September 30, 2025 the Company and the Banks

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

As disclosed in “Regulatory Developments

Regarding First Federal of Kentucky”, the OCC has imposed individual minimum capital requirements (“IMCRs”) on First

Federal Savings Bank of Kentucky.

At December 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 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

As of September 30, 2025, First Federal Savings Bank of Kentucky’s common equity tier 1 capital ratio was 16.07%,

As of December 31, 2025, First Federal Savings Bank of Kentucky’s common equity tier 1 capital ratio was 13.99%,

its tier 1 capital ratio was 13.99%, its total capital ratio was 14.76%, and its leverage ratio was 10.37%.

At September 30, 2025, the

Company’s assets totaled $366.5 million, a decrease of $4.7 million, or 1.3%, from total assets at June 30, 2025, due primarily

to the decrease in fed funds sold, as well as a decrease in loans, net of allowance.

As First Federal of Kentucky has not been designated as “less

than well capitalized” and has maintained capital levels in excess of the IMCRs, there have been no restrictions or waiver requirements

imposed on First Federal of Kentucky for rolling brokered deposits or other types of wholesale deposits.

At December 31, 2025, the Company’s

assets totaled $375.3 million, an increase of $4.1 million, or 1.1%, from total assets at June 30, 2025, due primarily to the increase

in loans, as well as an increase in securities available-for-sale.

Cash and cash equivalents:

and cash equivalents overall decreased $4.9 million or 24.9% to $14.6 million at September 30, 2025.

The decrease is primarily due to

fed funds sold decreasing $6.5 million or 75.5% and totaling $2.1 million at September 30, 2025.

Most of the Company’s cash and

cash equivalents are held in interest-bearing demand deposits, which increased $2.1 million or 24.6% and totaled $10.7 million.

cash equivalents overall increased $192,000 or 1.0% to $19.7 million at December 31, 2025.

Most of the Company’s cash and cash equivalents

are held in interest-bearing demand deposits that increased $5.5 million or 64.5%, which were slightly offset by fed funds sold decreasing

$5.3 million or 61.9% compared to June 30, 2025.

Investment securities:

At December 31,

2025, our securities portfolio, which consisted of mortgage-backed securities, increased $1.4 million or 14.2% and totaled $11.3 million,

compared to June 30, 2025.

The increase is due to the purchase of mortgage-backed securities totaling $2.5 million during the quarter

ended September 30, 2025.

Loans, net and loans

held-for-sale in the aggregate decreased $1.4 million or 0.4% and totaled $326.8 million at September 30, 2025.

Loans receivable, net,

decreased by $798,000 or 0.2% to $326.5 million at September 30, 2025.

Loans held-for-sale decreased to $305,000 at September 30, 2025.

Loans, net and loans held-for-sale

in the aggregate increased $2.3 million or 0.8% and totaled $330.5 million at December 31, 2025.

Loans receivable, net, increased by $2.6

million or 0.7% to $329.8 million at December 31, 2025.

Loans held-for-sale decreased $254,000 and totaled $623,000 at December 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

1 unchanged sentence

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 a consistently having a balance in loans

held-for-sale.

the Company has had more success in selling mortgages into the secondary market, which has led to elevated balances loans held-for-sale.

Non-performing and classified loans:

September 30, 2025, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of approximately $3.2

December 31, 2025, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of approximately $2.4

million, or 0.7% of total loans compared to $3.9 million or 1.2%, of total loans at June 30, 2025.

The Company’s ACL totaled $2.2

million at September 30, 2025 and the ACL totaled $2.2 million at June 30, 2025, respectively.

The ACL at September 30, 2025, represented

67.1% of nonperforming loans and 0.7% of total loans, while at June 30, 2025, ACL represented 54.1% of nonperforming loans and 0.7% of

million at both December 31, 2025 and June 30, 2025.

The ACL at December 31, 2025, represented 92.7% of nonperforming loans and 0.7% of

total loans, while at June 30, 2025, ACL represented 54.1% of nonperforming loans and 0.7% of total loans.

The Company had $6.3 million in assets classified

as substandard for regulatory purposes at September 30, 2025, and there was no real estate owned (REO).

as substandard for regulatory purposes at December 31, 2025, with $0 in real estate owned (“REO”).

Classified loans as a percentage

of total loans (including loans acquired) was 1.6% and 1.9% at September 30, 2025 and June 30, 2025, respectively.

of total loans (including loans acquired) was 1.9% and 1.9% at December 31, 2025 and June 30, 2025, respectively.

Of substandard loans,

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

The table below shows the aggregate amounts of

our assets classified for regulatory purposes at the dates indicated:

The table below shows the aggregate amounts of our

assets classified for regulatory purposes at the dates indicated:

(dollars in thousands)

September 30,

Substandard assets

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Total classified assets

The Company’s real estate acquired through

foreclosure represented 0.0% of substandard assets at both September 30, 2025 and June 30, 2025 as there was no real estate owned in either

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

Loans to facilitate the sale of other real estate owned, which were included in substandard loans, totaled $0 and $0 at September 30,

2025 and June 30, 2025, respectively.

The Company had no real estate acquired through foreclosure

at December 31, 2025 or June 30, 2025.

During the period presented the Company made no loans to facilitate the purchase of its other real

estate owned by qualified buyers.

Loans to facilitate the sale of other real estate owned, which were included in substandard loans, totaled

$0 and $0 at December 31, 2025 and June 30, 2025, respectively.

Kentucky First Federal Bancorp

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Discussion of Financial Condition Changes from

June 30, 2025 to September 30, 2025 (continued)

The following table presents the aggregate carrying

value of REO at the dates indicated:

At September 30, 2025 and June 30, 2025, the Company

June 30, 2025 to December 31, 2025 (continued)

At December 31, 2025 and June 30, 2025, the Company

had $661,000 and $672,000 of loans classified as special mention, respectively.

This category includes assets which do not currently expose

us to a sufficient degree of risk to warrant classification, but does possess credit deficiencies or potential weaknesses deserving our

us to a sufficient degree of risk to warrant classification, but do possess credit deficiencies or potential weaknesses deserving our

close attention.

Total liabilities

decreased $5.1 million, or 1.6% to $317.7 million at September 30, 2025, as deposits decreased $6.1 million or 2.2%.

Certificates of

deposit decreased $3.5 million or 1.8% and totaled $196.1 million at September 30, 2025, of which $34.4 million were brokered

deposits, compared to $44.0 million at June 30, 2025.

Savings deposit accounts decreased $4.7 million or 9.7% and totaled $43.9

million at quarter end.

Demand deposit accounts increased $2.1 million or 7.0% and totaled $31.4 million at the end of the current

Federal Home Loan Bank Advances increased $1.0 million or 2.4% and totaled $43.8 million at September 30, 2025.

costs have begun to decrease due to a decrease in general market interest rates and balance sheet management.

Continued decreases in

funding costs will be contingent on market forces including future Federal Reserve rate decisions.

Total liabilities increased

$3.3 million, or 1.0% to $326.2 million at December 31, 2025, as Federal Home Loan Bank advances increased $8.7 million or 20.3% to $51.4

million and demand deposit accounts increased $874,000 or 3.0%.

Savings decreased $5.1 million or 10.5% and totaled

43.5 million at December 31, 2025 primarily related to a decrease in savings accounts associated with distributions of funds in administration

of various estate accounts.

Certificates of deposit decreased $123,000 or 0.1%, due to brokered certificates of deposit decreasing $5.6

million or 12.8% to $38.4 million, which were offset by retail certificates of deposit increasing $5.5 million or 3.6%.

Shareholders’ Equity:

30, 2025, the Company’s shareholders’ equity totaled $48.8 million, an increase of $410,000 or 0.8% from the June 30, 2025.

The increase in shareholders’ equity was primarily associated with net income of $344,000 in the quarter as well as decreased other

comprehensive loss of $66,000.

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 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, 2025 for

additional discussion regarding dividends.

31, 2025, the Company’s shareholders’ equity totaled $49.1 million, an increase of $732,000 or 1.5% from June 30, 2025.

increase in shareholders’ equity was primarily associated with net income of $648,000, as well as accumulated other comprehensive

loss decreasing $84,000 or 57.9% from a loss of $145,000 at June 30, 2025 to a loss of $61,000 at December 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

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

2025 for additional discussion regarding dividends.

Kentucky First Federal Bancorp

1 unchanged sentence

AND RESULTS OF OPERATIONS (continued)

Comparison of Operating Results for the Six-month

Periods Ended December 31, 2025 and 2024

Net income totaled $648,000 or $0.08 diluted earnings per share for

the six-months ended December 31, 2025, an increase of $650,000 from net loss of $2,000 or ($0.00) diluted earnings per share for the

same period in 2024.

The increase in net earnings for the six-months ended December 31, 2025, was primarily attributable to increased

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

Net Interest Income

Net interest income increased $1.3 million or 32.1%

to $5.2 million due primarily to increased interest income and decreased interest expense.

Interest income increased $825,000 or 8.8%

due to an increase in the average rate earned on interest-earning assets, which increased 48 basis points to 5.65%.

Average interest-earning

assets decreased $1.6 million or 0.5% to $362.1 million for the recently-ended quarterly period.

The average rate earned on assets was

due primarily to an increase in the rate earned on loans, which was the result of new loan production carrying higher interest rates and

adjustable rate mortgages continuing to reprice upward.

Interest expense decreased $428,000 or 7.8% to $5.1 million for the six-months

recently ended due to a decrease in the average balance of interest-bearing liabilities as well as a decrease in the average rate paid

on those funds.

Average interest-bearing liabilities decreased $1.7 million or 0.5% to $308.7 million for the quarterly period just ended,

while the average rate paid decreased 26 basis points to 3.28% for the period.

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

was due the average rate earned on loans increasing 60 basis points to 5.80% despite the average balance of loans decreasing $4.3 million

or 1.3% compared to the six months ended December 31, 2024.

The decrease in interest expense was primarily due

to decreased interest expense on FHLB advances of $584,000 or 37.3%.

The decrease in interest expense on FHLB advances was due to both

the average rate paid decreasing 38 basis points to 4.34% and the average balance decreasing $21.1 million to $45.3 million compared to

the same period last year.

Net interest spread increased from 1.63% for the prior

year six-month period to 2.37% for the six-month period ended December 31, 2025.

Provision for Credit Losses

Management determined that a $10,000 provision for

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

Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Comparison of Operating Results for the Six-month

Periods Ended December 31, 2025 and 2024 (continued)

Non-interest Income

Non-interest income increased $23,000 or 7.5% to $331,000

for the six-months ended December 31, 2025 compared to the prior year period, primarily because of an increase in net gains from sale

of loans of $25,000 or 17.7%.

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

Non-interest Expense

Non-interest expense increased $412,000 or 9.8% to

$4.6 million for the six months ended December 31, 2025, primarily due to higher data processing expense, outside service fees, and employee

compensation and benefits.

Data processing expense increased $180,000 or 66.4%, outside service fees increased $169,000 or 75.1%, and

employee compensation and benefits increased $119,000 or 5.0%.

These were slightly offset by professional fees decreasing $81,000

Income tax expense increased $219,000 to an income

tax expense of $206,000 for the six months ended December 31, 2025, compared to the prior year period due to increased earnings.

The effective

tax rates for the six-month periods ended December 31, 2025 and 2024 were 24.1% and 86.7%, respectively.

Included in net income is earnings

of $44,000 on bank-owned life insurance which is non-taxable.

Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Comparison of Operating Results for the Three-month

Periods Ended September 30, 2025 and 2024

Periods Ended December 31, 2025 and 2024

Net income totaled $304,000 or $0.04 diluted earnings

per share for the three months ended September 30, 2025, an increase of $359,000 from net loss of $15,000 or ($0.00) diluted earnings

per share for the same period in 2024.

The increase in net earnings for the quarter ended September 30, 2025, was primarily attributable

to increased net interest income partially offset by increased total non-interest expense.

per share for the three months ended December 31, 2025, an increase of $291,000 from net income of $13,000 or $0.00 diluted earnings per

share for the same period in 2024.

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

higher net interest income, which was partially offset by higher non interest expense and higher income taxes.

Net Interest Income

Net interest income increased $634,000 or 33.9%

to $2.5 million due primarily to both increased interest income and decreased interest expense.

Interest income increased $432,000 or

9.4%, while interest expense decreased $202,000 or 7.3% to $2.5 million for the recently-ended quarter.

Repricing of many of our loans

had been slowed by contractual limits on rate changes, whereas the cost of most liabilities did not have this constraint.

many of our loans during the recent period of increasing rates had been slowed by contractual limits on those rate changes, whereas the

cost of most liabilities did not have this constraint.

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

has decreased, while the average rate earned on assets continues to increase as adjustable rate loans that were constrained due to those

limits continue to reprice and because, as loans pay off, new market-rate loans tend to have a higher rate.

The company has also

adjusted the annual and lifetime caps on certain new loans that will better align with the company's interest rate risk profile.

also made effective funding concentration changes to control total cost of funds.

Net interest income increased $618,000 or 30.3% to

$2.6 million due primarily to interest income increasing while interest expense decreased period to period.

Interest income increased

$392,000 or 8.2% to $5.2 million, while interest expense decreased $226,000 or 8.2% to $2.5 million for the recently-ended quarter.

market rates have begun to decrease, liabilities have repriced down while our assets continue to reprice upward.

The average rate earned on interest-earning assets

increased 54 basis points to 5.59% and was the primary reason for the increase in interest income, outweighing the decrease in average

interest earning assets of $4.0 million or 1.1% to $361.7 million for the recently-ended quarterly period.

The increase in interest income

was due primarily to an increase of $430,000 or 10.1% in interest income from loans, which totaled $4.7 million for the period.

increased 44 basis points to 5.72% and was the primary reason for the increase in interest income, as average interest-earning assets

decreased $623,000 or 0.2% to $361.7 million for the recently-ended quarterly period.

The increase in interest income was due primarily

to an increase of $447,000 or 10.1% in interest income from loans, which totaled $4.9 million for the period.

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

was due to average rate earned on loans increasing 63 basis points to 5.71%.

was due to the average rate earned on loans increasing 58 basis points to 5.89%.

The average balance of loans decreased $2.3 million or

to $328.8 million for the three months ended September 30, 2025.

While average total interest-bearing liabilities

decreased $3.0 million or 1.0%, the primary reason for decreased interest expense was the decrease in the average rate paid on interest

bearing liabilities, decreasing 22 basis points to 3.33% for the three-month period ended September 30, 2025.

Although interest expense

on certificates of deposit increased $114,000 or 6.1% due to the average balance increasing $20.5 million, this was offset by interest

expense on FHLB borrowings decreasing $336,000 as the average balance decreased $25.0 million and the average rate paid decreased 37

basis points to 4.36%.

The average cost of interest-bearing demand deposit accounts increased 42 basis points due to increased rates

paid on certain demand deposit accounts.

The pricing associated with these accounts is becoming more competitive in general.

Some institutions

are willing to pay higher rates for demand accounts, and the higher cost is associated with the banks efforts to strengthen customer

relationships by paying tiered interest rates to customers with significant loan balances and some local government entities.

Net interest spread increased from 1.50% for the

prior year quarterly period to 2.26% for the three-month period ended September 30, 2025.

0.7% to $331.4 million for the three months ended December 31, 2025.

The average balance of interest-bearing liabilities

decreased $2.9 million or 0.9% to $308.2 million for the quarter just ended, and the average rate paid decreased 26 basis points to 3.27%.

The cost of liabilities decreased primarily due to decreased FHLB advance expense, which was $248,000 or 33.0% less than the same period

ended December 31, 2024.

While the average rate paid on FHLB advances decreased 29 basis points to 4.35%, the primary reason for

the decrease was the average balance decreasing $18.5 million or 28.5%.

Net interest spread increased from 1.75% for the prior

year quarterly period to 2.45% for the three-month period ended December 31, 2025.

Provision for Credit Losses

Management determined foregoing a provision for

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

Management determined that a $10,000 provision for

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

Kentucky First Federal Bancorp

2 unchanged sentences

Comparison of Operating Results for the Three-month

Periods Ended September 30, 2025 and 2024 (continued)

Periods Ended December 31, 2025 and 2024 (continued)

Non-interest Income

Non-interest income increased $16,000 or 11.7%

to $153,000 for the three months ended September 30, 2025, compared to the prior year period, primarily because of an increase in net

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

Non-interest income increased $7,000 or 4.1% to $178,000

for the recently ended quarter primarily due to increased net gain of sale on loans, increasing $20,000 or 24.7% for the three months

recently ended.

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

Non-interest Expense

Non-interest expense increased $191,000 or 9.5%

and totaled $2.2 million for the three months ended September 30, 2025, primarily due to increased data processing charges and increased

outside service fees.

Data processing costs increased $62,000 or 37.8%

and totaled $226,000 due to higher rates and additional fees associated with expanded technology services offered to customers.

Outside service fees increased $90,000 or 128.6%

and totaled $160,000 due to higher rates as well as additional third party services utilized in the quarter.

Income Tax Expense

Income tax expense increased $115,000 from a benefit

of $6,000 for the three months ended September 30, 2024, to an expense of $109,000 for the recently-ended period due to higher earnings.

The effective tax rates for the three-month periods ended September 30, 2025 and 2024 were 24.1% and 28.6%, respectively.

Non-interest expense increased $220,000 or 10.0% and

totaled $2.4 million for the three months ended December 31, 2025, primarily due to increased data processing expense, employee compensation

and benefits, and outside service fees.

Income taxes expense increased $104,000 to an expense

of $97,000 from a benefit of $94,000 for the three months ended December 31, 2024 for the recently-ended period.

The effective tax rates

for the three-month periods ended December 31, 2025 and 2024, were 24.2% and -116.7%, respectively.

Included in net income is earnings

of $22,000 on bank-owned life insurance which is non-taxable.

Kentucky First Federal Bancorp

1 unchanged sentence

About Market Risk

This item is not applicable as the Company is

a smaller reporting company.

This item is not applicable as the Company is a smaller

reporting company.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis