UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2025

 

OR

 

☐  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from ____________ to _______________

 

Commission File Number: 0-51176

 

KENTUCKY FIRST FEDERAL BANCORP

(Exact name of registrant as specified in its charter)

 

United States of America		61-1484858
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

655 Main Street, Hazard, Kentucky 41702

(Address of principal executive offices)(Zip Code)

 

(502) 223-1638

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common Stock, $0.01 par value per share		KFFB		The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐	Accelerated filer	☐
Non-Accelerated filer	☒	Smaller Reporting Company	☒
		Emerging Growth Company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: At February 13, 2026, the latest practicable date, the Corporation had 8,086,715 shares of $.01 par value common stock outstanding (including 4,727,938 shares held by First Federal MHC).

 

 

 

INDEX

 

		Page
PART I FINANCIAL INFORMATION		1
ITEM 1 FINANCIAL STATEMENTS		1
Condensed Consolidated Balance Sheets		1
Condensed Consolidated Statements of Operations		2
Condensed Consolidated Statements of Comprehensive Income (Loss)		3
Consolidated Statements of Changes in Shareholders’ Equity		4
Condensed Consolidated Statements of Cash Flows		6
Notes to Condensed Consolidated Financial Statements		8
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk		41
ITEM 4 Controls and Procedures		41
PART II OTHER INFORMATION		42
SIGNATURES		44

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1: Financial Statements

 

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

  

		December 31, 2025				June 30, 2025
		Unaudited
ASSETS
Cash and due from financial institutions		$	2,326			$	2,342
Fed funds sold			3,266				8,577
Interest-bearing demand deposits			14,080				8,561
Cash and cash equivalents			19,672				19,480
Securities available-for-sale, at fair value			11,185				9,757
Securities held-to-maturity, at amortized cost-approximate fair value of $151 and $167 at December 31, 2025 and June 30, 2025, respectively			152				171
Loans held for sale			623				877
Loans, net of allowance for credit losses of $2,176 and $2,170 at December 31, 2025 and June 30, 2025, respectively			329,829				327,248
Office premises and equipment - at depreciated cost			4,184				4,211
Federal Home Loan Bank stock - at cost			3,805				3,980
Accrued interest receivable			1,469				1,438
Bank-owned life insurance			3,045				3,001
Prepaid income taxes			99				-
Prepaid expenses and other assets			1,215				1,048
Total assets		$	375,278			$	371,211
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings		$	43,496			$	48,616
Certificates of deposit			199,452				199,575
Demand deposit accounts			30,246				29,372
Deposits			273,194				277,563
Federal Home Loan Bank advances			51,448				42,760
Advances by borrowers for taxes and insurance			255				869
Accrued interest payable			510				949
Accrued income tax			-				63
Deferred income taxes			122				30
Other liabilities			648				608
Total liabilities			326,177				322,842
Shareholders’ equity
Preferred stock, 500,000 shares authorized, $.01 par value; no shares issued			-				-
Common stock, 20,000,000 shares authorized, $.01 par value; 8,596,064 shares issued			86				86
Additional paid-in capital			34,891				34,891
Retained earnings - restricted			18,154				17,506
Treasury shares at cost, 509,349 common shares at December 31, 2025 and June 30, 2025, respectively			(3,969	)			(3,969	)
Accumulated other comprehensive loss			(61	)			(145	)
Total shareholders’ equity			49,101				48,369
Total liabilities and shareholders’ equity		$	375,278			$	371,211

 

See accompanying notes to condensed consolidated financial statements.

 

 

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share data)

 

		Six months ended December 31,								Three months ended December 31,
		2025				2024				2025				2024
Interest income
Loans, including fees		$	9,579			$	8,702			$	4,884			$	4,437
Mortgage-backed securities			205				157				107				76
Interest-bearing deposits and other			444				544				185				271
Total interest income			10,228				9,403				5,176				4,784
Interest expense
Interest-bearing demand deposits			55				18				25				9
Savings			98				100				49				50
Certificates of deposit			3,933				3,812				1,943				1,936
Deposits			4,086				3,930				2,017				1,995
Borrowings			982				1,566				503				751
Total interest expense			5,068				5,496				2,520				2,746
Net interest income			5,160				3,907				2,656				2,038
Provision for credit losses			10				15				10				-
Net interest income after provision for credit losses			5,150				3,892				2,646				2,038
Non-interest income
Earnings on bank-owned life insurance			44				43				22				22
Net gain on sales of loans			166				141				101				81
Net gain on sales of real estate owned			-				5				-				5
Other			121				119				55				63
Total non-interest income			331				308				178				171
Non-interest expense
Employee compensation and benefits			2,515				2,396				1,311				1,211
Data processing			451				271				225				107
Occupancy and equipment			270				273				134				136
FDIC insurance premiums			140				138				79				75
Voice and data communications			66				66				33				32
Advertising			99				91				56				49
Outside service fees			394				225				234				155
Auditing and accounting			191				167				96				86
Regulatory assessments			46				46				23				23
Foreclosure and real estate owned expenses, net			45				41				19				19
Franchise and other taxes			71				70				40				42
Legal Fees			148				229				124				181
Other			191				202				49				87
Total non-interest expense			4,627				4,215				2,423				2,203
Income (loss) before income taxes			854				(15	)			401				6
Income tax expense (benefit)			206				(13	)			97				(7	)
NET INCOME (LOSS)		$	648			$	(2	)		$	304			$	13
EARNINGS (LOSS) PER SHARE
Basic and diluted		$	0.08			$	(0.00	)		$	0.04			$	0.00
DIVIDENDS PER SHARE		$	0.00			$	0.00			$	0.00			$	0.00

 

See accompanying notes to condensed consolidated financial statements.

 

 

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

 

		Six months ended December 31,								Three months ended December 31,
		2025				2024				2025				2024
Net income (loss)		$	648			$	(2	)		$	304			$	13
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities designated as available-for-sale, net of taxes of $28, $20, $6 and $(60) during the respective periods			84				60				18				(181	)
Comprehensive income (loss)		$	732			$	58			$	322			$	(168	)

 

See accompanying notes to condensed consolidated financial statements.

 

 

Kentucky First Federal Bancorp

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the six months ended

(Unaudited)

(Dollar amounts in thousands, except per share data)

 

December 31, 2025

 

		Common stock				Additional paid-in capital				Retained earnings				Treasury shares				Accumulated other comprehensive loss				Total
Balance at June 30, 2025		$	86			$	34,891			$	17,506			$	(3,969	)		$	(145	)		$	48,369
Net income			–				–				648				–				–				648
Other comprehensive income, net of tax			–				–				–				–				84				84
Balance at December 31, 2025		$	86			$	34,891			$	18,154			$	(3,969	)		$	(61	)		$	49,101

 

December 31, 2024

 

		Common stock				Additional paid-in capital				Retained earnings				Treasury shares				Accumulated other comprehensive loss				Total
Balance at June 30, 2024		$	86			$	34,891			$	17,325			$	(3,969	)		$	(336	)		$	47,997
Net loss			–				–				(2	)			–				–				(2	)
Other comprehensive income, net of tax			–				–				–				–				60				60
Balance at December 31, 2024		$	86			$	34,891			$	17,323			$	(3,969	)		$	(276	)		$	48,055

 

See accompanying notes to condensed consolidated financial statements.

 

 

Kentucky First Federal Bancorp

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the three months ended

(Unaudited)

(Dollar amounts in thousands, except per share data)

 

December 31, 2025

 

		Common stock				Additional paid-in capital				Retained earnings				Treasury shares				Accumulated other comprehensive loss				Total
Balance at September 30, 2025		$	86			$	34,891			$	17,850			$	(3,969	)		$	(79	)		$	48,779
Net income			–				–				304				–				–				304
Other comprehensive income, net of tax			–				–				–				–				18				18
Balance at December 31, 2025		$	86			$	34,891			$	18,154			$	(3,969	)		$	(61	)		$	49,101

 

December 31, 2024

 

		Common stock				Additional paid-in capital				Retained earnings				Treasury shares				Accumulated other comprehensive loss				Total
Balance at September 30, 2024		$	86			$	34,891			$	17,310			$	(3,969	)		$	(95	)		$	48,223
Net income			–				–				13				–				–				13
Other comprehensive loss, net of tax			–				–				–				–				(181	)			(181	)
Balance at December 31, 2024		$	86			$	34,891			$	17,323			$	(3,969	)		$	(276	)		$	48,055

 

See accompanying notes to condensed consolidated financial statements.

 

 

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

		Six months ended December 31,
		2025				2024
Cash flows from operating activities:
Net income (loss)		$	648			$	(2	)
Adjustments to reconcile net income (loss) to net cash from operating activities
Depreciation			96				103
Amortization of deferred loan origination fees, net			(99	)			(13	)
Amortization of premiums on investment securities			(23	)			(10	)
Net gain on sale of loans			(166	)			(141	)
Earnings on bank-owned life insurance			(44	)			(43	)
Provision for credit losses			10				15
Origination of loans held for sale			(5,836	)			(3,656	)
Proceeds from loans held for sale			6,256				3,791
Deferred Income Taxes			63				30
Accrued Income Tax			(162	)			-
Increase (decrease) in cash, due to changes in:
Accrued interest receivable			(31	)			(95	)
Prepaid expenses and other assets			(166	)			(52	)
Accrued interest payable			(439	)			302
Other liabilities			40				(189	)
Net cash provided by operating activities			147				40
Cash flows from investing activities:
Purchase of securities available for sale			(2,405	)			-
Securities maturities, prepayments and calls:
Held-to-maturity			17				22
Available-for-sale			1,114				1,111
Proceeds from redemption of FHLB stock			617				133
Purchase of FHLB stock			(442	)			(342	)
Loans originated for investment, net of principal collected			(2,492	)			2,791
Additions to premises and equipment, net			(69	)			(83	)
Net cash provided by (used in) investing activities			(3,660	)			3,632
Cash flows from financing activities:
Net change  in deposits			(4,369	)			6,916
Payments by borrowers for taxes and insurance, net			(614	)			(703	)
Proceeds from Federal Home Loan Bank advances			27,102				14,446
Repayments on Federal Home Loan Bank advances			(18,414	)			(21,642	)
Net cash provided by (used in) financing activities			3,705				(983	)
Net increase in cash and cash equivalents			192				2,689
Beginning cash and cash equivalents			19,480				18,287
Ending cash and cash equivalents		$	19,672			$	20,976

 

See accompanying notes to condensed consolidated financial statements.

 

 

Kentucky First Federal Bancorp

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

(In thousands)

 

		Six months ended December 31,
		2025				2024
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes		$	305			$	-
Interest on deposits and borrowings		$	5,068			$	5,194

 

See accompanying notes to condensed consolidated financial statements.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025

(unaudited)

 

The Kentucky First Federal Bancorp (“Kentucky First” or the “Company”) was incorporated under federal law in March 2005 and is the mid-tier holding company for First Federal Savings and Loan Association of Hazard, Hazard, Kentucky (“First Federal of Hazard”) and Frankfort First Bancorp, Inc. (“Frankfort First”). Frankfort First is the holding company for First Federal Savings Bank of Kentucky, Frankfort, Kentucky (“First Federal of Kentucky”). First Federal of Hazard and First Federal of Kentucky (hereinafter collectively the “Banks”) are Kentucky First’s primary operations, which consist of operating the Banks as two independent, community-oriented savings institutions.

 

Note 1. Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements, which represent the condensed consolidated balance sheets and results of operations of the Company, were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) which are necessary for a fair presentation of the condensed consolidated financial statements have been included. The results of operations for the six-month period ended December 31, 2025, are not necessarily indicative of the results which may be expected for an entire fiscal year. The condensed consolidated balance sheet as of June 30, 2025, has been derived from the audited consolidated balance sheet as of that date. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report for 2025 filed with the Securities and Exchange Commission on September 30, 2025.

 

Principles of Consolidation - The consolidated financial statements include the accounts of the Company, Frankfort First, and its wholly-owned banking subsidiaries, First Federal of Hazard and First Federal of Kentucky (collectively hereinafter “the Banks”). All intercompany transactions and balances have been eliminated in consolidation. The Company is a majority-owned subsidiary of First Federal MHC. The accounts of First Federal MHC are not consolidated in the accompanying consolidated financial statements of the Company.

 

Critical Accounting Policies and Estimates

 

Investments – Management determines the classification of debt securities at purchase as held-to-maturity, trading, or available-for-sale. Held-to-maturity securities are those we have both the intent and ability to hold to maturity and are reported at amortized cost. Securities that are not considered held-to-maturity are considered either trading or available-for-sale securities in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 320, Investments – Debt Securities, and are reported at fair value in the statement of financial position. We have no trading securities. The adjustment to fair value for available-for-sale securities for unrealized gains and losses is included as a separate component of shareholders’ equity, net of tax.

 

Loans – Loans for which we have the ability and intent to hold until maturity and/or payoff are reported at the carrying value of the unpaid principal reduced by unearned interest, an allowance for credit losses and unamortized deferred fees and costs and premiums. Interest income is accrued on a level yield basis. In circumstances where management believes that collection of interest income is uncollectible on specific loans, after considering economic and business conditions, collateral value and collection efforts, interest accrual is discontinued. Interest income may be recognized on the cash basis when received unless a determination has been made by management to apply all of the payment against principal.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 1. Basis of Presentation (continued)

 

Critical Accounting Policies and Estimates (continued)

 

Allowance for Credit Losses – We account for the allowance for credit losses (ACL) under ASC 326, Measurement of Credit Losses on Financial Instruments, which is commonly known as CECL. We measure expected credit losses of financial assets on a weighted average remaining maturity (WARM) basis.

 

We maintain an ACL at a level that is appropriate to cover estimated credit losses on individually evaluated loans, as well as estimated credit losses inherent in the estimated life of the loan portfolio. Credit losses are charged to and recoveries are credited to the ACL.

 

Loans with similar risk characteristics are evaluated on a collective basis within homogeneous loan pools under ASC 326. Our homogeneous loan pools are primarily determined by loan purpose and collateral type. Pools include residential real estate (composed of one-to-four-family, multi-family, and construction), land, farm, nonresidential real estate, commercial and industrial, and consumer loans (composed of Loans on deposit, home equity, automobile, and unsecured). Credits that are nonaccrual status are subject to individual evaluation.

 

Historical loss rates for loans are adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition. Qualitative factors used to derive our ACL include delinquency trends, current economic conditions and trends, strength of supervision and administration of the loan portfolio, levels of underperforming loans, trends in loan losses and underwriting exceptions. Reasonable and supportable economic forecasts that may offset collectibility are also included as factors in our ACL model. Management continually reevaluates the other subjective factors included in its ACL analysis.

 

Income Taxes – Income tax expense is based on the taxes due on the consolidated tax return plus deferred taxes on the expected future tax benefits and consequences of temporary differences between carrying amounts and tax bases of assets and liabilities, using enacted tax rates.

 

Recently Issued Accounting Pronouncements Not Yet Effective

 

In October 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-06 Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (ASU 2023-06). The amendments in this ASU are the result of FASB’s decision to incorporate into the Accounting Standards Codification certain disclosure requirements, referred by the SEC, for incremental information to US GAAP. Topics in the ASU that have applicability to the Company are (1) Statement of Cash Flows which requires an accounting policy disclosure in annual periods of where cash flows associated with derivative instruments and their related gains and losses are presented in the statement of cash flows, (2) Debt which requires disclosure of amounts and terms of unused lines of credit and unfunded commitments and the weighted-average interest rate on outstanding short-term borrowings, and (3) Derivatives and Hedging which adds cross-reference to disclosure requirements related to where cash flows associated with derivative instruments and their related gains and losses are presented in the statement of cash flows.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 1. Basis of Presentation (continued)

 

Recently Issued Accounting Pronouncements Not Yet Effective (continued)

 

The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. If by June 30, 2027- the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Accounting Standards Codification and will not become effective for any entity. Management is reviewing the provisions of ASU 2023-06, and does not expect the adoption of the ASU to have a material effect on the Company’s financial statements.

 

In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this update require disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period (1) the Company disclose the amounts of (a) employee compensation, (b) depreciation, and (c) intangible asset amortization included in each relevant expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed; (2) include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as the other disaggregation requirements; (3) disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively; (4) disclose the total amount of selling expenses and, in annual reporting periods, the Company’s definition of selling expenses. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this update should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this update or (2) retrospectively to any or all prior periods presented in the financial statements. Management is currently evaluating the update and does not expect adoption of the update to have a material effect on the Company’s financial position or results of operations.

 

Accounting Pronouncements Adopted in Fiscal Year 2025

 

In November 2023, FASB issued ASU 2023-07 Segment Reporting (ASU 2023-07). The amendments in ASU 2023-07 apply to all public entities that are required to report segment information in accordance with FASB ASC Topic 280, Segment Reporting. The amendments in ASU 2023-07 are intended to improve reportable segment disclosure requirements primarily through requiring enhanced disclosures about significant segment expenses. The amendments require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of segment profit or loss. Public entities are required to disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. In addition, public entities must provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by FASB ASC Topic 280, Segment Reporting in interim periods. The amendments clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity’s consolidated financial statements. The amendments require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Finally, the amendments require that a public entity that has a single reportable segment provide all the disclosures required by the amendments in ASU 2023-07 and all existing segment disclosures in ASC Topic 280. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. A public entity that adopts ASU 2023-07 is required to apply the amendments retrospectively to all prior periods presented in the financial statements. Upon adoption of ASU 2023-07, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company adopted ASU 2023-07 on January 1, 2025 with little impact as currently the Company’s financial service operations are aggregated into one reportable operating segment.

 

In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). FASB issued ASU 2023-09 to address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is to be applied on a prospective basis and became effective for annual periods beginning after December 15, 2024. ASU 2023-09 impacts income tax disclosures, and did not have a material impact to the Company’s consolidated financial statements.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 1. Basis of Presentation (continued)

 

Accounting Pronouncements Adopted in Fiscal Year 2025 (continued)

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update require annual and interim disclosures on significant segment expenses that are regularly provided to the chief operating decision maker and require annual and interim disclosures on “other segment items”, where the other segment items category is the difference between segment revenue less segment expense compared to the reported measure of segment profit or loss. In addition, the amendments require all annual disclosures that are currently required to be reported on an interim basis and require the disclosure of the title and position of the chief operating decision maker and how that position uses the information to assess segment performance and the allocation of resources. While the Company only has one reportable segment, the update requires public entities with a single segment to provide all segment disclosures under ASC 280. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 in the fiscal year ended June 30, 2025, and the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. 

 

Note 2. Earnings Per Share

 

Diluted earnings per share is computed taking into consideration common shares outstanding and dilutive potential common shares to be issued or released under the Company’s share-based compensation plans. The factors used in the basic and diluted earnings per share computations follow:

 

		Six months ended December 31,								Three months ended December 31,
		2025				2024				2025				2024
Net income (loss) allocated to common shareholders, basic and diluted		$	648			$	(2	)		$	304			$	13
Earnings (loss) per share, basic and diluted		$	0.08			$	(0.00	)		$	0.04			$	0.00
Weighted average common shares outstanding, basic and diluted			8,098,715				8,098,715				8,098,715				8,098,715

 

There were no stock option shares outstanding for the six- or three-month periods ended December 31, 2025 and 2024.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 3. Investment Securities

 

The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at December 31, 2025 and June 30, 2025, the corresponding amounts of gross unrealized gains recognized in accumulated other comprehensive income and gross unrecognized gains and losses:

 

		December 31, 2025
(in thousands)		Amortized cost				Gross unrealized gains				Gross unrealized losses				Estimated fair value
Available-for-sale Securities
Agency mortgage-backed: residential		$	11,266			$	13			$	94			$	11,185
Held-to-maturity Securities
Agency mortgage-backed: residential		$	152			$	3			$	4			$	151

 

		June 30, 2025
(in thousands)		Amortized cost				Gross unrealized gains				Gross unrealized losses				Estimated fair value
Available-for-sale Securities
Agency mortgage-backed: residential		$	9,950			$	-			$	193			$	9,757
Held-to-maturity Securities
Agency mortgage-backed: residential		$	171			$	-			$	4			$	167

 

At December 31, 2025 and June 30, 2025 the Company’s debt securities consisted of mortgage-backed securities, which do not have a single maturity date. Actual maturities may differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

There were no pledged securities for both December 31, 2025 and June 30, 2025. In addition, at both December 31, 2025 and June 30, 2025, there were no pledged overnight deposits.

 

We evaluated securities in unrealized loss positions for evidence of credit loss, considering duration, severity, financial condition of the issuer, our intention to sell or requirement to sell. Those securities were agency mortgage-backed securities, which carry a very limited amount of risk. Also, we have no intention to sell nor believe that we will be compelled to sell such securities before maturity. Based on our evaluation, no reserve for credit loss was considered necessary. Debt securities in an unrealized loss position as a percent of total debt securities were 65.3% and 88.8% at December 31, 2025 and June 30, 2025, respectively. The following table provides the amortized cost, gross unrealized losses, fair value, and length of time the individual securities have been in a continuous unrealized loss position as of December 31, 2025.

 

December 31, 2025

 

Available-for-Sale 

 

(in thousands)		Amortized Cost				Gross Unrealized Losses				Fair Value
Less Than 12 Months
Agency mortgage-backed securities		$	945			$	2			$	943
12 Months or More
Agency mortgage-backed securities			6,422				92				6,330
Total		$	7,367			$	94			$	7,273

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 3. Investment Securities (continued)

 

Held to Maturity 

 

(in thousands)		Amortized Cost				Gross Unrealized losses				Fair Value
Less Than 12 Months
Agency mortgage-backed securities		$	-			$	-			$	-
12 Months or More
Agency mortgage-backed securities			93				4				89
Total		$	93			$	4			$	89

 

June 30, 2025

 

Available-for-Sale 

 

(in thousands)		Amortized Cost				Gross Unrealized Losses				Fair Value
Less Than 12 Months
Agency mortgage-backed securities		$	2,000			$	20			$	1,980
12 Months or More
Agency mortgage-backed securities			6,700			$	173			$	6,527
Total temporarily impaired AFS securities		$	8,700			$	193			$	8,507

 

Held to Maturity 

 

(in thousands)		Amortized Cost				Gross Unrealized Losses				Fair Value
Less Than 12 Months
Agency mortgage-backed securities		$	-			$	-			$	-
12 Months or More
Agency mortgage-backed securities			171				4				167
Total temporarily impaired HTM securities		$	171			$	4			$	167

 

Note 4. Loans receivable

 

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, adjusted for deferred loan origination costs, net, discounts on purchased loans, and the allowance for credit losses. Interest income is accrued on the unpaid principal balance unless the collectability of the loan is in doubt. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments. Interest income on one-to-four-family residential loans is generally discontinued at the time a loan is 180 days delinquent and on other loans at the time a loan is 90 days delinquent. All other loans are moved to non-accrual status in accordance with the Company’s policy, typically 90 days after the loan becomes delinquent. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

 

The composition of the loan portfolio was as follows:

 

		December 31,				June 30,
(in thousands)		2025				2025
Residential real estate
One- to four-family		$	250,748			$	251,338
Multi-family			14,975				15,505
Construction			10,704				9,314
Land			1,920				1,508
Farm			2,595				3,023
Nonresidential real estate			32,744				31,698
Commercial and industrial			790				691
Consumer and other:
Loans on deposits			594				813
Home equity			16,270				14,643
Automobile			151				134
Unsecured			514				751
			332,005				329,418
Allowance for credit losses			(2,176	)			(2,170	)
		$	329,829			$	327,248

 

The amounts above include net deferred loan costs of $101,000 and $144,000 as of December 31, 2025 and June 30, 2025, respectively.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

The allowance for credit losses is a valuation allowance that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected for the loans. Loan losses are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

 

Management estimates the allowance balance required using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience, derived from the Company’s data, provides the basis for estimation of expected credit losses, although management also compares the Company’s data with peer group data. Adjustments to historical loss information may be made for differences in: lending policy, procedures and practice; economic conditions; the nature and volume of the loan portfolio; volume delinquent and problem loans; the current and anticipated economic conditions in the primary lending area; and other external factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

  

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the pool evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the sale of the collateral, the expected credit losses are based on the fair value of the collateral at the reporting date, less any discounts and selling costs.

 

Management monitors loan performance on a monthly basis and performs a quarterly evaluation of the adequacy of the ACL. The Banks begin enhanced monitoring of all loans rated 5-Watch or worse and obtain a new appraisal or asset valuation for most loans placed on nonaccrual status. New appraisals are usually not obtained on loans with outstanding principal amounts of $50,000 or less. Management, at its discretion, may determine that additional adjustments to the appraisal or valuation are required. Valuation adjustments will be made as necessary based on factors, including, but not limited to: the economy, deferred maintenance, industry, type of collateral, age of the appraisal, etc., and the knowledge Management has about a particular situation. In addition, the cost to sell or liquidate the collateral is also estimated and deducted from the valuation in order to determine the net realizable value to the Banks. When determining the ACL, certain factors involved in the evaluation are inherently subjective and require material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows. Management monitors the adequacy of the ACL on an ongoing basis and reports its adequacy quarterly to the Board of Directors. Management believes the ACL at December 31, 2025 is adequate.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments, when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a modification will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Banks.

 

The Banks categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, and current economic trends, among other factors. Management utilizes a risk rating scale ranging from 1-Highest Pass to 9-Loss to evaluate loan quality. Consumer purpose loans are identified as either performing or nonperforming based on the payment status of the loans. Nonperforming consumer loans are loans that are nonaccrual or 90 days or more past due and still accruing.

 

Our portfolio segments include residential real estate, nonresidential real estate, farm, land, commercial and industrial, and consumer and other loans. Risk factors associated with our portfolio segments are as follows:

 

Residential Real Estate

 

Our primary lending activity is the origination of mortgage loans, which enable a borrower to purchase or refinance existing homes in the Banks’ respective market areas. We further classify our residential real estate loans as one-to-four-family (owner-occupied vs nonowner-occupied), multi-family or construction. We believe that our first mortgage position on loans secured by residential real estate presents lower risk than our other loans, with the exception of loans secured by deposits.

 

We offer a mix of adjustable-rate and fixed-rate mortgage loans with terms up to 30 years for owner-occupied properties. For these properties a borrower may be able to borrow up to 97% of the value with private mortgage insurance. Alternatively, the borrower may be able to borrow up to 90% of the value through other programs offered by the bank.

 

We offer loans on one-to-four-family rental properties at a maximum of 80% loan-to-value (“LTV”) ratio and we generally charge a slightly higher interest rate on such loans.

 

We also originate loans to individuals to finance the construction of residential dwellings for personal use or for use as rental property. We occasionally lend to builders for construction of speculative or custom residential properties for resale, but on a limited basis. Construction loans are generally less than one year in length, do not exceed 80% of the appraised value, and provide for the payment of interest only during the construction phase. Funds are disbursed as progress is made toward completion of the construction.

 

Multi-family Loans

 

We offer mortgage loans secured by residential multi-family (five or more units). Generally, these loans are originated for 25 years or less and do not exceed 80% of the appraised value. Loans secured by multi-family generally have larger balances and involve a greater degree of risk than one-to-four-family residential mortgage loans. These loans depend on the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment on such loans may be subject to a greater extent to adverse conditions in the real estate market or economy than owner-occupied residential loans.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

Nonresidential Loans

 

We offer mortgage loans secured by nonresidential real estate comprised generally of commercial office buildings, churches and properties used for other purposes. Generally, these loans are originated for 25 years or less and do not exceed 80% of the appraised value. As with multi-family loans, commercial real estate loans generally have larger balances and involve a greater degree of risk than one-to-four-family residential mortgage loans and these loans depend on the borrower’s creditworthiness, as well as the feasibility and cash flow potential of the project. Payments on loans secured by nonresidential properties often depend on successful operation and management of the properties. As a result, repayment on such loans may be subject to a greater extent to adverse conditions in the real estate market or economy than owner-occupied residential loans.

 

Consumer lending

 

Our consumer loans include home equity lines of credit, loans secured by savings deposits, automobile loans, and unsecured loans. Home equity loans are generally second mortgage loans subordinate only to first mortgages also held by the bank and do not exceed 80% of the estimated value of the property. We do offer home equity loans up to 90% of the estimated value to qualified borrowers and these loans carry a premium interest rate. Loans secured by savings are originated up to 90% of the depositor’s savings account balance and bear interest at a rate higher than the rate paid on the deposit account. Because the deposit account must be pledged as collateral to secure the loan, the inherent risk of this type of loan is minimal. Loans secured by automobiles are made directly to consumers (there are no relationships with dealers) and are based on the value of the vehicle and the borrower’s creditworthiness. Vehicle loans present a higher level of risk because of the natural decline in the value of the property as well as its mobility. Unsecured loans are based entirely on the borrower’s creditworthiness and present the highest level of risk to the bank. 

 

Impaired loans

 

The Banks choose the most appropriate method for accounting for impaired loans. For secured loans, which make up the vast majority of the loans in the Banks’ portfolio, this method involves determining the fair value of the collateral, reduced by estimated selling costs. Where appropriate, the Banks would account for impaired loans by determining the present value of expected future cash flows discounted at the loan’s effective interest rate.

 

A loan is considered impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Although most of our loans are secured by collateral, we rely heavily on the capacity of our borrowers to generate sufficient cash flow to service their debt. As a result, our loans do not become collateral-dependent until there is deterioration in the borrower’s cash flow and financial condition, which makes it necessary for us to look to the collateral for our sole source of repayment. Collateral-dependent loans which are more than ninety days delinquent are considered to constitute more than a minimum delay in repayment and are evaluated for impairment under the policy at that time.

 

We utilize updated independent appraisals to determine fair value for collateral-dependent loans, adjusted for estimated selling costs, in determining our specific reserve. In some situations, management does not secure an updated independent appraisal. These situations may involve small loan amounts or loans that, in management’s opinion, have an abnormally low loan-to-value ratio.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

The following table presents the activity in the ACL by portfolio segment for the six months ended December 31, 2025.

 

December 31, 2025:

 

(in thousands)		Balance at September 30, 2025				Provision for (recovery of) credit losses on loans				Loans charged off				Recoveries				Credit Losses for Unfunded Liabilities				Ending balance
Residential real estate:
One-to-four-family		$	1,690			$	(52	)		$	(4	)		$	-			$	-			$	1,634
Multi-family			86				9				-				-				-				95
Construction			70				37				-				-				-				107
Land			24				-				-				-				-				24
Farm			16				(1	)			-				-				-				15
Nonresidential real estate			230				13				-				-				-				243
Commercial and industrial			7				(3	)			-				-				-				4
Consumer and other:
Loans on deposits			-				-				-				-				-				-
Home equity			36				8				-				-				-				44
Automobile			1				-				-				-				-				1
Unsecured			10				(1	)			-				-				-				9
		$	2,170			$	10			$	(4	)		$	-			$	-			$	2,176

 

The following table presents the activity in the ACL by portfolio segment for the six months ended December 31, 2024:

 

December 31, 2024:

 

(in thousands)		Balance at June 30, 2024				Provision for (recovery of) credit losses on loans				Loans charged off				Recoveries				Credit Losses for Unfunded Liabilities				Ending balance
Residential real estate:
One-to-four-family		$	1,661			$	(43	)		$	-			$	-			$	-			$	1,618
Multi-family			100				(2	)			-				-				-				98
Construction			122				(33	)			-				-				(2	)			87
Land			28				4				-				-				-				32
Farm			4				12				-				-				-				16
Nonresidential real estate			192				(18	)			-				-				-				174
Commercial and industrial			3				-				-				-				-				3
Consumer and other:
Home equity			14				96				-				1				-				111
Unsecured			3				(1	)			-				-				-				2
		$	2,127			$	15			$	-			$	1			$	(2	)		$	2,141

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

The following table presents the activity in the ACL by portfolio segment for the three months ended December 31, 2025:

 

December 31, 2025:

 

(in thousands)		Balance at September 30, 2025				Provision for (recovery of) credit losses on loans				Loans charged off				Recoveries				Credit Losses for Unfunded Liabilities				Ending balance
Residential real estate:
One-to-four-family		$	1,663			$	(29	)		$	-			$	-			$	-			$	1,634
Multi-family			95				-				-				-				-				95
Construction			84				23				-				-				-				107
Land			24				-				-				-				-				24
Farm			14				1				-				-				-				15
Nonresidential real estate			230				13				-				-				-				243
Commercial and industrial			7				(3	)			-				-				-				4
Consumer and other:
Loans on deposits			-				-				-				-				-				-
Home equity			38				6				-				-				-				44
Automobile			1				-				-				-				-				1
Unsecured			10				(1	)			-				-				-				9
		$	2,166			$	10			$	-			$	-			$	-			$	2,176

  

The following table presents the activity in the ACL by portfolio segment for the three months ended December 31, 2024:

 

December 31, 2024:

 

(in thousands)		Balance at September 30, 2024				Provision for (recovery of) credit losses on loans				Loans charged off				Recoveries				Credit Losses for Unfunded Liabilities				Ending balance
Residential real estate:
One-to-four-family		$	1,627			$	(9	)		$	-			$	-			$	-			$	1,618
Multi-family			97				1				-				-				-				98
Construction			119				(32	)			-				-				-				87
Land			27				5				-				-				-				32
Farm			4				12				-				-				-				16
Nonresidential real estate			199				(25	)			-				-				-				174
Commercial and industrial			3				-				-				-				-				3
Consumer and other:
Home equity			63				48				-				-				-				111
Unsecured			2				-				-				-				-				2
		$	2,141			$	-			$	-			$	-			$	-			$	2,141

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

The following table presents the amortized cost basis of collateral-dependent loans by portfolio class as of December 31, 2025. The recorded investment in loans excludes accrued interest receivable due to immateriality.

 

December 31, 2025:

 

(in thousands)		Amortized Cost Basis				Ending allowance on collateral- dependent loans
Loans individually evaluated for impairment:
Residential real estate:
One- to four-family		$	1,372			$	–
Nonresidential real estate			197				–
		$	1,569			$	–

 

Real estate stands as collateral for loans individually evaluated for impairment. Collateral on nonresidential real estate individually evaluated for impairment includes one commercial office building.

 

The following table presents the amortized cost basis of collateral-dependent loans by portfolio class as of June 30, 2025. The recorded investment in loans excludes accrued interest receivable due to immateriality.

 

June 30, 2025:

 

(in thousands)		Amortized Cost Basis				Ending allowance on collateral- dependent loans
Loans individually evaluated for impairment:
Residential real estate:
One- to four-family		$	1,856			$	–
Nonresidential real estate			927				–
		$	2,783			$	–

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

The following table presents the recorded investment in nonaccrual and loans past due over 89 days still on accrual by class of loans as of December 31, 2025, and June 30, 2025:

 

		December 31, 2025								June 30, 2025
(in thousands)		Nonaccrual				Loans Past Due Over 89 Days Still Accruing				Nonaccrual				Loans Past Due Over 89 Days Still Accruing
Residential real estate
One- to four-family		$	1,613			$	328			$	1,924			$	592
Construction			-				-				291				-
Nonresidential real estate			56				-				927				-
Consumer and other Automobile			53				-				-				-
Unsecured			324				-				131				-
		$	2,046			$	328			$	3,273			$	592

 

Nonaccrual loans had no related allowance for credit losses based on individual evaluation at December 31, 2025 or June 30, 2025.

 

One-to-four-family loans in process of foreclosure totaled $384,000 and $213,000 at December 31, 2025 and June 30, 2025, respectively.

 

There were no loans modified during the six months ended December 31, 2025 to borrowers experiencing financial difficulties.

 

The following table presents the aging of the principal balance outstanding in past due loans as of December 31, 2025, by class of loans:

 

December 31, 2025:

 

(in thousands)		30-59 Days Past Due				60-89 Days Past Due				90 Days or Greater				Total Past Due				Loans Not Past Due				Total
Residential real estate:
One-to-four-family		$	3,653			$	471			$	1,487			$	5,611			$	245,137			$	250,748
Multi-family			241				-				-				241				14,734				14,975
Construction			33				-				-				33				10,671				10,704
Land			-				28				-				28				1,892				1,920
Farm			-				519				-				519				2,076				2,595
Nonresidential real estate			34				-				-				34				32,710				32,744
Commercial and industrial			-				-				-				-				790				790
Consumer and other:
Loans on deposits			-				-				-				-				594				594
Home equity			-				-				-				-				16,270				16,270
Automobile			-				-				-				-				151				151
Unsecured			13				-				-				13				501				514
		$	3,974			$	1,018			$	1,487			$	6,479			$	325,526			$	332,005

  

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

The following tables present the aging of the principal balance outstanding in past due loans as of June 30, 2025, by class of loans:

 

June 30, 2025:

 

(in thousands)		30-59 Days Past Due				60-89 Days Past Due				90 Days or Greater				Total Past Due				Loans Not Past Due				Total
Residential real estate
One- to four-family		$	3,731			$	687			$	1,000			$	5,418			$	245,920			$	251,338
Multi-family			-				246				-				246				15,259				15,505
Construction			127				-				291				418				8,896				9,314
Land			-				-				-				-				1,508				1,508
Farm			-				-				-				-				3,023				3,023
Nonresidential real estate			1,704				25				-				1,729				29,969				31,698
Commercial and industrial			-				-				-				-				691				691
Consumer and other
Loans on deposits			-				-				-				-				813				813
Home equity			-				-				-				-				14,643				14,643
Automobile			-				-				-				-				134				134
Unsecured			23				-				-				23				728				751
		$	5,585			$	958			$	1,291			$	7,834			$	321,584			$	329,418

 

Credit Quality Indicators:

 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on an annual basis. The Company uses the following definitions for risk ratings:

 

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

 

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

 

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans. Loans listed that are not rated are included in groups of homogeneous loans and are evaluated for credit quality based on performing status. See the aging of past due loan table above. As of December 31, 2025, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

(in thousands)		Term Loans Amortized Cost by Origination Fiscal Year																								Revolving Loans Amortized
As of December 31, 2025		2026				2025				2024				2023				2022				Prior				Cost Basis				Total
Residential real estate:
One-to-four-family
Risk Rating:
Pass		$	18,067			$	27,148			$	29,021			$	43,976			$	38,105			$	89,220			$	-			$	245,537
Special mention			-				-				-				-				-				88				-				88
Substandard			-				356				383				598				50				3,736				-				5,123
Doubtful			-				-				-				-				-				-				-				-
Total		$	18,067			$	27,504			$	29,404			$	44,574			$	38,155			$	93,044			$	-			$	250,748
Current period gross charge offs		$	-			$	4			$	-			$	-			$	-			$	-			$	-			$	-
Multi-family
Risk Rating:
Pass		$	-			$	782			$	545			$	5,475			$	5,153			$	2,779			$	-			$	14,734
Special mention			-				-				-				-				-				241				-				241
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	-			$	782			$	545			$	5,475			$	5,153			$	3,020			$	-			$	14,975
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Construction
Risk Rating:
Pass		$	5,394			$	3,944			$	1,233			$	6			$	-			$	-			$	-			$	10,577
Special mention			-				-				-				-				-				-				-				-
Substandard			-				127				-				-				-				-				-				127
Doubtful			-				-				-				-				-				-				-				-
Total		$	5,394			$	4,071			$	1,233			$	6			$	-			$	-			$	-			$	10,704
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Land
Risk Rating:
Pass		$	711			$	362			$	345			$	240			$	134			$	47			$	-			$	1,839
Special mention			-				-				-				-				-				-				-				-
Substandard			25				28				28				-				-				-				-				81
Doubtful			-				-				-				-				-				-				-				-
Total		$	736			$	390			$	373			$	240			$	134			$	47			$	-			$	1,920
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Farm
Risk Rating:
Pass		$	519			$	1,575			$	-			$	-			$	208			$	293			$	-			$	2,595
Special mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	519			$	1,575			$	-			$	-			$	208			$	293			$	-			$	2,595
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

																										Revolving
(in thousands)		Term Loans Amortized Cost by Origination Fiscal Year																								Loans Amortized
As of December 31, 2025		2026				2025				2024				2023				2022				Prior				Cost Basis				Total
Nonresidential real estate
Risk Rating:
Pass		$	6,684			$	3,384			$	3,740			$	773			$	2,380			$	14,632			$	-			$	31,593
Special mention			-				24				-				-				-				549				-				573
Substandard			-				-				-				-				381				197				-				578
Doubtful			-				-				-				-				-				-				-				-
Total		$	6,884			$	3,408			$	3,740			$	773			$	2,761			$	15,378			$	-			$	32,744
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Commercial and industrial
Risk Rating:
Pass		$	212			$	232			$	23			$	8			$	-			$	315			$	-			$	790
Special mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	212			$	232			$	23			$	8			$	-			$	315			$	-			$	790
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Share Loans
Risk Rating:
Pass		$	57			$	62			$	51			$	77			$	-			$	347			$	-			$	594
Special mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	57			$	62			$	51			$	77			$	-			$	347			$	-			$	594
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Home Equity
Risk Rating:
Pass		$	-			$	-			$	-			$	-			$	-			$	-			$	16,270			$	16,270
Special mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	-			$	-			$	-			$	-			$	-			$	-			$	16,270			$	16,270
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Auto
Risk Rating:
Pass		$	58			$	43			$	25			$	1			$	13			$	11			$	-			$	151
Special mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	58			$	43			$	25			$	1			$	13			$	11			$	-			$	151
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Unsecured
Risk Rating:
Pass		$	113			$	177			$	74			$	6			$	8			$	11			$	-			$	389
Special mention			-				-				-				-				-				-				-				-
Substandard			-				125				-				-				-				-				-				125
Doubtful			-				-				-				-				-				-				-				-
Total		$	113			$	302			$	74			$	6			$	8			$	11			$	-			$	514
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

As of June 30, 2025, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

																										Revolving
(in thousands)		Term Loans Amortized Cost by Origination Fiscal Year																								Loans Amortized
As of June 30, 2025		2025				2024				2023				2022				2021				Prior				Cost Basis				Total
Residential real estate:
One- to four-family
Risk Rating:
Pass		$	30,263			$	30,777			$	46,914			$	40,661			$	38,891			$	59,027			$	-			$	246,533
Special mention			-				-				-				-				-				96				-				96
Substandard			345				194				-				-				350				3,820				-				4,709
Doubtful			-				-				-				-				-				-				-				-
Total		$	30,608			$	30,971			$	46,914			$	40,661			$	39,241			$	62,943			$	-			$	251,338
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Multi-family
Risk Rating:
Pass		$	1,185			$	395			$	5,840			$	5,226			$	1,202			$	1,657			$	-			$	15,505
Special mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	1,185			$	395			$	5,840			$	5,226			$	1,202			$	1,657			$	-			$	15,505
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Construction
Risk Rating:
Pass		$	5,241			$	3,392			$	282			$	-			$	108			$	-			$	-			$	9,023
Special mention			-				-				-				-				-				-				-				-
Substandard			-				291				-				-				-				-				-				291
Doubtful			-				-				-				-				-				-				-				-
Total		$	5,241			$	3,683			$	282			$	-			$	108			$	-			$	-			$	9,314
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Land
Risk Rating:
Pass		$	355			$	581			$	288			$	207			$	49			$	-			$	-			$	1,480
Special mention			-				-				-				-				-				-				-				-
Substandard			28				-				-				-				-				-				-				28
Doubtful			-				-				-				-				-				-				-				-
Total		$	383			$	581			$	288			$	207			$	49			$	-			$	-			$	1,508
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Farm
Risk Rating:
Pass		$	2,510			$	-			$	-			$	212			$	-			$	301			$	-			$	3,023
Special mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	2,510			$	-			$	-			$	212			$	-			$	301			$	-			$	3,023
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

																										Revolving
(in thousands)		Term Loans Amortized Cost by Origination Fiscal Year																								Loans Amortized
As of June 30, 2025		2025				2024				2023				2022				2021				Prior				Cost Basis				Total
Nonresidential real estate
Risk Rating:
Pass		$	2,662			$	7,245			$	1,169			$	2,360			$	2,822			$	13,937			$	-			$	30,195
Special mention			25				-				-				-				-				551				-				576
Substandard			-				-				722				-				-				205				-				927
Doubtful			-				-				-				-				-				-				-				-
Total		$	2,687			$	7,245			$	1,891			$	2,360			$	2,822			$	14,693			$	-			$	31,698
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Commercial and industrial
Risk Rating:
Pass		$	545			$	130			$	16			$	-			$	-			$	-			$	-			$	691
Special mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	545			$	130			$	16			$	-			$	-			$	-			$	-			$	691
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Share Loans
Risk Rating:
Pass		$	138			$	57			$	81			$	-			$	6			$	531			$	-			$	813
Special mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	138			$	57			$	81			$	-			$	6			$	531			$	-			$	813
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Home Equity
Risk Rating:
Pass		$	-			$	-			$	-			$	-			$	-			$	-			$	14,643			$	14,643
Special mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	-			$	-			$	-			$	-			$	-			$	-			$	14,643			$	14,643
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Auto
Risk Rating:
Pass		$	69			$	40			$	2			$	18			$	1			$	4			$	-			$	134
Special mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Doubtful			-				-				-				-				-				-				-				-
Total		$	69			$	40			$	2			$	18			$	1			$	4			$	-			$	134
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Unsecured
Risk Rating:
Pass		$	340			$	52			$	17			$	21			$	161			$	29			$	-			$	620
Special mention			-				-				-				-				-				-				-				-
Substandard			131				-				-				-				-				-				-				131
Doubtful			-				-				-				-				-				-				-				-
Total		$	471			$	52			$	17			$	21			$	161			$	29			$	-			$	751
Current period gross charge offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 4. Loans receivable (continued)

 

At December 31, 2025, the risk category of loans by class of loans was as follows:

 

(in thousands)		Pass				Special Mention				Substandard				Doubtful
Residential real estate:
One-to-four-family		$	245,537			$	88			$	5,123			$	-
Multi-family			14,734				-				241				-
Construction			10,577				-				127				-
Land			1,839				-				81				-
Farm			2,595				-				-				-
Nonresidential real estate			31,593				573				578				-
Commercial and industrial			790				-				-				-
Consumer and other:
Loans on deposits			594				-				-				-
Home equity			16,270				-				-				-
Automobile			151				-				-				-
Unsecured			389				-				125				-
		$	325,069			$	661			$	6,275			$	-

 

At June 30, 2025, the risk category of loans by class of loans was as follows:

 

(in thousands)		Pass				Special Mention				Substandard				Doubtful
Residential real estate
One- to four-family		$	246,533			$	96			$	4,709			$	-
Multi-family			15,505				-				-				-
Construction			9,023				-				291				-
Land			1,480				-				28				-
Farm			3,023				-				-				-
Nonresidential real estate			30,195				576				927				-
Commercial and industrial			691				-				-				-
Consumer and other
Loans on deposits			813				-				-				-
Home equity			14,643				-				-				-
Automobile			134				-				-				-
Unsecured			620				-				131				-
		$	322,660			$	672			$	6,086			$	-

 

Purchased Credit Impaired Loans:

 

The Company purchased loans during fiscal year 2013 for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans, net of a purchase credit discount of $25,000 and $25,000 at December 31, 2025 and June 30, 2025, respectively, is as follows:

 

(in thousands)		December 31, 2025				June 30, 2025
One-to-four-family residential real estate		$	131			$	134

 

Accretable yield, or income expected to be collected, is as follows:

 

(in thousands)		Six months ended December 31, 2025				Twelve months ended June 30, 2025
Balance at beginning of period		$	227			$	260
Accretion of income			(16	)			(33	)
Balance at end of period		$	211			$	227

 

For those purchased loans disclosed above, the Company made no increase in allowance for credit losses for the year ended June 30, 2025, or for the six-month period ended December 31, 2025. Neither were any allowance for credit losses reversed during those periods.

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 5. Disclosures About Fair Value of Assets and Liabilities

 

ASC topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (exit price) at the measurement date. ASC topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes six levels of inputs that may be used to measure fair value:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

 

Securities

 

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics. Level 2 securities include agency mortgage-backed securities and agency bonds.

 

Financial assets measured at fair value on a recurring basis are summarized below:

 

		Fair Value Measurements Using
(in thousands)		Fair Value				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
December 31, 2025
Agency mortgage-backed: residential		$	11,185			$	–			$	11,185			$	–
June 30, 2025
Agency mortgage-backed: residential		$	9,757			$	–			$	9,757			$	–

 

There were no assets or liabilities which were measured at fair value on a nonrecurring basis at December 31, 2025, and June 30, 2025.

 

The following is a disclosure of the fair value of financial instruments, both assets and liabilities, whether or not recognized in the condensed consolidated balance sheet, for which it is practicable to estimate that value. For financial instruments where quoted market prices are not available, fair values are based on estimates using present value and other valuation methods.

 

The methods used are greatly affected by the assumptions applied, including the discount rate and estimates of future cash flows. Therefore, the fair values presented may not represent amounts that could be realized in an exchange for certain financial instruments.

 

  

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 5. Disclosures About Fair Value of Assets and Liabilities (continued)

 

Based on the foregoing methods and assumptions, the carrying value and fair value of the Company’s financial instruments at December 31, 2025 and June 30, 2025 are as follows:

 

						Fair Value Measurements at
		Carrying				December 31, 2025 Using
(in thousands)		Value				Level 1				Level 2				Level 3				Total
Financial assets
Cash and cash equivalents		$	19,672			$	19,672											$	19,672
Available-for-sale securities			11,185							$	11,185								11,185
Held-to-maturity securities			152								151								151
Loans receivable – net			329,829											$	326,635				326,635
Federal Home Loan Bank stock			3,805																n/a
Accrued interest receivable			1,469								1,469								1,469
Financial liabilities
Deposits		$	273,194			$	73,742			$	199,492								273,234
Federal Home Loan Bank advances			51,448																51,495
Advances by borrowers for taxes and insurance			255								255								255
Accrued interest payable			510								510								510

 

						Fair Value Measurements at
		Carrying				June 30, 2025 Using
(in thousands)		Value				Level 1				Level 2				Level 3				Total
Financial assets
Cash and cash equivalents		$	19,480			$	19,480											$	19,480
Available-for-sale securities			9,757							$	9,757								9,757
Held-to-maturity securities			171								167								167
Loans receivable - net			327,248											$	319,432				319,432
Federal Home Loan Bank stock			3,980																n/a
Accrued interest receivable			1,438								1,438								1,438
Financial liabilities
Deposits		$	277,563			$	77,988			$	199,603							$	277,591
Federal Home Loan Bank advances			42,760								42,837								42,837
Advances by borrowers for taxes and insurance			869								869								869
Accrued interest payable			949								949								949

 

 

Kentucky First Federal Bancorp

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2025

(unaudited)

 

Note 6. Other Comprehensive Income (Loss)

 

The Company’s other comprehensive income (loss) is comprised solely of unrealized gains and losses on available-for-sale securities. The following is a summary of the accumulated other comprehensive income balances, net of tax:

 

(in thousands)		Six months ended December 31, 2025				Three months ended December 31, 2025
Balance at beginning of period		$	(145	)		$	(79	)
Current period change			84				18
Balance at end of period		$	(61	)		$	(61	)

 

Other comprehensive income (loss) components and related tax effects for the periods indicated were as follows:

 

		Six months ended								Three months ended
		December 31,								December 31,
(in thousands)		2025				2024				2025				2024
Unrealized holding gains (losses) on available-for-sale securities		$	112			$	80			$	24			$	(241	)
Tax effect			(28	)			(20	)			(6	)			60
		$	84			$	60			$	18			$	(181	)

 

Note 7: Formal Written Agreement

 

On August 13, 2024, First Federal of Kentucky entered into a formal written agreement (the “Agreement”) with the OCC, which became effective as of the same date. The Agreement will remain effective until it is amended by First Federal of Kentucky and the OCC, or the OCC modifies, waives or terminates the Agreement. As a result of the Agreement, pursuant to 12 C.F.R. § 5.51(c)(7)(ii), First Federal of Kentucky is in “troubled condition,” and is not an “eligible savings association” for purposes of 12 C.F.R. § 5.3, unless otherwise informed in writing by the OCC. In addition to the Agreement, the OCC has also imposed individual minimum capital requirements (“IMCRs”) on First Federal of Kentucky. The IMCRs require First Federal of Kentucky to maintain a common equity tier 1 capital ratio of at least 9.0%, a tier 1 capital ratio of at least 11.0%, a total capital ratio of at least 12.0%, and a leverage ratio of at least 9.0%.

 

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

 

●

create a compliance committee composed of at least three of First Federal of Kentucky’s directors to monitor and oversee First Federal of Kentucky’s compliance with the provisions of the Agreement and submit quarterly evaluation reports to First Federal of Kentucky’s board of directors regarding actions First Federal of Kentucky has taken to comply with the Agreement and the results and status of such actions;

 

●

submit to the OCC, adopt and implement an acceptable revised written three-year strategic plan establishing objectives for First Federal of Kentucky’s overall risk profile, balance sheet mix, funding structure, interest rate risk, liquidity and capital adequacy, earnings performance, and asset and core deposit growth, together with strategies to achieve those objectives;

 

●

submit to the OCC, adopt and implement an acceptable revised written succession plan for First Federal of Kentucky that is designed to promote adequate staffing and continuity of capable 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; and

 

●

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. First Federal of Kentucky’s Board and management are committed to fully addressing the provisions of the Agreement within the required time frames. As of the date of this filing, First Federal of Kentucky’s Board and management believe that First Federal of Kentucky has addressed the deficiencies that resulted in the Agreement. For additional information, see Exhibit 10.1 to the Company Current Report on Form 8-K filed with the Securities and Exchange Commission on August 15, 2024 and Item 1A, “Risk Factors - We are required to comply with the terms of a formal written agreement and IMCRs issued by the OCC, and lack of compliance could result in monetary penalties and /or additional regulatory actions” and Note K - Stockholders’ Equity and Regulatory Capital of the Notes to Consolidated Financial Statements included in Item 8 of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 30, 2025.

 

 

Kentucky First Federal Bancorp

 

ITEM 2: 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 ability to fully and timely address the deficiencies that resulted in the Agreement that First Federal Savings Bank of Kentucky has entered into with the Office of the Comptroller of the Currency (“OCC”); First Federal Savings Bank of Kentucky’s ability to satisfy the Individual Minimum Capital Requirements imposed by the OCC; statements regarding our business plans, prospects, growth and operating strategies; statements regarding the quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits. Kentucky First Federal Bancorp’s actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions; prices for real estate in the Company’s market areas; the interest rate environment and the impact of the interest rate environment on our business, financial condition and results of operations; our ability to successfully execute our strategy to increase earnings, increase core deposits, reduce reliance on higher cost funding sources and shift more of our loan portfolio towards higher-earning loans; our ability to pay future dividends and if so at what level; the success of our recently restructured management team; our ability to receive any required regulatory approval or non-objection to pay dividends to shareholders; our ability to pay dividends from First Federal Savings and Loan Association of Hazard and First Federal Savings Bank of Kentucky to the Company in order for the Company to pay dividends to shareholders; the ability of First Federal MHC to receive approval of its members to waive the payment of any Company dividends to First Federal MHC; competitive conditions in the financial services industry; changes in the level of inflation; the impacts of tariffs, sanctions and other trade policies of the United States and its global trading counterparts; 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, 2025. Except as required by applicable law or regulation, the Company does not undertake the responsibility, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

 

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.

 

Management Transition

 

On October 2, 2025, the Boards of Kentucky First Federal Bancorp and First Federal Savings Bank of Kentucky, an indirect wholly-owned bank subsidiary of the Company (“First Federal of Kentucky”), appointed R. Clay Hulette as Chief Executive Officer of the Company and as President and Chief Executive Officer of First Federal of Kentucky, respectively. Such appointments were subject to regulatory approval. On December 10, 2025, the Company and First Federal of Kentucky received final regulatory non-objection, effective immediately, to these appointments. In connection with this transition, Don D. Jennings was appointed Director of Operations of First Federal of Kentucky and continues to serve as President of the Company and Chairman of the Board of Directors of First Federal of Kentucky.

 

  

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

 

Regulatory Developments Regarding First Federal of Kentucky

 

On August 13, 2024, First Federal of Kentucky entered into a formal written agreement (the “Agreement”) with the OCC, which became effective as of the same date. The Agreement will remain effective until it is amended by First Federal of Kentucky and the OCC, or the OCC modifies, waives or terminates the Agreement. As a result of the Agreement, pursuant to 12 C.F.R. § 5.51(c)(7)(ii), First Federal of Kentucky is in “troubled condition,” and is not an “eligible savings association” for purposes of 12 C.F.R. § 5.3, unless otherwise informed in writing by the OCC. In addition to the Agreement, the OCC has also imposed individual minimum capital requirements (“IMCRs”) on First Federal of Kentucky. The IMCRs require First Federal of Kentucky to maintain a common equity tier 1 capital ratio of at least 9.0%, a tier 1 capital ratio of at least 11.0%, a total capital ratio of at least 12.0%, and a leverage ratio of at least 9.0%. As of December 31, 2025, First Federal Savings Bank of Kentucky’s common equity tier 1 capital ratio was 13.99%, its tier 1 capital ratio was 13.99%, its total capital ratio was 14.76%, and its leverage ratio was 10.37%. As First Federal of Kentucky has not been designated as “less than well capitalized” and has maintained capital levels in excess of the IMCRs, there have been no restrictions or waiver requirements imposed on First Federal of Kentucky for rolling brokered deposits or other types of wholesale deposits.

 

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

 

	●	create a compliance committee composed of at least three of First Federal of Kentucky’s directors to monitor and oversee First Federal of Kentucky’s compliance with the provisions of the Agreement and submit quarterly evaluation reports to First Federal of Kentucky’s board of directors regarding actions First Federal of Kentucky has taken to comply with the Agreement and the results and status of such actions;
	●	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; and
	●	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. First Federal of Kentucky’s Board and management are committed to fully addressing the provisions of the Agreement within the required time frames. As of the date of this filing, First Federal of Kentucky’s Board and management believe that First Federal of Kentucky has addressed the deficiencies that resulted in the Agreement. For additional information, see Exhibit 10.1 to the Company Current Report on Form 8-K filed with the Securities and Exchange Commission on August 15, 2024 and Item 1A, “Risk Factors - We are required to comply with the terms of a formal written agreement and IMCRs issued by the OCC, and lack of compliance could result in monetary penalties and /or additional regulatory actions” and Note K - Stockholders’ Equity and Regulatory Capital of the Notes to Consolidated Financial Statements included in Item 8 of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 30, 2025.

 

Asset/Liability Management

 

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.

 

General market participants believe that the FOMC will continue interest rate decreases. Our December 31, 2025 EVE is anticipated to increase by approximately 4.1% and 0.6% under sudden and sustained decrease in prevailing market interest rates of 100 basis points and 200 basis points, respectively. The company continues to strive for acceptable EVE in both increasing and decreasing interest rate environments. Computations or prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments, and deposit run-offs. These computations should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions the Banks may undertake in response to changes in interest rates. Certain shortcomings are inherent in this method of computing EVE. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in differing degrees to changes in market interest 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.

 

  

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 six-month periods ended December 31, 2025 and 2024, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

 

		Six Months Ended December 31,
		2025												2024
		Average Balance				Interest And Dividends				Yield/ Cost				Average Balance				Interest And Dividends				Yield/ Cost
		(Dollars in thousands)
Interest-earning assets:
Loans 1		$	330,334			$	9,579				5.80	%		$	334,634			$	8,702				5.20	%
Mortgage-backed securities			11,171				205				3.67				9,422				157				3.33
Other interest-earning assets			20,578				444				4.32				19,630				544				5.54
Total interest-earning assets			362,083				10,228				5.65				363,686				9,403				5.17
Less: Allowance for credit losses			(2,171	)											(2,134	)
Non-interest-earning assets			11,853												13,168
Total assets		$	371,765											$	374,720
Interest-bearing liabilities:
Demand deposits		$	17,507			$	55				0.63	%		$	15,624			$	18				0.23	%
Savings			46,937				98				0.42				49,117				100				0.41
Certificates of deposit			198,939				3,933				3.95				179,256				3,812				4.25
Total deposits			263,383				4,086				3.10				243,997				3,930				3.22
Borrowings			45,309				982				4.34				66,369				1,566				4.72
Total interest-bearing liabilities			308,692				5,068				3.28				310,366				5,496				3.54
Noninterest-bearing demand deposits			12,269												14,437
Noninterest-bearing liabilities			2,143												1,891
Total liabilities			323,104												326,694
Shareholders’ equity			48,661												48,026
Total liabilities and shareholders’ equity		$	371,765											$	374,720
Net interest spread						$	5,160				2.37	%						$	3,907				1.63	%
Net interest margin											2.85	%											2.15	%
Average interest-earning assets to average interest-bearing liabilities											117.30	%											117.18	%

 

1

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

 

 

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

 

Average Balance Sheets (continued)

 

The following table represents the average balance sheets for the three-month periods ended December 31, 2025 and 2024, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

 

		Three Months Ended December 31,
		2025												2024
		Average Balance				Interest And Dividends				Yield/ Cost				Average Balance				Interest And Dividends				Yield/ Cost
		(Dollars in thousands)
Interest-earning assets:
Loans 1		$	331,429			$	4,884				5.89	%		$	333,761			$	4,437				5.32	%
Mortgage-backed securities			11,634				107				3.68				9,178				76				3.31
Other interest-earning assets			18,629				185				3.97				19,376				271				5.60
Total interest-earning assets			361,692				5,176				5.72				362,315				4,784				5.28
Less: Allowance for credit losses			(2,168	)											(2,140	)
Non-interest-earning assets			11,976												13,828
Total assets		$	371,500											$	374,003
Interest-bearing liabilities:
Demand deposits		$	17,380				25				0.58	%		$	15,305				9				0.24	%
Savings			45,235			$	49				0.43				49,832			$	50				0.40
Certificates of deposit			199,310				1,943				3.90				181,207				1,936				4.27
Total deposits			261,925				2,017				3.08				246,344				1,995				3.24
Borrowings			46,309				503				4.35				64,761				751				4.64
Total interest-bearing liabilities			308,234				2,520				3.27				311,105				2,746				3.53
Noninterest-bearing demand deposits			12,590												13,243
Noninterest-bearing liabilities			1,832												1,592
Total liabilities			322,656												325,940
Shareholders’ equity			48,844												48,063
Total liabilities and shareholders’ equity		$	371,500											$	374,003
Net interest spread						$	2,656				2.45	%						$	2,038				1.75	%
Net interest margin											2.94	%											2.25	%
Average interest-earning assets to average interest-bearing liabilities											117.34	%											116.46	%

 

1	Includes loan fees, immaterial in amount, in both interest income and the calculation of yield on loans. Also includes loans on nonaccrual status.

 

  

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

 

Discussion of Financial Condition Changes from June 30, 2025 to December 31, 2025

 

Financial Position and Results of Operations

 

At December 31, 2025 the Company and the Banks were considered well-capitalized with capital ratios in excess of regulatory requirements. However, an extended economic recession could adversely impact the Company’s and the Banks’ capital position and Company in its Current Report on Form 8-K filed on August 15, 2024, in addition to the formal written Agreement, the OCC has also imposed individual minimum capital requirements (“IMCRs”) on First Federal Savings Bank of Kentucky. The IMCRs require First Federal Savings Bank of Kentucky to maintain a common equity tier 1 capital ratio of at least 9.0%, a tier 1 capital ratio of at least 11.0%, a total capital ratio of at least 12.0%, and a leverage ratio of at least 9.0%. As of December 31, 2025, First Federal Savings Bank of Kentucky’s common equity tier 1 capital ratio was 13.99%, its tier 1 capital ratio was 13.99%, its total capital ratio was 14.76%, and its leverage ratio was 10.37%. As First Federal of Kentucky has not been designated as “less than well capitalized” and has maintained capital levels in excess of the IMCRs, there have been no restrictions or waiver requirements imposed on First Federal of Kentucky for rolling brokered deposits or other types of wholesale deposits.

 

Assets: At December 31, 2025, the Company’s assets totaled $375.3 million, an increase of $4.1 million, or 1.1%, from total assets at June 30, 2025, due primarily to the increase in loans, as well as an increase in securities available-for-sale.

 

Cash and cash equivalents: Cash and cash equivalents overall increased $192,000 or 1.0% to $19.7 million at December 31, 2025. Most of the Company’s cash and cash equivalents are held in interest-bearing demand deposits that increased $5.5 million or 64.5%, which were slightly offset by fed funds sold decreasing $5.3 million or 61.9% compared to June 30, 2025.

 

Investment securities: At December 31, 2025, our securities portfolio, which consisted of mortgage-backed securities, increased $1.4 million or 14.2% and totaled $11.3 million, compared to June 30, 2025.

 

Loans: Loans, net and loans held-for-sale in the aggregate increased $2.3 million or 0.8% and totaled $330.5 million at December 31, 2025. Loans receivable, net, increased by $2.6 million or 0.7% to $329.8 million at December 31, 2025. Loans held-for-sale decreased $254,000 and totaled $623,000 at December 31, 2025. Management continues to look for high-quality loans to add to its portfolio and will continue to emphasize loan originations to the extent 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 elevated balances loans held-for-sale.

 

Non-performing and classified loans: At December 31, 2025, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of approximately $2.4 million, or 0.7% of total loans compared to $3.9 million or 1.2%, of total loans at June 30, 2025. The Company’s ACL totaled $2.2 million at both December 31, 2025 and June 30, 2025. The ACL at December 31, 2025, represented 92.7% of nonperforming loans and 0.7% of total loans, while at June 30, 2025, ACL represented 54.1% of nonperforming loans and 0.7% of total loans.

 

The Company had $6.3 million in assets classified as substandard for regulatory purposes at December 31, 2025, with $0 in real estate owned (“REO”). Classified loans as a percentage of total loans (including loans acquired) was 1.9% and 1.9% at December 31, 2025 and June 30, 2025, respectively. Of substandard loans, 100.0% were secured by real estate on which the Banks have priority lien position.

 

The table below shows the aggregate amounts of our assets classified for regulatory purposes at the dates indicated:

 

(dollars in thousands)		December 31, 2025				June 30, 2025
Substandard assets		$	6,275			$	6,086
Doubtful assets			-				–
Loss assets			-				–
Total classified assets		$	6,275			$	6,086

 

The Company had no real estate acquired through foreclosure at December 31, 2025 or June 30, 2025. During the period presented the Company made no loans to facilitate the purchase of its other real estate owned by qualified buyers. Loans to facilitate the sale of other real estate owned, which were included in substandard loans, totaled $0 and $0 at December 31, 2025 and June 30, 2025, respectively.

 

 

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

 

Discussion of Financial Condition Changes from June 30, 2025 to December 31, 2025 (continued)

 

At December 31, 2025 and June 30, 2025, the Company had $661,000 and $672,000 of loans classified as special mention, respectively. This category includes assets which do not currently expose us to a sufficient degree of risk to warrant classification, but do possess credit deficiencies or potential weaknesses deserving our close attention.

 

Liabilities: Total liabilities increased $3.3 million, or 1.0% to $326.2 million at December 31, 2025, as Federal Home Loan Bank advances increased $8.7 million or 20.3% to $51.4 million and demand deposit accounts increased $874,000 or 3.0%.

 

Savings decreased $5.1 million or 10.5% and totaled 43.5 million at December 31, 2025 primarily related to a decrease in savings accounts associated with distributions of funds in administration of various estate accounts. Certificates of deposit decreased $123,000 or 0.1%, due to brokered certificates of deposit decreasing $5.6 million or 12.8% to $38.4 million, which were offset by retail certificates of deposit increasing $5.5 million or 3.6%.

 

Shareholders’ Equity: At December 31, 2025, the Company’s shareholders’ equity totaled $49.1 million, an increase of $732,000 or 1.5% from June 30, 2025. The increase in shareholders’ equity was primarily associated with net income of $648,000, as well as accumulated other comprehensive loss decreasing $84,000 or 57.9% from a loss of $145,000 at June 30, 2025 to a loss of $61,000 at December 31, 2025.

 

On January 16, 2024, the Company announced the suspension of quarterly dividends indefinitely. Holders of our common stock are only entitled to receive such dividends as our Board of Directors may declare out of funds available for such payments under applicable law and regulatory guidance. We cannot predict when or whether the Company will be able to pay future common stock dividends and if so, the amount of any such common stock dividends. Our ability to pay future dividends and if so at what level will also be dependent on numerous factors, including: our ability to receive any required regulatory approval or non-objection to pay dividends or for the payment of dividends from First Federal Savings and Loan Association of Hazard and First Federal Savings Bank of Kentucky to the Company or from the Company to shareholders; our ability to fully and timely address the deficiencies that resulted in the Agreement that First Federal Savings Bank of Kentucky has entered into with the OCC; First Federal Savings Bank of Kentucky’s ability to satisfy the IMCR’s imposed by the OCC; the ability of First Federal MHC to receive approval of its members to waive the payment of any Company dividends to First Federal MHC; and our ability to successfully execute our strategy to increase earnings and core deposits, reduce reliance on higher cost funding sources and shift more of our loan portfolio towards higher-earning loans. See “Risk Factors” in Part II, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended June 30, 2025 for additional discussion regarding dividends.

 

 

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

 

Comparison of Operating Results for the Six-month Periods Ended December 31, 2025 and 2024

 

General

 

Net income totaled $648,000 or $0.08 diluted earnings per share for the six-months ended December 31, 2025, an increase of $650,000 from net loss of $2,000 or ($0.00) diluted earnings per share for the same period in 2024. The increase in net earnings for the six-months ended December 31, 2025, was primarily attributable to increased net interest income, which was partially offset by higher non-interest expense.

 

Net Interest Income

 

Net interest income increased $1.3 million or 32.1% to $5.2 million due primarily to increased interest income and decreased interest expense. Interest income increased $825,000 or 8.8% due to an increase in the average rate earned on interest-earning assets, which increased 48 basis points to 5.65%. Average interest-earning assets decreased $1.6 million or 0.5% to $362.1 million for the recently-ended quarterly period. The average rate earned on assets was due primarily to an increase in the rate earned on loans, which was the result of new loan production carrying higher interest rates and adjustable rate mortgages continuing to reprice upward. Interest expense decreased $428,000 or 7.8% to $5.1 million for the six-months recently ended due to a decrease in the average balance of interest-bearing liabilities as well as a decrease in the average rate paid on those funds. Average interest-bearing liabilities decreased $1.7 million or 0.5% to $308.7 million for the quarterly period just ended, while the average rate paid decreased 26 basis points to 3.28% for the period.

 

The increase in interest income from loans period-to-period was due the average rate earned on loans increasing 60 basis points to 5.80% despite the average balance of loans decreasing $4.3 million or 1.3% compared to the six months ended December 31, 2024.

 

The decrease in interest expense was primarily due to decreased interest expense on FHLB advances of $584,000 or 37.3%. The decrease in interest expense on FHLB advances was due to both the average rate paid decreasing 38 basis points to 4.34% and the average balance decreasing $21.1 million to $45.3 million compared to the same period last year.  

 

Net interest spread increased from 1.63% for the prior year six-month period to 2.37% for the six-month period ended December 31, 2025.

 

Provision for Credit Losses

 

Management determined that a $10,000 provision for credit loss was prudent during the recently-ended six-month period.

 

  

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

 

Comparison of Operating Results for the Six-month Periods Ended December 31, 2025 and 2024 (continued)

 

Non-interest Income

 

Non-interest income increased $23,000 or 7.5% to $331,000 for the six-months ended December 31, 2025 compared to the prior year period, primarily because of an increase in net gains from sale of loans of $25,000 or 17.7%. Recently, the market has become more conducive to the sale of fixed rate mortgages to the secondary market.

 

Non-interest Expense

 

Non-interest expense increased $412,000 or 9.8% to $4.6 million for the six months ended December 31, 2025, primarily due to higher data processing expense, outside service fees, and employee compensation and benefits. Data processing expense increased $180,000 or 66.4%, outside service fees increased $169,000 or 75.1%, and employee compensation and benefits increased $119,000 or 5.0%. These were slightly offset by professional fees decreasing $81,000 or 35.4%.

  

Income Tax

 

Income tax expense increased $219,000 to an income tax expense of $206,000 for the six months ended December 31, 2025, compared to the prior year period due to increased earnings. The effective tax rates for the six-month periods ended December 31, 2025 and 2024 were 24.1% and 86.7%, respectively. Included in net income is earnings of $44,000 on bank-owned life insurance which is non-taxable.

 

 

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

 

Comparison of Operating Results for the Three-month Periods Ended December 31, 2025 and 2024

 

General

 

Net income totaled $304,000 or $0.04 diluted earnings per share for the three months ended December 31, 2025, an increase of $291,000 from net income of $13,000 or $0.00 diluted earnings per share for the same period in 2024. The increase in net earnings for the quarter ended December 31, 2025, was primarily attributable to higher net interest income, which was partially offset by higher non interest expense and higher income taxes.

 

Net Interest Income

 

Net interest income increased $618,000 or 30.3% to $2.6 million due primarily to interest income increasing while interest expense decreased period to period. Interest income increased $392,000 or 8.2% to $5.2 million, while interest expense decreased $226,000 or 8.2% to $2.5 million for the recently-ended quarter. As market rates have begun to decrease, liabilities have repriced down while our assets continue to reprice upward.

 

The average rate earned on interest-earning assets increased 44 basis points to 5.72% and was the primary reason for the increase in interest income, as average interest-earning assets decreased $623,000 or 0.2% to $361.7 million for the recently-ended quarterly period. The increase in interest income was due primarily to an increase of $447,000 or 10.1% in interest income from loans, which totaled $4.9 million for the period.

 

The increase in interest income from loans period-to-period was due to the average rate earned on loans increasing 58 basis points to 5.89%. The average balance of loans decreased $2.3 million or 0.7% to $331.4 million for the three months ended December 31, 2025.

 

The average balance of interest-bearing liabilities decreased $2.9 million or 0.9% to $308.2 million for the quarter just ended, and the average rate paid decreased 26 basis points to 3.27%. The cost of liabilities decreased primarily due to decreased FHLB advance expense, which was $248,000 or 33.0% less than the same period ended December 31, 2024. While the average rate paid on FHLB advances decreased 29 basis points to 4.35%, the primary reason for the decrease was the average balance decreasing $18.5 million or 28.5%.

 

Net interest spread increased from 1.75% for the prior year quarterly period to 2.45% for the three-month period ended December 31, 2025.

 

Provision for Credit Losses

 

Management determined that a $10,000 provision for credit loss was prudent due to our current expected credit loss analysis performed during the recently-ended quarter.

 

 

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

 

Comparison of Operating Results for the Three-month Periods Ended December 31, 2025 and 2024 (continued)

 

Non-interest Income

 

Non-interest income increased $7,000 or 4.1% to $178,000 for the recently ended quarter primarily due to increased net gain of sale on loans, increasing $20,000 or 24.7% for the three months recently ended. Recently, the market has become more conducive to the sale of fixed rate mortgages to the secondary market.

 

Non-interest Expense

 

Non-interest expense increased $220,000 or 10.0% and totaled $2.4 million for the three months ended December 31, 2025, primarily due to increased data processing expense, employee compensation and benefits, and outside service fees.

 

Income Tax

 

Income taxes expense increased $104,000 to an expense of $97,000 from a benefit of $94,000 for the three months ended December 31, 2024 for the recently-ended period. The effective tax rates for the three-month periods ended December 31, 2025 and 2024, were 24.2% and -116.7%, respectively. Included in net income is earnings of $22,000 on bank-owned life insurance which is non-taxable.

 

  

Kentucky First Federal Bancorp

 

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk

 

This item is not applicable as the Company is a smaller reporting company.

 

ITEM 4: Controls and Procedures

 

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, and have concluded that the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

Based upon their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have also concluded that there were no significant changes during the quarter ended December 31, 2025 in the Company’s internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

Kentucky First Federal Bancorp

 

PART II – OTHER INFORMATION

 

ITEM 1. Legal Proceedings

 

None.

 

ITEM 1A. Risk Factors

 

Please see “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended June 30, 2025 for information regarding risk factors that could materially affect the Company’s business, financial condition, or future results of operations. As of December 31, 2025, the risk factors of the Company have not materially changed from those disclosed in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended June 30, 2025.

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

(c) The following table sets forth information regarding Company’s repurchases of its common stock during the quarter ended December 31, 2025.

 

Period

Total # of shares purchased

Average price paid per share (including commissions)

Total # of shares purchased as part of publicly announced plans or programs

Maximum # of shares that may yet be purchased under the plans or programs

October 1–31, 2025

–

$

–

–

–

November 1–30, 2025

–

$

–

–

–

December 1–31, 2025

–

$

–

–

–

 

(1)

On  May 18, 2023, the Company announced that it had substantially completed its program to repurchase up to 150,000 shares of its Common Stock, which was initiated on February 3, 2021.

 

ITEM 3. Defaults Upon Senior Securities

 

Not applicable.

 

ITEM 4. Mine Safety Disclosures.

 

Not applicable.

 

ITEM 5. Other Information

 

During the fiscal quarter ended December 31, 2025, none of our directors or officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.

 

 

Kentucky First Federal Bancorp

 

ITEM 6. Exhibits

 

3.11		Charter of Kentucky First Federal Bancorp
3.22		Bylaws of Kentucky First Federal Bancorp, as amended and restated
3.33		Amendment No. 1 to the Bylaws of Kentucky First Federal Bancorp
3.44		Amendment No. 2 to the Bylaws of Kentucky First Federal Bancorp
3.45		Amendment No. 3 to the Bylaws of Kentucky First Federal Bancorp
4.11		Specimen Stock Certificate of Kentucky First Federal Bancorp
10.1		Letter Agreement dated October 2, 2025, between First Federal Savings Bank of Kentucky and Kentucky First Federal Bancorp, Inc.
31.1		CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.0		The following materials from Kentucky First Federal Bancorp’s Quarterly Report On Form 10-Q for the quarter ended December 31, 2025 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Changes in Shareholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows: and (vi) the related Notes.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

(1)	Incorporated herein by reference to the Company’s Registration Statement on Form S-1 (File No. 333-119041).
(2)	Incorporated herein by reference to the Company’s Annual Report on Form 10-K for the Year Ended June 30, 2012 (File No. 0-51176).
(3)	Incorporated herein by reference to the Company’s Current Report on Form 8-K filed August 25, 2017 (File No. 0-51176).
(4)	Incorporated herein by reference to the Company’s Current Report on Form 8-K filed September 28, 2020 (File No. 0-51176).
(5)	Incorporated herein by reference to the Company’s Current Report on Form 8-K filed February 2, 2022 (File No. 51176).

 

 

Kentucky First Federal Bancorp

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

			KENTUCKY FIRST FEDERAL BANCORP
Date:	February 13, 2026		By:	/s/ R. Clay Hulette
				R. Clay Hulette
				Chief Executive Officer (Principal Executive Officer)
Date:	February 13, 2026		By:	/s/ Tyler W. Eades
				Tyler W. Eades
				Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)