Kentucky First Federal Bancorp

Liquidity and Capital Resources

Liquidity is the ability to meet current and future short-term financial obligations. Our primary sources of funds consist of cash and deposits at other banks, deposit inflows, loan repayments and maturities, calls and sales of investment and mortgage-backed securities and advances from the FHLB. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

We periodically assess our available liquidity and projected upcoming liquidity demands. We regularly adjust our investments in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits, federal funds, and short- and intermediate-term U.S. Government agency obligations.

Our most liquid assets are cash, federal funds sold and interest-bearing deposits. The levels of these assets depend on our operating, financing, lending, and investing activities during any given period. At June 30, 2026 and June 30, 2025, cash and cash equivalents totaled $16.5 million and $19.5 million, respectively. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $10.9 million and $9.8 million at June 30, 2026 and 2025, respectively.

We are not aware of any trends and/or demands, commitments, events or uncertainties that could result in a material protracted decrease in liquidity. We expect that all our liquidity needs, including the contractual commitments can be met by our currently available liquid assets and cash flows. In the event any unforeseen demand or commitments were to occur, we have access to brokered deposits, FHLB advances, the Federal Reserve Discount Window and an unsecured line of credit with a correspondent bank. We expect that our currently available liquid assets and our ability to access our other liquidity sources would be sufficient to satisfy our liquidity needs without any material adverse effect on our liquidity.

Our primary investing activities are the origination of loans and the purchase of investment securities. In fiscal 2026 we originated $60.3 million of loans, which was less than loan prepayments and repayments by $5.3 million. In fiscal 2025 we originated $52.3 million of loans, which was less than loan prepayments and repayments by $5.6 million. During fiscal 2026 and 2025 proceeds from principal repayments on loans totaled $65.6 million and $57.9 million, respectively.

Financing activities consist primarily of activity in deposit accounts and in FHLB advances. Total deposits decreased $16.7 million for the year ended June 30, 2026, compared to a net increase of $21.4 million for the year ended June 30, 2025. Included in deposits are brokered deposits which totaled $44.0 million at June 30, 2025 compared to $29.6 million in such deposits as of June 30, 2026, a decrease of $14.4 million. We increased FHLB advances by $5.8 million or 13.6% from June 30, 2025 to June 30, 2026. Deposit flows are affected by the overall level of interest rates, the products and corresponding interest rates offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive and to increase core deposit relationships. FHLB advances are collateralized by a blanket mortgage on the 1-4 family residential mortgages and multi-family residential mortgages owned by the Banks. See Note G-Advances from the Federal Home Loan Bank in Notes to Consolidated Financial Statements. At June 30, 2026, the Banks had combined additional FHLB borrowing capacity of $76.1 million.