Kentucky First Federal Bancorp

MARKET INFORMATION

The Company’s common stock began trading under the symbol “KFFB” on the Nasdaq National Market on March 3, 2005. There are currently 8,086,715 shares of common stock outstanding and approximately 500 holders of record of the common stock. Following are the high and low closing prices, by fiscal quarter, as reported on the Nasdaq National Market during the periods indicated, as well as dividends declared on the common stock during each quarter.

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TABLE OF CONTENTS

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Dear Shareholder:

We are pleased to present the 2024 Annual Report for Kentucky First Federal Bancorp. We encourage you to read both the Annual Report and Proxy Statement. We encourage you to vote and, if possible, to attend our annual meeting on November 14, 2024 as we return to The Challenger Center on the campus of Hazard Community and Technical College for this year’s meeting. The location is One Community College Drive in Hazard, KY.

This has been a difficult year for our Company. For the year ended June 30, 2024, we experienced a net loss of $1.7 million. Please note that $947,000 of that loss was a non-cash write off due to an impairment of goodwill. This portion of the loss has no effect on the capital ratios at our subsidiary banks. But the remainder was indeed a significant loss which was primarily the result of lower net interest income. The cost of our funds increased faster than the returns on our assets, mostly loans, increased. The lower income precipitated our decision, announced on January 16, 2024, to suspend our dividend. Low income and the lack of a dividend has caused continued deterioration in our stock price. In addition, our larger subsidiary, First Federal Savings Bank of Kentucky entered into a formal agreement with its primary regulator, the Office of the Comptroller of the Currency, which will require the bank to adopt a revised strategic plan, a revised succession plan, and revised Liquidity and Interest Rate Risk management programs.

Ultimately, our response to the agreement, and part of our earnings plan, for both banks, will be to reduce reliance on non-core funding. As wholesale funding sources are usually more sensitive to interest rate changes, the increased market rates in 2022 and 2023 caused our costs to escalate quickly, followed by increases to our retail deposits. Our loan portfolio is primarily made up of adjustable-rate mortgages what have adjusted or will adjust after a set fixed period, and will continue to adjust, but the speed of the increase in costs has so far outpaced the rise in returns.

However, we believe that the worst of this period is over. Our net interest income has increased in the last two quarters. The 0.5% interest rate cut announced by the Federal Reserve on September 18, 2024, was welcome and will help to ease pressure on our margin. Our plan going forward will depend on an expanding margin with some deleveraging of our owner-occupied portfolio. With increasing rates on their adjustable-rate loans, we believe many borrowers will be looking to find a fixed rate option, which we hope to provide and earn fee income from selling the loan to the secondary market.

Another key aspect of our plan is to continue to build our commitment and reliance on our local communities. In March, First Federal of Kentucky introduced our “Hometown Banking” line of consumer and business deposit products. Since, we have taken every available opportunity to promote our commitment to customer service through superior deposit products across our communities. We will continue to build our local deposit base—and we would appreciate your support. In this connection, please consider our banks for your deposit needs.

There have been some major personnel changes in the last year. First, our original Chief Financial Officer, Clay Hulette, who also served as Area President of First Federal of Kentucky, retired at the first of this year. Clay was instrumental in the formation of our Company and his hard work and wise counsel were of immense value. Clay has continued to serve as a director of First Federal of Kentucky and in August was appointed to the board of the Company. Clay was replaced as CFO by Tyler Eades. Also, our Secretary, Lee Ann Hockensmith, who also served as the Chief Customer Officer at First Federal of Kentucky, left our employment in August to take a position in another industry. Jaime Coffey, President and CEO of First Federal of Hazard, was appointed to take her place as Secretary. Finally, our longtime Chairman and one-time Chief Executive Officer Tony Whitaker, retired on August 1, 2024. Tony had served the banking industry for over 50 years and developed the ideas behind the foundation of our Company. His replacement as Chairman of the Company is long-time director Walter G. Ecton Jr. and his replacement as Chair of First Federal of Hazard is director and long-time employee and CEO Lou Ella R. Farler.

It has been a truly eventful year, but the commitment of our board, our management, and our staff to return to profitability and to resolve our regulatory issues has not waivered.

Sincerely,

Don Jennings

President and Chief Executive Officer