Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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. 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 business plans, prospects, growth and operating strategies; statements regarding the quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits. Kentucky First Federal Bancorp's actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions; prices for real estate in the Company's market areas; the interest rate environment and the impact of the interest rate environment on our business, financial condition and results of operations; our ability to successfully execute our strategy to increase earnings, increase core deposits, reduce reliance on higher cost funding sources and shift more of our loan portfolio towards higher-earning loans; our ability to pay future dividends and if so at what level; our ability to receive any required regulatory approval or non-objection to pay dividends to 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; changes in the demand for loans, deposits and other financial services that we provide; the possibility that future credit losses may be higher than currently expected; competitive pressures among financial services companies; the ability to attract, develop and retain qualified employees; our ability to maintain the security of our data processing and information technology systems; 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, 2026. 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.

General

The Company was incorporated as a mid-tier holding company under the laws of the United States on March 2, 2005, upon the completion of the reorganization of First Federal of Hazard into a federal mutual holding company form of organization (the "Reorganization"). On that date, Kentucky First Federal also completed its minority stock offering and its concurrent acquisition of Frankfort First Bancorp, Inc. ("Frankfort First Bancorp") and its wholly owned subsidiary, First Federal of Kentucky, Frankfort Kentucky ("First Federal of Kentucky") (the "Merger"). Following the Reorganization and Merger, the Company has operated First Federal of Hazard and First Federal of Kentucky (collectively, the "Banks") as two independent, community-oriented savings institutions.

On December 31, 2012, the Company acquired CKF Bancorp, Inc., a savings and loan holding company which operated three banking locations in Boyle and Garrard Counties in Kentucky. 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 on net interest income, which is the difference between the income earned on our loans and securities and our cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by the provision for losses on loans and service charges and fees collected on our deposit accounts. Our general, administrative, and other expense primarily consists of employee compensation and benefits expense, occupancy and equipment expense, data processing expense, other operating expenses and state and federal income taxes. Results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities.

Kentucky First Federal Bancorp

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)

Regulatory Developments Regarding First Federal of Kentucky

On August 13, 2024, First Federal of Kentucky entered into a formal written agreement (the "Agreement") with the OCC, First Federal of Kentucky's primary federal banking regulator, which became effective as of the same date. On February 19, 2026, the OCC published notification that it had terminated the Agreement. As a result of the termination of the agreement, First Federal of Kentucky is no longer considered to be in "troubled condition" pursuant to 12 C.F.R. § 5.51(c)(7)(ii) and is an "eligible savings association" for purposes of 12 C.F.R. § 5.3.

In addition to terminating the Agreement, the OCC also lifted the individual minimum capital requirements on First Federal of Kentucky in connection with the Agreement. For additional information, see the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 19, 2026.

Asset/Liability Management

Management and the boards of the subsidiary Banks are responsible for the asset/liability management issues that affect the individual Banks. Either Bank may work with its sister Bank 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. These changes in cash flow are estimated based on hypothetical instantaneous and permanent increases and decreases in market interest rates.

On September 16, 2026, the FOMC raised overnight interest rates by 25 basis points. From that time the general consensus of market participants pivoted from forecasting interest rate decreases to belief that the FOMC will continue interest rate increases. Our IRR model indicated that at June 30, 2026, in the event of a sudden and sustained increase in prevailing market interest rates of 300 basis points, our EVE would be expected to decrease by $19.3 million or 35.6% to $35.0 million, at which level our fair value of tangible equity to fair value of tangible assets would be expected to be 13.2%. The projected decrease in EVE in the event of a sudden and sustained 300 basis point increase in prevailing interest rates is not within the parameters established by each subsidiary Bank's Board of Directors. 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 rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Most market analysts believe that elevated target rates over an extended period of time are likely, but a 300 basis points increase from the current level is very unlikely.

Kentucky First Federal Bancorp
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)

Average Balance Sheets

The following table represents the average balance sheets for the three-month periods ended September 30, 2026 and 2025, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

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, 2026 to September 30, 2026

Financial Position and Results of Operations

At September 30, 2026 the Company and the Banks were considered well-capitalized with capital ratios in excess of regulatory requirements. As of September 30, 2026, First Federal Savings Bank of Kentucky's leverage ratio was 10.98% and First Federal Savings and Loan Association of Hazard was 23.31%.

Assets: At September 30, 2026, the Company's assets totaled $356.3 million, a decrease of $6.1 million, or 1.7%, from total assets at June 30, 2026, due primarily to the decrease in loans, net of allowance, and securities available-for-sale at market.

Cash and cash equivalents: Cash and cash equivalents overall increased $406,000 or 2.5% to $16.9 million at September 30, 2026. The increase is primarily due to fed funds sold increasing $3.3 million or 217.3% and totaling $4.8 million at September 30, 2026. Most of the Company's cash and cash equivalents are held in interest-bearing demand deposits, which decreased $2.2 million or 17.7% and totaled $10.1 million.

Debt securities: At September 30, 2026, our securities portfolio, which consisted of mortgage-backed securities, decreased $2.1 million or 18.9% and totaled $9.0 million compared to June 30, 2026. The decrease is due to repayments and prepayments totaling $2.0 million during the quarter ended September 30, 2026, as well as a decrease in fair market value of available for sale investments, which decreased $109,000 during the period.

Loans: Loans, net and loans held-for-sale in the aggregate decreased $4.5 million or 1.4% and totaled $316.1 million at September 30, 2026. Loans receivable, net, decreased by $4.1 million or 1.3% to $315.3 million at September 30, 2026. Loans held-for-sale decreased to $757,000 at September 30, 2026. Management continues to look for high-quality loans to add to its portfolio and will continue to emphasize loan originations to the extent that it is profitable, prudent and consistent with our interest rate risk strategies. Because market interest rates have become more favorable, the Company has had more success in selling mortgages into the secondary market, which has led to consistently having a balance in loans held-for-sale.

Non-Performing and Classified Loans: At September 30, 2026, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of approximately $3.1 million, or 1.0% of total loans compared to $2.6 million or 0.8%, of total loans at June 30, 2026. The Company's ACL totaled $2.3 million at September 30, 2026 and the ACL totaled $2.3 million at June 30, 2026, respectively. The ACL at September 30, 2026, represented 73.7% of nonperforming loans and 0.7% of total loans, while at June 30, 2026, ACL represented 87.9% of nonperforming loans and 0.7% of total loans.

The Company had $6.0 million in assets classified as substandard for regulatory purposes at September 30, 2026, and there was $79,000 in real estate owned (REO). Classified loans as a percentage of total loans (including loans acquired) was 1.9% and 1.9% at September 30, 2026 and June 30, 2026, respectively. Of substandard loans, 98.1% 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 Company's real estate acquired through foreclosure represented 1.3% of substandard assets at both September 30, 2026 and June 30, 2026. 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 both at September 30, 2026 and June 30, 2026.

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, 2026 to September 30, 2026 (continued)

Financial Position and Results of Operations (continued)

At September 30, 2026 and June 30, 2026, the Company had $842,000 and $2.2 million 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 close attention.

Liabilities: Total liabilities decreased $6.8 million, or 2.2% to $305.3 million at September 30, 2026, as deposits decreased $7.2 million or 2.8%. Certificates of deposit decreased $6.9 million or 3.8% and totaled $176.2 million at September 30, 2026, of which $34.3 million were brokered deposits, compared to $35.0 million at June 30, 2026. Savings deposit accounts decreased $607,000 or 1.4% and totaled $43.9 million at quarter end. Demand deposit accounts increased $251,000 or 0.8% and totaled $33.4 million at the end of the current period. Federal Home Loan Bank Advances decreased $105,000 or 0.2% and totaled $48.5 million at September 30, 2026.

Shareholders' Equity: At September 30, 2026, the Company's shareholders' equity totaled $51.0 million, an increase of $669,000 or 1.3% from the June 30, 2026. The increase in shareholders' equity was primarily associated with net income of $919,000 in the quarter, which was somewhat offset by increased other comprehensive loss of $82,000.

The Company paid dividends of $168,000 for the three-month period just ended. On July 28, 2026, the members of First Federal MHC approved a proposal to waive the receipt of dividends aggregating up to $0.40 per share declared and paid by Kentucky First Federal Bancorp to shareholders of its common stock during the 12-month period immediately following member approval of the waiver proposal (the "Dividend Waiver"). On July 28, 2026, the Company's Board declared a cash dividend on shares of its common stock of $0.05 per share payable on September 21, 2026 to shareholders of record on August 31, 2026. On October 29, 2026, the Company's Board declared a cash dividend on shares of its common stock of $0.05 per share payable on December 21, 2026 to shareholders of record on November 30, 2026. As a result of the approval of the Dividend Waiver by the members of First Federal MHC on July 28, 2026, First Federal MHC did and will not receive these dividends. See Risk Factors, "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 Part II, Item 1A, of the Company's Annual Report on Form 10-K for the year ended June 30, 2026 for additional discussion regarding the payment of dividends.

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, 2026 and 2025

General

Net income totaled $919,000 or $0.11 diluted earnings per share for the three months ended September 30, 2026, an increase of $575,000 from net income of $344,000 or $0.04 diluted earnings per share for the same period in 2025. The increase in net earnings for the quarter ended September 30, 2026 was primarily attributable to increased net interest income and decreased non-interest expense.

Net Interest Income

Net interest income increased $639,000 or 25.5% to $3.1 million due primarily to both increased interest income and decreased interest expense. Interest income increased $159,000 or 3.1%, while interest expense decreased $480,000 or 18.8% to $2.1 million for the recently-ended quarter.

The average rate earned on interest-earning assets increased 38 basis points to 5.97% and was the primary reason for the increase in interest income, outweighing the decrease in average interest earning assets of $12.6 million or 3.5% to $349.1 million for the recently-ended quarterly period. The increase in interest income was due primarily to an increase of $249,000 or 5.3% 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 47 basis points to 6.18%. The average balance of loans decreased $8.9 million or 2.7% to $319.9 million for the three months ended September 30, 2026.

While average total interest-bearing liabilities decreased $13.4 million or 4.4%, the primary reason for decreased interest expense was the decrease in the average rate paid on interest bearing liabilities, decreasing 50 basis points to 2.82% for the three-month period ended September 30, 2026. Interest expense on certificates of deposit decreased $486,000 or 24.4% and totaled $1.5 million for the three months ended September 30, 2026. While the average balance of certificates of deposit decreased $18.4 million or 9.3% period to period, the average rate paid decreased 67 basis points to 3.37% and was the main reason for the decrease.

Net interest spread increased from 2.26% for the prior year quarterly period to 3.15% for the three-month period ended September 30, 2026.

Provision for Credit Losses

Management determined a provision for credit losses of $40,000 for the three months ended September 30, 2026 was appropriate compared to no provision for credit losses during the same period last year. Management determined that an increase in provision for loan losses for the quarter just ended was appropriate in light of the current economic environment and the recent increase in the overnight interest rate made by the Federal Open Market Committee. While the current economic indicators present a mixed bag of positive and negative attributes, the recent interest rate increase and market sentiment about future interest rate increases may increase pressure on borrowers and, therefore, impact our loan portfolio.

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, 2026 and 2025 (continued)

Non-interest Income

Non-interest income increased $28,000 or 18.3% to $181,000 for the three months ended September 30, 2026, compared to the prior year period, primarily because of an increase in net gains on sales of loans of $27,000.

Non-interest Expense

Non-interest expense decreased $130,000 or 5.9% and totaled $2.1 million for the three months ended September 30, 2026, primarily due to decreased outside service fees, other non-interest expense, FDIC insurance premiums, and employee compensation and benefits.

Outside service fees decreased $55,000 or 34.4% due to the reduction in the utilization of third party services period to period, which was primarily the result of the completion of third party services associated with the Company's efforts to address the requirements in the Formal Agreement with the OCC, which was terminated. Other non-interest expense decreased $41,000 or 24.7% due to other employee expense decreasing as the Company discontinued its use of a placement service to identify management level employee candidates. FDIC insurance premiums decreased $19,000 or 31.1% due to First Federal of Kentucky's no longer being under formal agreement with the OCC, which lowered that bank's premiums. Employee compensation and benefits decreased $12,000 due chiefly to having 3 less full-time employees from period to period.

Income Tax Expense

Income tax expense increased $182,000 from $109,000 for the three months ended September 30, 2025, to $291,000 for the recently-ended period due to higher earnings. The effective tax rates for the three-month periods ended September 30, 2026 and 2025 were 24.1% and 24.1%, respectively.

Kentucky First Federal Bancorp