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Item 1A. Risk Factors

2026-09-28 compared with 2025-09-30 · 484 added, 539 removed, 19 unchanged (98% of the section changed)

Risk Factors .

Interest Rate Risk

Rising interest rates may hurt our profits

and asset values .

Beginning in March, 2022, the Federal Reserve

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 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,

interest rates may hurt our profits and asset values .

Net interest income rose $2.8 million from June

30, 2025 to June 30, 2026 as a result of increased interest income and decreased interest expense.

This time period consisted of the Federal

Reserve Board (“FOMC”) decreasing interest rates, which in part improved net interest income.

The FOMC has since increased

their target and subsequently increased rates 25 basis points in September, 2026.

If interest rates continue to 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.

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

4 unchanged sentences

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

the ability of borrowers to repay loans.

We offer fixed-rate and adjustable-rate mortgage

loans with terms of up to 30 years;

however, across our loan portfolio, interest rates and payments adjust annually after a one-, three-,

five- or seven-year initial fixed period.

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

Inflationary pressures and rising prices

may affect our results of operations and financial condition.

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.

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, 2026, this decrease in fair value of the securities, otherwise known as Accumulated

other comprehensive loss totaled $129,000 or 1.2% of our securities portfolio.

interest rates may adversely affect the ability of borrowers to repay loans.

offer fixed-rate and adjustable-rate mortgage loans with terms of up to 30 years;

however, across our loan portfolio, interest rates

and payments adjust annually after a one-, three-, five- or seven-year initial fixed period.

At June 30, 2026, 92.1% of our residential

real estate loan portfolio was 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.

Related to Our Lending Activities

pressures and rising prices may affect our results of operations and financial condition.

Inflation has risen sharply since the end of 2021

1 unchanged sentence

Inflationary pressures are currently expected to remain elevated throughout 2026.

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

Inflation could

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

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

sufficient to cover actual loan losses, our results of operations would be negatively affected.

In determining the amount of the allowance for

credit loss, we analyze our loss and delinquency experience by loan categories and we consider the effect of existing economic conditions.

In addition, we make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness

of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.

actual results are different from our estimates, or our analyses are incorrect, our allowance for credit loss may not be sufficient to

cover losses inherent in our loan portfolio, which would require additions to our allowance and would decrease our net income.

on loan growth or shifting the types of loans the banks make, as well as any future credit deterioration, could require us to increase

our allowance further in the future.

In addition, our banking regulators periodically review our allowance for loan losses and could

require us to increase our provision for loan losses.

Any increase in our allowance for credit loss or loan charge-offs as required by

regulatory authorities may have a material adverse effect on our results of operations and financial condition.

A large percentage of our loans are collateralized

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

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

loans exposes us to increased lending risks.

At June 30, 2025, $275.3 million, or 83.6%, of

our loan portfolio was secured by one-to-four family real estate, all of which is located in the Commonwealth of Kentucky, and we intend

to continue this type of lending in the foreseeable future.

One-to-four family residential mortgage lending is generally sensitive to

regional and local economic conditions that significantly impact the ability of borrowers to meet their loan payment obligations, making

loss levels difficult to predict.

A decline in residential real estate values as a result of a downturn in the local housing markets

or in the markets in neighboring states in which we originate residential mortgage loans could reduce the value of the real estate collateral

securing these types of loans.

Declines in real estate values could cause some of our residential mortgages to be inadequately collateralized,

which would expose us to a greater risk of loss if we seek to recover on defaulted loans by selling the real estate collateral.

The distressed economy in First Federal

of Hazard’s market area could hurt our profits and slow our growth.

Our banks operate in three distinct market areas.

First Federal of Hazard’s market area consists of Perry and surrounding counties in eastern Kentucky.

The economy in this market

area has been distressed in recent years due to the decline in the coal industry on which the economy has been dependent.

While the region

has seen improvement in the economy from the influx of other industries, such as health care and manufacturing, the competition provided

by new methods of extracting natural gas has recently hurt the coal industry.

As a consequence, the economy in First Federal of Hazard’s

market area continues to lag behind the economies of Kentucky and the United States and First Federal of Hazard has experienced insufficient

loan demand in its market area.

Moreover, the slow economy in First Federal of Hazard’s market area will limit our ability to grow

our asset base in that market.

Our mortgage banking revenue and the value

of our mortgage servicing rights can be volatile.

We plan to continue to sell our longer-term,

conforming and non-conforming fixed-rate loans that we originate to generate noninterest income.

We also earn revenue from fees we receive

for servicing mortgage loans.

Changes in interest rates may impact our mortgage banking revenues, which could negatively impact our noninterest

When rates rise, the demand for mortgage loans usually tends to fall, reducing loan origination volume and the related amount

of gains on the sales of loans.

Under the same conditions, net revenue from our mortgage servicing activities can increase due to slower

prepayments, which reduces our amortization expense for mortgage servicing rights.

When rates fall, mortgage originations usually tend

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, 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

by the amount of noninterest expenses associated with mortgage banking activities, such as salaries and employee benefits (including

commissions), occupancy, equipment and data processing expense, and other operating costs.

During periods of reduced loan demand, our

results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in

mortgage loan origination activity.

Liquidity Risk

Financial challenges at other banking institutions

could lead to depositor concerns that spread within the banking industry causing disruptive and destabilizing deposit outflows.

In March 2023, Silicon Valley Bank and Signature

Bank experienced large deposit outflows coupled with insufficient liquidity to meet withdrawal demands, resulting in the institutions

being placed into FDIC receivership.

rates have declined since September 2024, the FOMC raised interest rates by a quarter of a percentage point in September 2026 and higher

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

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.

our allowance for credit losses is not sufficient to cover actual loan losses, our results of operations would be negatively affected.

determining the amount of the allowance for credit losses, we analyze our loss and delinquency experience by loan categories and we consider

the effect of existing economic conditions.

In addition, we make various assumptions and judgments about the collectability of our loan

portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for

the repayment of many of our loans.

If the actual results are different from our estimates, or our analyses are incorrect, our allowance

for credit losses may not be sufficient to cover losses inherent in our loan portfolio, which would require additions to our allowance

and would decrease our net income.

An emphasis on loan growth or shifting the types of loans the banks make, as well as any future credit

deterioration, could require us to increase our allowance further in the future.

In addition, our banking regulators periodically review

our allowance for loan losses and could require us to increase our provision for loan losses.

Any increase in our allowance for credit

losses or loan charge-offs as required by regulatory authorities may have a material adverse effect on our results of operations and financial

large percentage of our loans are collateralized by real estate and disruptions in the real estate market may result in losses and hurt

our earnings.

Approximately

99.5% of our loan portfolio at June 30, 2026 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

concentration of residential mortgage loans exposes us to increased lending risks.

June 30, 2026, $240.0 million, or 74.6%, of our loan portfolio was secured by one-to-four family real estate, all of which is located

in the Commonwealth of Kentucky, and we intend to continue this type of lending in the foreseeable future.

One-to-four family residential

mortgage lending is generally sensitive to regional and local economic conditions that significantly impact the ability of borrowers

to meet their loan payment obligations, making loss levels difficult to predict.

A decline in residential real estate values as a result

of a downturn in the local housing markets or in the markets in neighboring states in which we originate residential mortgage loans could

reduce the value of the real estate collateral securing these types of loans.

Declines in real estate values could cause some of our

residential mortgages to be inadequately collateralized, which would expose us to a greater risk of loss if we seek to recover on defaulted

loans by selling the real estate collateral.

distressed economy in First Federal of Hazard’s market area could hurt our profits and slow our growth.

banks operate in four distinct market areas.

First Federal of Hazard’s market area consists of Perry and surrounding counties

in eastern Kentucky.

The economy in this market area has been distressed in recent years due to the decline in the coal industry on which

the economy has been dependent.

While the region has seen improvement in the economy from the influx of other industries, such as health

care and manufacturing, the competition provided by new methods of extracting natural gas has recently hurt the coal industry.

As a consequence,

the economy in First Federal of Hazard’s market area continues to lag behind the economies of Kentucky and the United States and

First Federal of Hazard has experienced insufficient loan demand in its market area.

Moreover, the slow economy in First Federal of Hazard’s

market area will limit our ability to grow our asset base in that market.

mortgage banking revenue and the value of our mortgage servicing rights can be volatile.

plan to continue to sell our longer-term, conforming and non-conforming fixed-rate loans that we originate to generate noninterest income.

We also earn revenue from fees we receive for servicing mortgage loans.

Changes in interest rates may impact our mortgage banking revenues,

which could negatively impact our noninterest income.

When rates rise, the demand for mortgage loans usually tends to fall, reducing

loan origination volume and the related amount of gains on the sales of loans.

Under the same conditions, net revenue from our mortgage

servicing activities can increase due to slower prepayments, which reduces our amortization expense for mortgage servicing rights.

rates fall, mortgage originations usually tend to increase and the value of our mortgage servicing rights usually tends to decline, also

with some offsetting revenue effect.

During the fiscal year ended June 30, 2026, non-interest income increased $129,000 or 25.8% compared

to June 30, 2025 and totaled $629,000, primarily due to increased net gains on sales of loans of $108,000 or 53.7%.

addition, our results of operations are affected by the amount of noninterest expenses associated with mortgage banking activities, such

as salaries and employee benefits (including commissions), occupancy, equipment and data processing expense, and other operating costs.

During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce

expenses commensurate with the decline in mortgage loan origination activity.

challenges at other banking institutions could lead to depositor concerns that spread within the banking industry causing disruptive

and destabilizing deposit outflows.

In March 2023, Silicon Valley Bank and Signature Bank experienced large

deposit outflows coupled with insufficient liquidity to meet withdrawal demands, resulting in the institutions being placed into FDIC

receivership.

In May 2023, First Republic Bank was also placed into FDIC receivership.

In the aftermath of these

events, there has been substantial market disruption and concerns that diminished depositor confidence could spread across the banking

industry, leading to deposit outflows that could destabilize other institutions.

To strengthen public confidence in the banking system,

the FDIC took action to protect funds held in uninsured deposit accounts at Silicon Valley Bank, Signature Bank and First Republic Bank.

However, the FDIC has not committed to protecting uninsured deposits in other institutions that experience outsized withdrawal demands.

To further bolster the banking system, the Federal Reserve Board created a new Bank Term Funding Program to provide an additional source

of liquidity.

At June 30, 2025, we had $29.2 million in available liquidity, including $19.5 million in cash and cash equivalents.

uninsured deposits are estimated to be approximately $37.1 million or 13.4% of total deposits.

At June 30, 2025, we had off-balance sheet

liquidity sources totaling $80.3 million, including $71.0 million in additional borrowing capacity at the Federal Home Loan Bank of Cincinnati.

Notwithstanding our significant liquidity, large deposit outflows could adversely affect our financial condition and results of operations

and could result in the closure of the Banks.

Furthermore, the recent bank failures may result in strengthening of capital and liquidity

rules which, if the revised rules apply to us, could adversely affect our financial condition and results of operations.

Insufficient liquidity or liquidity related

concerns could impair our ability to fund operations, pay dividends on outstanding shares of stock, and jeopardize our financial condition,

growth and prospects.

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

the suspension of quarterly dividends indefinitely.

The suspension of our quarterly cash dividend could have an adverse impact on the

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

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

In the aftermath of these events, there has been

substantial market disruption and concerns that diminished depositor confidence could spread across the banking industry, leading to deposit

outflows that could destabilize other institutions.

To strengthen public confidence in the banking system, the FDIC took action to protect

funds held in uninsured deposit accounts at Silicon Valley Bank, Signature Bank and First Republic Bank.

However, the FDIC has not committed

to protecting uninsured deposits in other institutions that experience outsized withdrawal demands.

To further bolster the banking system,

the Federal Reserve Board created a new Bank Term Funding Program to provide an additional source of liquidity.

At June 30, 2026, we had

$27.4 million in available liquidity, including $16.5 million in cash and cash equivalents.

Our uninsured deposits are estimated to be

approximately $31.7 million or 12.2% of total deposits.

At June 30, 2026, we had off-balance sheet liquidity sources totaling $89.4 million,

including $76.1 million in additional borrowing capacity at the Federal Home Loan Bank of Cincinnati.

Notwithstanding our significant

liquidity, large deposit outflows could adversely affect our financial condition and results of operations and could result in the closure

of the Banks.

Furthermore, the recent bank failures may result in strengthening of capital and liquidity rules which, if the revised rules

apply to us, could adversely affect our financial condition and results of operations.

liquidity or liquidity related concerns could impair our ability to fund operations, pay dividends on outstanding shares of stock, and

jeopardize our financial condition, 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.

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

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 Board approval

to waive the payment of quarterly dividends that would otherwise be payable to First Federal MHC expired.

On July 28, 2026, First Federal

MHC held a meeting to vote on a proposal to permit First Federal MHC to waive its right to receive quarterly dividends aggregating up

to $0.40 per share declared by Kentucky First during the 12-month period following member approval of the dividend waiver proposal.

members of First Federal MHC voted and approved the waiver of First Federal MHC’s right to receive quarterly dividends and the Company

has resumed the payment of dividends.

In the future, it is expected that First Federal MHC will 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.

Related to Our Business and Industry Generally

competition within our market areas could hurt our profits and slow growth.

we consider ourselves competitive in our market areas, we face intense competition both in making loans and attracting deposits.

competition for loans and deposits might result in our earning less on our loans and paying more on our deposits, which reduces net interest

Some of the institutions with which we compete have substantially greater resources than we have and may offer services that

we do not provide.

We expect competition to increase in the future as a result of legislative, regulatory and technological changes and

the continuing trend of consolidation in the financial services industry.

Our profitability will depend upon our continued ability to

compete successfully in our market areas.

Related to Laws and Regulations

Regulation of the financial services industry

is intense, and we may be adversely affected by changes in laws and regulations.

We are subject to extensive government regulation, supervision and

examination, 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.

Such regulation, supervision and examination

govern the activities in which we may engage and are intended primarily for the protection of the federal deposit insurance fund and the

Banks’ depositors, rather than the protection of the Company’s stockholders.

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.

Any future legislative or regulatory changes could have a material impact on our profitability, the

value of assets held for investment or the value of collateral for loans.

Future legislative changes could also require changes to business

practices and potentially expose us to additional costs, liabilities, enforcement action and reputational risk.

Federal regulatory agencies

also have the ability to take strong supervisory actions against financial institutions that have experienced increased loan production

and losses and other underwriting weaknesses or have compliance weaknesses.

These actions include entering into formal or informal written

agreements and cease and desist orders that place certain limitations on their operations, and/or they can impose fines.

If we were to

become subject to a regulatory action, such action could negatively impact our ability to execute our business plan, and result in operational

restrictions, as well as our ability to grow, pay dividends, repurchase stock or engage in mergers and acquisitions.

On August 13, 2024,

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

of the same date.

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

§ 5.51(c)(7)(ii), First Federal of Kentucky was deemed to be

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

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

Federal of Kentucky.

The IMCRs required 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%.

If the OCC were

to have determined 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 our common stock, and may negatively

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

On February 19, 2026, the OCC published

notification that it had terminated the Agreement.

In addition to terminating the Agreement, the OCC also lifted the individual minimum

capital requirements imposed on First Federal of Kentucky in connection with the Agreement.

For additional information regarding the Agreement

and the IMCRs and the termination of the Agreement and the IMCRs, see “Item 1:

Business—Regulation and Supervision.

We may be unable to disclose some regulatory

restrictions or limitations on our operations imposed by our regulators, even if material to our business.

As part of our regular examination process, our

regulators may advise us to operate under various restrictions as a prudential matter.

Any such actions or restrictions, if and in whatever

manner imposed, could adversely affect our costs and revenues.

Moreover, efforts to comply with any such nonpublic supervisory actions

or restrictions may require material investments in additional resources and systems, as well as a significant commitment of managerial

time and attention.

As a result, such supervisory actions or restrictions, if and in whatever manner imposed, could have a material adverse

effect on our business and results of operations;

and, in certain instances, we may not be able to publicly disclose these matters, even

if material to our business.

Non-compliance

with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used

for money laundering and terrorist activities.

If such activities are suspected, financial institutions are obligated to file suspicious

activity reports with the U.S.

Treasury’s Office of Financial Crimes Enforcement Network.

These rules require financial institutions

to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts.

Failure to comply

with these regulations could result in fines or sanctions, including restrictions on pursuing any acquisitions or establishing or acquiring

new branches.

The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may

not be effective in preventing violations of these laws and regulations.

Furthermore, these rules and regulations continue to evolve

We have not been subject to fines or other penalties, or have suffered business or reputational harm, as a result of money

laundering activities in the past.

policies and regulations of the Federal Reserve Board could adversely affect our business, financial condition and results of operations.

addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve

An important function of the Federal Reserve Board is to regulate the money supply and credit conditions.

Among the instruments

used by the Federal Reserve Board to implement these objectives are open market purchases and sales of U.S.

government securities, adjustments

to the discount rate and changes in banks’ reserve requirements against bank deposits.

These instruments are used in varying combinations

to influence overall economic growth and the distribution of credit, bank loans, investments and deposits.

Their use also affects interest

rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve Board have had a significant

effect on the operating results of financial institutions in the past and are expected to continue to do so in the future.

of such policies upon our business, financial condition and results of operations cannot be predicted.

may be adversely affected by recent changes in U.S.

tax laws and regulations.

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, includes a number of provisions that will have an impact on the banking industry, borrowers and the market for residential real

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.

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.

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 regulators require federally insured depository institutions

to meet several minimum capital standards:

(1) total capital to risk-weighted assets of 8.0%;

(2) tier 1 capital to risk-weighted assets

(3) common equity tier 1 capital to risk-weighted assets of 4.5%;

and (4) tier 1 capital to adjusted total assets of 4.0%.

addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary

bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity

tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.

The regulators

established a framework for the classification of savings institutions into five categories:

well capitalized, adequately capitalized,

undercapitalized, significantly undercapitalized, and critically undercapitalized.

Generally, an institution is considered well capitalized

a total capital to risk-weighted assets ratio of at least 10.0%, a tier 1 capital to risk-weighted assets ratio of at least

8.0%, a common tier 1 capital to risk-weighted assets ratio of at least 6.5%, and a tier 1 capital to adjusted total assets ratio of at

In August 2024, First Federal of Kentucky entered into an Agreement with the OCC and the OCC imposed IMCRs which required

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 was required to 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%.

On February 19, 2026, the OCC published a notification that it had terminated the Agreement.

In addition to terminating

the Agreement, the OCC also lifted the IMCRs imposed on First Federal of Kentucky in connection with the Agreement.

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.”

Federal Reserve Board may require us to commit capital resources to support the Banks.

law requires that a holding company act as a source of financial and managerial strength to its subsidiary banks and to commit resources

to support such subsidiary banks.

Under the “source of strength” doctrine, the Federal Reserve Board may require a holding

company to make capital injections into a troubled subsidiary bank and may charge the holding company with engaging in unsafe and unsound

practices for failure to commit resources to a subsidiary bank.

A capital injection may be required at times when the holding company

may not have the resources to provide it and therefore may be required to borrow the funds or raise capital.

Thus, any borrowing or funds

needed to raise capital required to make a capital injection may be more expensive or difficult to obtain and could have an adverse effect

on our business, financial condition and results of operations.

Related to Accounting Matters

in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial

condition or operating results.

preparing the periodic reports and consolidated financial statements we file under the Securities Exchange Act of 1934, as amended, our

management is and will be required under applicable rules and regulations to make estimates and assumptions as of a specified date.

estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial

risk and uncertainty.

Materially different results may occur as circumstances change and additional information becomes known.

requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for loan losses,

the valuation of mortgage servicing rights, and the fair value of financial instruments.

in accounting standards could affect reported earnings.

bodies responsible for establishing accounting standards, including the Financial Accounting Standards Board, the Securities and Exchange

Commission and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation

of our financial statements.

These changes can be hard to predict and can materially impact how we record and report our consolidated

financial condition and results of operations.

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

Related to Operational Matters

are subject to certain risks in connection with our use of technology.

security measures may not be sufficient to mitigate the risk of a cyber attack.

Communications and information systems are essential

to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger and virtually all other

aspects of our business.

Our operations rely on the secure processing, storage, and transmission of confidential and other information

in our computer systems and networks.

Although we take protective measures and endeavor to modify them as circumstances warrant, the

security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses,

or other malicious code and cyber attacks that could have a security impact.

If one or more of these events occur, this could jeopardize

our or our customers’ confidential and other information processed and stored in, and transmitted through, our computer systems

and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our customers or counterparties.

We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities

or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered

through any insurance maintained by us.

We could also suffer significant reputational damage.

breaches in our Internet banking activities could further expose us to possible liability and damage our reputation.

Any compromise of

our security also could deter customers from using our Internet banking services that involve the transmission of confidential information.

We rely on standard Internet security systems to provide the security and authentication necessary to effect secure transmission of data.

These precautions may not protect our systems from compromises or breaches of our security measures, which could result in significant

legal liability and significant damage to our reputation and our business.

security measures may not protect us from systems failures or interruptions.

we have established policies and procedures to prevent or limit the impact of systems failures and interruptions, there can be no assurance

that such events will not occur or that they will be adequately addressed if they do.

In addition, we outsource certain aspects of our

data processing and other operational functions to certain third-party providers.

If our third-party providers encounter difficulties,

or if we have difficulty in communicating with them, our ability to adequately process and account for transactions could be affected,

and our business operations could be adversely impacted.

Threats to information security also exist in the processing of customer information

through various other vendors and their personnel.

occurrence of any failures or interruptions may require us to identify alternative sources of such services, and we cannot assure you

that we could negotiate terms that are as favorable to us or could obtain services with similar functionality as found in our existing

systems without the need to expend substantial resources, if at all.

Further, the occurrence of any systems failure or interruption could

damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose

us to legal liability.

Any of these occurrences could have a material adverse effect on our financial condition and results of operations.

must keep pace with technological change to remain competitive.

products and services have become increasingly technology-driven.

Our ability to meet the needs of our customers competitively, and in

a cost-efficient manner, is dependent on the ability to keep pace with technological advances and to invest in new technology as it becomes

available, as well as related essential personnel.

In addition, technology has lowered barriers to entry into the financial services

market and made it possible for financial technology companies and other non-bank entities to offer financial products and services traditionally

provided by banks.

The ability to keep pace with technological change is important, and the failure to do so, due to cost, proficiency

or otherwise, could have a material adverse impact on our business and therefore on our financial condition and results of operations.

Related to Our Holding Company Structure

Federal MHC owns a majority of our common stock and is able to exercise voting control over most matters put to a vote of stockholders,

including preventing sale or merger transactions you may like or a second-step conversion by First Federal MHC.

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.

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.

Federal Reserve Board regulations would likely prevent an acquisition

of Kentucky First other than by another mutual holding company or a mutual institution.

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.

long-term ability to pay dividends to our stockholders is based primarily upon the ability of the Banks to make capital distributions

to Kentucky First Federal, and also on the availability of cash at the holding company level in the event earnings are not sufficient

to pay dividends according to the cash dividend payout policy.

Under Office of the Comptroller of the Currency safe harbor regulations,

the Banks may each distribute to Kentucky First capital not exceeding net retained income for the current calendar year and the prior

two calendar years.

Federal MHC owns a majority of Kentucky First Federal’s outstanding stock.

First Federal MHC has historically waived its right

to dividends on the Kentucky First common shares it owns and, without the waiver of such dividends, the amount of dividends paid to public

stockholders is significantly higher than it would be if First Federal MHC accepted dividends.

First Federal MHC is not required to waive

dividends, but Kentucky First expects this practice to continue, subject to member and regulatory approval annually, to the extent Kentucky

First continues to pay dividends 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.

Federal Reserve Board in 2011 issued regulations that govern the activities of Kentucky First Federal and First Federal MHC and the regulations

were implemented in the fourth quarter of 2011.

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.

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.

Federal MHC has received Federal Reserve Board approval to waive quarterly dividends 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.

It is expected that

First Federal MHC will continue to waive future dividends, to the extent Kentucky First continues to pay dividends in future periods,

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, our ability to pay dividends to our stockholders may be substantially impaired and the amounts

of any such dividends may be significantly reduced.

On January 16, 2024, we announced that the Board

had determined to suspend the payment of quarterly dividends.

On July 28, 2026, First Federal MHC approved a proposal to permit First

Federal MHC to waive its right to receive quarterly dividends aggregating up to $0.40 per share declared by Kentucky First during the

12-month period following member approval of the dividend waiver proposal.

Following the approval of the dividend waiver, the Company’s

Board of Directors announced the resumption of the dividend and declared a cash dividend of $0.05 per share payable on September 21, 2026

to shareholders of record on August 31, 2026.

It is expected that First Federal MHC will continue to waive future dividends, to the extent

Kentucky First continues to pay dividends in future periods, 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

4 unchanged sentences

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

Strong competition within our market areas

could hurt our profits and slow growth.

Although we consider ourselves competitive in

our market areas, we face intense competition both in making loans and attracting deposits.

Price competition for loans and deposits

might result in our earning less on our loans and paying more on our deposits, which reduces net interest income.

Some of the institutions

with which we compete have substantially greater resources than we have and may offer services that we do not provide.

We expect competition

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

in the financial services industry.

Our profitability will depend upon our continued ability to compete successfully in our market areas.

Risks Related to Laws and Regulations

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.

On August 13, 2024, First Federal of Kentucky

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

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%.

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

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.

First Federal of Kentucky’s Board and management

are committed to fully addressing the provisions of the Agreement within the required time frames.

The OCC may determine, however, in

its sole discretion that the issues raised by the Agreement have not been addressed satisfactorily, or that any current or past actions,

violations or deficiencies could be the subject of further regulatory enforcement actions.

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.

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 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,

Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

The USA PATRIOT and Bank Secrecy Acts require

financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities.

If such activities are suspected, financial institutions are obligated to file suspicious activity reports with the U.S.

Office of Financial Crimes Enforcement Network.

These rules require financial institutions to establish procedures for identifying and

verifying the identity of customers seeking to open new financial accounts.

Failure to comply with these regulations could result in

fines or sanctions, including restrictions on pursuing any acquisitions or establishing or acquiring new branches.

The policies and procedures

we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations

of these laws and regulations.

Furthermore, these rules and regulations continue to evolve and expand.

We have not been subject to fines

or other penalties, or have suffered business or reputational harm, as a result of money laundering activities in the past.

Monetary policies and regulations of the

Federal Reserve Board could adversely affect our business, financial condition and results of operations.

In addition to being affected by general economic

conditions, our earnings and growth are affected by the policies of the Federal Reserve Board.

An important function of the Federal Reserve

Board is to regulate the money supply and credit conditions.

Among the instruments used by the Federal Reserve Board to implement these

objectives are open market purchases and sales of U.S.

government securities, adjustments to the discount rate and changes in banks’

reserve requirements against bank deposits.

These instruments are used in varying combinations to influence overall economic growth and

the distribution of credit, bank loans, investments and deposits.

Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve Board have had a significant effect on the operating results of financial

institutions in the past and are expected to continue to do so in the future.

The effects of such policies upon our business, financial

condition and results of operations cannot be predicted.

We may be adversely affected by recent

changes in U.S.

tax laws and regulations.

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 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

requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and define “capital”

for calculating these ratios.

The minimum capital requirements are:

(i) a new common equity Tier 1 capital ratio of 4.5%;

1 to risk-based assets capital ratio of 6% (increased from 4%);

(iii) a total capital ratio of 8% (unchanged from current rules);

(iv) a Tier 1 leverage ratio of 4%.

The regulations also establish a “capital conservation” buffer of 2.5%, and will result

in the following minimum ratios:

(i) a common equity Tier 1 capital ratio of 7%;

(ii) a Tier 1 to risk-based assets capital ratio of

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.

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

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

to support the Banks.

Federal law requires that a holding company act

as a source of financial and managerial strength to its subsidiary banks and to commit resources to support such subsidiary banks.

the “source of strength” doctrine, the Federal Reserve Board may require a holding company to make capital injections into

a troubled subsidiary bank and may charge the holding company with engaging in unsafe and unsound practices for failure to commit resources

to a subsidiary bank.

A capital injection may be required at times when the holding company may not have the resources to provide it

and therefore may be required to borrow the funds or raise capital.

Thus, any borrowing or funds needed to raise capital required to

make a capital injection may be more expensive or difficult to obtain and could have an adverse effect on our business, financial condition

and results of operations.

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.

In preparing the periodic reports and consolidated

financial statements we file under the Securities Exchange Act of 1934, as amended, our management is and will be required under applicable

rules and regulations to make estimates and assumptions as of a specified date.

These estimates and assumptions are based on management’s

best estimates and experience as of that date and are subject to substantial risk and uncertainty.

Materially different results may occur

as circumstances change and additional information becomes known.

Areas requiring significant estimates and assumptions by management

include our evaluation of the adequacy of our allowance for loan losses, the valuation of mortgage servicing rights, and the fair value

of financial instruments.

Changes in accounting standards could affect reported earnings.

The bodies responsible for establishing accounting

standards, including the Financial Accounting Standards Board, the Securities and Exchange Commission and other regulatory bodies, periodically

change the financial accounting and reporting guidance that governs the preparation of our financial statements.

These changes can be

hard to predict and can materially impact how we record and report our consolidated financial condition and results of operations.

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

Risks Related to Operational Matters

We are subject to certain risks in connection

with our use of technology.

Our security measures may not be sufficient to

mitigate the risk of a cyber attack.

Communications and information systems are essential to the conduct of our business, as we use such

systems to manage our customer relationships, our general ledger and virtually all other aspects of our business.

Our operations rely

on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks.

we take protective measures and endeavor to modify them as circumstances warrant, the security of our computer systems, software, and

networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber attacks that

could have a security impact.

If one or more of these events occur, this could jeopardize our or our customers’ confidential and

other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions

or malfunctions in our operations or the operations of our customers or counterparties.

We may be required to expend significant additional

resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject

to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us.

could also suffer significant reputational damage.

Security breaches in our Internet banking activities

could further expose us to possible liability and damage our reputation.

Any compromise of our security also could deter customers from

using our Internet banking services that involve the transmission of confidential information.

We rely on standard Internet security

systems to provide the security and authentication necessary to effect secure transmission of data.

These precautions may not protect

our systems from compromises or breaches of our security measures, which could result in significant legal liability and significant

damage to our reputation and our business.

Our security measures may not protect us

from systems failures or interruptions.

While we have established policies and procedures

to prevent or limit the impact of systems failures and interruptions, there can be no assurance that such events will not occur or that

they will be adequately addressed if they do.

In addition, we outsource certain aspects of our data processing and other operational

functions to certain third-party providers.

If our third-party providers encounter difficulties, or if we have difficulty in communicating

with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely

Threats to information security also exist in the processing of customer information through various other vendors and their

The occurrence of any failures or interruptions

may require us to identify alternative sources of such services, and we cannot assure you that we could negotiate terms that are as favorable

to us or could obtain services with similar functionality as found in our existing systems without the need to expend substantial resources,

Further, the occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers

and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability.

Any of these occurrences could

have a material adverse effect on our financial condition and results of operations.

We must keep pace with technological change

to remain competitive.

Financial products and services have become increasingly

technology-driven.

Our ability to meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on the

ability to keep pace with technological advances and to invest in new technology as it becomes available, as well as related essential

In addition, technology has lowered barriers to entry into the financial services market and made it possible for financial

technology companies and other non-bank entities to offer financial products and services traditionally provided by banks.

to keep pace with technological change is important, and the failure to do so, due to cost, proficiency or otherwise, could have a material

adverse impact on our business and therefore on our financial condition and results of operations.

Risks Related to Our Holding Company Structure

First Federal MHC owns a majority of our

common stock and is able to exercise voting control over most matters put to a vote of stockholders, including preventing sale or merger

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.

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

stockholders is based primarily upon the ability of the Banks to make capital distributions to Kentucky First Federal, and also on the

availability of cash at the holding company level in the event earnings are not sufficient to pay dividends according to the cash dividend

payout policy.

Under Office of the Comptroller of the Currency safe harbor regulations, the Banks may each distribute to Kentucky First

capital not exceeding net retained income for the current calendar year and the prior two calendar years.

First Federal MHC owns a majority of Kentucky

First Federal’s outstanding stock.

First Federal MHC has historically waived its right to dividends on the Kentucky First common

shares it owns and, without the waiver of such dividends, the amount of dividends paid to public stockholders is significantly higher

than it would be if First Federal MHC accepted dividends.

First Federal MHC is not required to waive dividends, but Kentucky First expects

this practice to continue, subject to member and regulatory approval annually, to the extent Kentucky First continues to pay dividends

in future periods.

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

that govern the activities of Kentucky First Federal and First Federal MHC and the regulations were implemented in the fourth quarter

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.

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.

First Federal MHC has received Federal Reserve

Board approval to waive quarterly dividends 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.

It is expected that First Federal MHC will continue to waive

future dividends, to the extent Kentucky First continues to pay dividends in future periods, 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,

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

On January 16, 2024, we announced that the Board

had determined to suspend the payment of dividends indefinitely.

For additional information regarding suspension of our quarterly dividend,

please see “Liquidity Risk - On January 16, 2024, the Company announced the suspension of quarterly dividends

indefinitely.

The suspension of our quarterly cash dividend could have an adverse impact on the market price of our common stock.”

If First Federal MHC is unable to waive the receipt of dividends, our ability to pay dividends to

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

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