UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q


(Mark
One)


x
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE
  SECURITIES


EXCHANGE
      ACT OF 1934





For the
quarterly period ended September
30,
2009





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
                
                (I.R.S.
      Employer Identification No.)incorporation
      or organization)





479 Main Street, Hazard,
      Kentucky  41702(Address
      of principal executive offices)(Zip
Code)





(606) 436-3860(Registrant’s
      telephone number, including area
code)





(Former
      name, former address and former fiscal year, if changed since last
      report)





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 such shorter period that the issuer was required to file
such reports and (2) has been subject to such filing requirements for the past
ninety days:  Yes xNo
 ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted 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 and post such files).  Yes  ̈    No
 ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company,” in Rule 12b-2 of the
Exchange Act.  (Check one):





Large accelerated filer ̈
            Accelerated filer ̈Non-accelerated filer ̈
            Smaller Reporting Companyx(Do
      not check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.)


Yes  ̈                             No
x





APPLICABLE
ONLY TO CORPORATE ISSUERS





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:  At November 9, 2009, the
latest practicable date, the Corporation had 7,564,576 shares of $.01 par value
common stock outstanding.








INDEX





PagePART
      I -
                  ITEM
      1
                  FINANCIAL
      INFORMATIONConsolidated
      Balance Sheets
                  3Consolidated
      Statements of Operations
                  4Consolidated
      Statements of Comprehensive Income (Loss)
                  5Consolidated
      Statements of Cash Flows
                  6Notes
      to Consolidated Financial Statements
                  8ITEM
      2
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  18ITEM
      3
                  Quantitative
      and Qualitative Disclosures About Market Risk
                  21ITEM
      4
                  Controls
      and Procedures
                  21PART
      II -
                  OTHER
      INFORMATION
                  22SIGNATURES
                  24


2


PART
I


ITEM 1:
Financial
Information


Kentucky
First Federal Bancorp





CONSOLIDATED
BALANCE SHEETS


(Unaudited)


(Dollars
in thousands, except per share data)





September 30,
                
                
                June 30,2009
                
                
                2009ASSETSCash
      and due from financial institutions
                
                $
                1,519
                
                
                $
                1,548Interest-bearing
      demand deposits
                
                
                1,717
                
                
                
                2,669Cash
      and cash equivalents
                
                
                3,236
                
                
                
                4,217Interest-bearing
      deposits
                
                
                100
                
                
                
                100Available-for-sale
      securities
                
                
                5,374
                
                
                
                5,451Held-to-maturity
      securities, at amortized cost- approximate fair value of $12,032 and
      $15,317 at September 30, and June 30, 2009, respectively
                
                
                11,506
                
                
                
                14,999Loans
      held for sale
                
                
                —
                
                
                
                230Loans
      receivable
                
                
                189,977
                
                
                
                189,609Allowance
      for loan losses
                
                
                (1,599
                )
                
                
                (678
                )Real
      estate acquired through foreclosure
                
                
                146
                
                
                
                109Office
      premises and equipment, net
                
                
                2,817
                
                
                
                2,844Federal
      Home Loan Bank stock
                
                
                5,641
                
                
                
                5,641Accrued
      interest receivable
                
                
                709
                
                
                
                750Bank-owned
      life insurance
                
                
                2,451
                
                
                
                2,428Goodwill
                
                
                14,507
                
                
                
                14,507Other
      intangible assets, net
                
                
                317
                
                
                
                349Prepaid
      federal income taxes
                
                
                312
                
                
                
                —Prepaid
      expenses and other assets
                
                
                353
                
                
                
                345Total
      assets
                
                $
                235,847
                
                
                $
                240,901LIABILITIES
      AND SHAREHOLDERS’ EQUITYDeposits
                
                $
                141,311
                
                
                $
                139,743Advances
      from the Federal Home Loan Bank
                
                
                34,005
                
                
                
                40,156Advances
      by borrowers for taxes and insurance
                
                
                442
                
                
                
                290Accrued
      interest payable
                
                
                189
                
                
                
                189Accrued
      federal income taxes
                
                
                —
                
                
                
                67Deferred
      federal income taxes
                
                
                1,319
                
                
                
                1,339Other
      liabilities
                
                
                779
                
                
                
                723Total
      liabilities
                
                
                178,045
                
                
                
                182,507Commitments
      and contingencies
                
                
                -
                
                
                
                -Shareholders’
      equityPreferred
      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 and outstanding
                
                
                86
                
                
                
                86Additional
      paid-in capital
                
                
                36,263
                
                
                
                36,223Retained
      earnings
                
                
                31,284
                
                
                
                31,930Shares
      acquired by stock benefit plans
                
                
                (2,521
                )
                
                
                (2,557
                )Treasury
      shares at cost, 728,930 common shares at September 30, and June 30,
      2009
                
                
                (7,379
                )
                
                
                (7,379
                )Accumulated
      other comprehensive income
                
                
                69
                
                
                
                91Total
      shareholders’ equity
                
                
                57,802
                
                
                
                58,394Total
      liabilities and shareholders’ equity
                
                $
                235,847
                
                
                $
                240,901





See
accompanying notes.


3


Kentucky
First Federal Bancorp





CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)


(Dollars
in thousands, except per share data)


Three months endedSeptember 30,2009
                
                
                2008Interest
      incomeLoans
                
                $
                2,648
                
                
                $
                2,779Mortgage-backed
      securities
                
                
                129
                
                
                
                149Investment
      securities
                
                
                47
                
                
                
                68Interest-bearing
      deposits and other
                
                
                70
                
                
                
                135Total
      interest income
                
                
                2,894
                
                
                
                3,131Interest
      expenseDeposits
                
                
                950
                
                
                
                1,080Borrowings
                
                
                416
                
                
                
                480Total
      interest expense
                
                
                1,366
                
                
                
                1,560Net
      interest income
                
                
                1,528
                
                
                
                1,571Provision
      for losses on loans
                
                
                968
                
                
                
                15Net
      interest income after provision for losses on loans
                
                
                560
                
                
                
                1,556Non-interest
      incomeEarnings
      on bank-owned life insurance
                
                
                23
                
                
                
                18Gain
      on sale of loans
                
                
                28
                
                
                
                12Loss
      on sale of real estate acquired through foreclosure
                
                
                (12
                )
                
                
                —Other
      operating
                
                
                28
                
                
                
                25Total
      non-interest income
                
                
                67
                
                
                
                55Non-interest
      expenseEmployee
      compensation and benefits
                
                
                745
                
                
                
                700Occupancy
      and equipment
                
                
                71
                
                
                
                88Franchise
      taxes
                
                
                46
                
                
                
                40Data
      processing
                
                
                54
                
                
                
                42FDIC
      insurance premiums
                
                
                42
                
                
                
                6Amortization
      of intangible assets
                
                
                32
                
                
                
                32Other
      operating
                
                
                187
                
                
                
                238Total
      non-interest expense
                
                
                1,177
                
                
                
                1,146Income
      (loss) before income taxes
                
                
                (550
                )
                
                
                465Federal
      income tax expense (benefit)Current
                
                
                (179
                )
                
                
                (214
                )Deferred
                
                
                (9
                )
                
                
                367Total
      federal income tax expense (benefit)
                
                
                (188
                )
                
                
                153NET
      INCOME (LOSS)
                
                $
                (362
                )
                
                $
                312EARNINGS
      (LOSS) PER SHAREBasic
                
                $
                (0.05
                )
                
                $
                0.04Diluted
                
                $
                (0.05
                )
                
                $
                0.04DIVIDENDS
      PER SHARE
                
                $
                0.10
                
                
                $
                0.10





See
accompanying notes.


4


Kentucky
First Federal Bancorp





CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)





(Unaudited)


(In
thousands)





Three months endedSeptember 30,2009
                
                
                2008Net
      income (loss)
                
                $
                (362
                )
                
                $
                312Other
      comprehensive income (loss), net of taxes (benefits):Unrealized
      holding losses on securities during the period, net of tax benefits of $11
      and $3 during the respective periods
                
                
                (22
                )
                
                
                (8
                )Comprehensive
      income (loss)
                
                $
                (384
                )
                
                $
                304





See
accompanying notes.


5


Kentucky
First Federal Bancorp





CONSOLIDATED
STATEMENTS OF CASH FLOWS





(Unaudited)


(In
thousands)


Three months endedSeptember 30,2009
                
                
                2008Cash
      flows from operating activities:Net
      income (loss) for the period
                
                $
                (362
                )
                
                $
                312Adjustments
      to reconcile net earnings to net cash provided by operating
      activities:Amortization
      of discounts and premiums on loans, investments and mortgage-backed
      securities – net
                
                
                —
                
                
                
                1Amortization
      of deferred loan origination fees
                
                
                (1
                )
                
                
                (9
                )Amortization
      of premiums on FHLB advances
                
                
                (113
                )
                
                
                (128
                )Amortization
      of core deposit intangibles
                
                
                32
                
                
                
                32Depreciation
      and amortization
                
                
                42
                
                
                
                40Amortization
      of stock benefit plans
                
                
                141
                
                
                
                143Provision
      for losses on loans
                
                
                968
                
                
                
                15Federal
      Home Loan Bank stock dividends
                
                
                —
                
                
                
                (75
                )Bank-owned
      life insurance earnings
                
                
                (23
                )
                
                
                (18
                )Mortgage
      loans originated for sale
                
                
                (1,628
                )
                
                
                (884
                )Gain
      on sale of loans
                
                
                (28
                )
                
                
                (12
                )Loss
      on sale of real estate acquired through foreclosure
                
                
                12
                
                
                
                —Proceeds
      from sale of mortgage loans
                
                
                1,886
                
                
                
                682Increase
      (decrease) in cash, due to changes in:Accrued
      interest receivable
                
                
                41
                
                
                
                (83
                )Prepaid
      expenses and other assets
                
                
                (9
                )
                
                
                18Accrued
      interest payable
                
                
                —
                
                
                
                3Other
      liabilities
                
                
                (9
                )
                
                
                95Federal
      income taxesCurrent
                
                
                (379
                )
                
                
                (214
                )Deferred
                
                
                (9
                )
                
                
                367Net
      cash provided by operating activities
                
                
                561
                
                
                
                285Cash
      flows provided by (used in) investing activities:Investment
      securities maturities, prepayments and calls:Held
      to maturity
                
                
                3,493
                
                
                
                668Available
      for sale
                
                
                44
                
                
                
                33Proceeds
      from sale of real estate acquired through foreclosure
                
                
                42
                
                
                
                —Loan
      principal repayments
                
                
                9,418
                
                
                
                16,728Loan
      disbursements
                
                
                (9,923
                )
                
                
                (20,778
                )Purchase
      of office equipment
                
                
                (15
                )
                
                
                (126
                )Net
      cash provided by (used in) investing activities
                
                
                3,059
                
                
                
                (3,475
                )Cash
      flows provided by (used in) financing activities:Net
      increase (decrease) in deposit accounts
                
                
                1,568
                
                
                
                (612
                )Proceeds
      from Federal Home Loan Bank advances
                
                
                1,000
                
                
                
                8,500Repayment
      of Federal Home Loan Bank advances
                
                
                (7,038
                )
                
                
                (14,049
                )Advances
      by borrowers for taxes and insurance
                
                
                152
                
                
                
                126Dividends
      paid on common stock
                
                
                (283
                )
                
                
                (305
                )Treasury
      stock repurchases
                
                
                —
                
                
                
                (414
                )Net
      cash used in financing activities
                
                
                (4,601
                )
                
                
                (6,754
                )Net
      decrease in cash and cash equivalents
                
                
                (981
                )
                
                
                (9,944
                )Cash
      and cash equivalents at beginning of period
                
                
                4,217
                
                
                
                15,966Cash
      and cash equivalents at end of period
                
                $
                3,236
                
                
                $
                6,022





See
accompanying notes.


6


Kentucky
First Federal Bancorp





CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)





(Unaudited)


(In
thousands)


Three months endedSeptember 30,2009
                
                
                2008Supplemental
      disclosure of cash flow information:Cash
      paid during the period for:Federal
      income taxes
                
                $
                200
                
                
                $
                -Interest
      on deposits and borrowings
                
                $
                1,479
                
                
                $
                1,684





See
accompanying notes.


7


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





Three-months
ended September 30, 2009 and 2008


(unaudited)





On March
2, 2005, First Federal Savings and Loan Association of Hazard (“First Federal of
Hazard” or the “Association”) completed a Plan of Reorganization (the “Plan” or
the “Reorganization”) pursuant to which the Association reorganized into the
mutual holding company form of ownership with the incorporation of a stock
holding company, Kentucky First Federal Bancorp (the “Company”) as parent of the
Association.  Coincident with the Reorganization, the Association
converted to the stock form of ownership, followed by the issuance of all the
Association’s outstanding stock to Kentucky First Federal
Bancorp.  Completion of the  Plan of Reorganization
culminated with Kentucky First Federal Bancorp issuing 4,727,938 common shares,
or 55% of its common shares, to First Federal Mutual Holding Company (“First
Federal MHC”), a federally chartered mutual holding company, with 2,127,572
common shares, or 24.8% of its shares offered for sale at $10.00 per share to
the public and a newly formed Employee Stock Ownership Plan
(“ESOP”).  The Company received net cash proceeds of $16.1 million
from the public sale of its common shares.  The Company’s remaining
1,740,554 common shares were issued as part of the $31.4 million cash and stock
consideration paid for 100% of the common shares of Frankfort First Bancorp
(“Frankfort First”) and its wholly-owned subsidiary, First Federal Savings Bank
of Frankfort (“First Federal of Frankfort”).  The acquisition was
accounted for using the purchase method of accounting and resulted in the
recordation of goodwill and other intangible assets totaling $15.4
million.





1.  Basis of
Presentation





The
accompanying unaudited consolidated financial statements, which represent the
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
accounting principles generally accepted in the United States of
America.  However, in the opinion of management, all adjustments
(consisting of only normal recurring adjustments) which are necessary for a fair
presentation of the consolidated financial statements have been
included.  The results of operations for the three-month period ended
September 30, 2009, are not necessarily indicative of the results which may be
expected for an entire fiscal year.  The consolidated balance sheet as
of June 30, 2009 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 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 2009 filed with the
Securities and Exchange Commission.





2.  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 Frankfort (collectively hereinafter “the
Banks”).  All intercompany transactions and balances have been
eliminated in consolidation.


8


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Three-months
ended September 30, 2009 and 2008


(unaudited)





3.  Earnings Per
Share





Basic
earnings per share is computed based upon the weighted-average common shares
outstanding during the period less shares in the Company’s ESOP that are
unallocated and not committed to be released.  Weighted average common
shares deemed outstanding give effect to 263,572 and 282,484 unallocated ESOP
shares for the three-month periods ended September 30, 2009, and 2008,
respectively.





Three months ended September 30,2009
                  
                  
                  2008Weighted-average
      common shares outstanding (basic)
                  
                  
                  7,564,576
                  
                  
                  
                  7,692,010Dilutive
      effect of:Assumed
      exercise of stock options
                  
                  
                  -
                  
                  
                  
                  -Weighted-average
      common shares outstanding (diluted)
                  
                  
                  7,564,579
                  
                  
                  
                  7,692,010





There
were 339,200 stock option shares outstanding for both of the three-month periods
ended September 30, 2009 and 2008, but were not considered in computing diluted
earnings per share, because they were anti-dilutive.





4.  New Accounting
Standards





FASB
Staff Position (“FSP”) ASC 260-10 is effective for fiscal years beginning after
December 15, 2008 and is to be applied retrospectively.  This FSP
requires share-based compensation awards that qualify as participating
securities to be included in basic EPS using the two-class method.  A
share-based compensation award is considered a participating security if it
receives non-forfeitable dividends.  A non-forfeitable dividend would
be a dividend that the participant receives before the award is vested and if
the participant forfeits the actual shares awarded the dividends he/she has
received do not have to be paid back to the company.  This guidance
was adopted in the first quarter and has been applied to all periods
shown.





In
connection with our adoption of FSP ASC 260-10, weighted average voting and
unvested common shares outstanding include unvested shares issued through the
year 2010 incentive compensation plan shares of 51,800 and 77,700 at September
30, 2009 and 2008, respectively.  This FSP requires share-based
compensation awards that qualify as participating securities to be included in
basis EPS using the two-class method.  Adoption of this FSP had no
effect on the basic and diluted EPS for either of the three month periods ended
September 30, 2009 or 2008.


9





Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Three-months
ended September 30, 2009 and 2008


(unaudited)





4.  New Accounting Standards
(continued)





In April
2009, the FASB issued FSP No. 107-1 and APB 28-1, “Interim Disclosures about
Fair Value of Financial Instruments,” which was subsequently incorporated into
ASC Topic 825, “Financial Instruments.”  This guidance amended FASB
Statement No. 107, “Disclosures about Fair Value of Financial Instruments,” to
require disclosures about fair value of financial instruments for interim
reporting periods of publicly traded companies that were previously only
required in annual financial statements.  The adoption of this
guidance at September 30, 2009, did not impact our results of operations or
financial position, as it only required disclosures, which are included in the
following section.





In May
2009, the FASB issued ASC 855, “Subsequent Events,” which establishes general
standards of accounting for and disclosures of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued.  In particular, this Statement sets for the period after
the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, the circumstances under which an entity
should recognize events or transactions occurring after the balance sheet date
in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet
date.  In accordance with this Statement, an entity should apply the
requirements to interim or annual financial periods ending after June 15,
2009.  Subsequent events were evaluated through November 13, 2009,
which is the date the financial statements were issued.  The impact of
the adoption did not have a material impact on the results of operations or
financial position of the Company.





In June
2009 the FASB issued Statement No. 168 (ASC 105-10), “The FASB Accounting
Standards Codification and Hierarchy of Generally Accepted Accounting
Principles-a replacement of FASB Statement No. 162,” Which was subsequently
incorporated into ASC 405.  This Statement has become the source of
authoritative U.S. generally accepted accounting principles (“GAAP”) recognized
by the FASB to be applied by nongovernmental entities.  Rules and
interpretive releases of the Securities and Exchange Commission (“SEC”) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants.  On the effective date of this Statement, the
Codification superseded all then-existing non-SEC accounting and reporting
standards.  All other non-grandfathered non-SEC accounting literature
not included in the Codification will become
non-authoritative.  Management has adopted this Statement for the
period ended September 30, 2009.  All authoritative language has been
updated to comply with ASC 405.





On June
12, 2009, the FASB issued new guidance impacting FASB ASC 860, Transfers and
Servicing.The new
guidance amends ASC 860, and will require more information about transfers of
financial assets, including securitization transactions, and where entities have
continuing exposure to the risks related to transferred financial assets. It
eliminates the concept of a “qualifying special-purpose entity,” changes the
requirements for derecognizing financial assets, and requires additional
disclosures. The new standard will be effective January 1, 2010 and the adoption
of this standard is not expected to have a material effect on the Company’s
results of operations or financial position.


10





Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Three-months
ended September 30, 2009 and 2008


(unaudited)





4.  New Accounting Standards
(continued)





On June
12, 2009, the FASB issued new guidance impacting FASB ASC 810-10, Consolidation
(Statement No. 167 amends FIN 46(R)).  The new guidance replaces the
quantitative-based risks and rewards calculation for determining which
enterprise, if any, has a controlling financial interest in a variable interest
entity with a qualitative approach focused on identifying which enterprise has
the power to direct the activities of a variable interest entity (VIE) that most
significantly impact the entity’s economic performance and (1) the obligation to
absorb losses of the entity or (2) the right to receive benefits from the
entity.   Unlike previous guidance, this Statement requires ongoing
reconsideration of whether (1) an entity is a VIE and (2) an enterprise is the
primary beneficiary of a VIE.  It is expected that the amendments will
result in more entities consolidating VIEs that previously were not consolidated
 This new guidance will also require additional disclosures about the
Company’s involvement in variable interest entities.   This new guidance
will be effective January 1, 2010 and the adoption of this standard is not
expected to have a material effect on the Company’s results of operations or
financial position.





5.  Investment
Securities





The
amortized cost, gross unrealized gains, gross unrealized losses and estimated
fair values of investment securities are summarized as follows:





September 30, 2009Gross
                  
                  
                  Gross
                  
                  
                  EstimatedAmortized
                  
                  
                  unrealized
                  
                  
                  unrealized
                  
                  
                  faircost
                  
                  
                  gains
                  
                  
                  losses
                  
                  
                  value(In thousands)Available-for-sale
      SecuritiesU.S.
      Government and Federal agency
                  
                  $
                  5,000
                  
                  
                  $
                  104
                  
                  
                  $
                  -
                  
                  
                  $
                  5,104Agency
      residential mortgage-backed securities
                  
                  
                  269
                  
                  
                  
                  2
                  
                  
                  
                  (1
                  )
                  
                  
                  270$
                  5,269
                  
                  
                  $
                  106
                  
                  
                  $
                  (1
                  )
                  
                  $
                  5,374Held-to-maturity
      SecuritiesU.S.
      Government and federal agency
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Agency
      residential mortgage-backed securities
                  
                  
                  11,506
                  
                  
                  
                  526
                  
                  
                  
                  -
                  
                  
                  
                  12,032$
                  11,506
                  
                  
                  $
                  526
                  
                  
                  $
                  -
                  
                  
                  $
                  12,032





June 30, 2009Gross
                  
                  
                  Gross
                  
                  
                  EstimatedAmortized
                  
                  
                  unrealized
                  
                  
                  unrealized
                  
                  
                  faircost
                  
                  
                  gains
                  
                  
                  losses
                  
                  
                  value(In thousands)Available-for-sale
      SecuritiesU.S.
      Government and federal agency
                  
                  $
                  5,000
                  
                  
                  $
                  136
                  
                  
                  $
                  -
                  
                  
                  $
                  5,136Agency
      residential mortgage-backed securities
                  
                  
                  314
                  
                  
                  
                  2
                  
                  
                  
                  (1
                  )
                  
                  
                  315$
                  5,314
                  
                  
                  $
                  138
                  
                  
                  $
                  (1
                  )
                  
                  $
                  5,451Held-to-maturity
      SecuritiesU.S.
      Government and federal agency
                  
                  $
                  3,000
                  
                  
                  $
                  2
                  
                  
                  $
                  -
                  
                  
                  $
                  3,002Agency
      residential mortgage-backed securities
                  
                  
                  11,999
                  
                  
                  
                  316
                  
                  
                  
                  -
                  
                  
                  
                  12,315$
                  14,999
                  
                  
                  $
                  318
                  
                  
                  $
                  -
                  
                  
                  $
                  15,317


11





Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Three-months
ended September 30, 2009 and 2008


(unaudited)


5.  Investment Securities
(continued)





The
amortized cost and estimated fair value of investment securities by contractual
maturity are shown below.  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.





September 30,
                  
                  
                  June 30,2009
                  
                  
                  2009Estimated
                  
                  
                  
                  
                  
                  Estimatedfair
                  
                  
                  Amortized
                  
                  
                  fair
                  
                  
                  Amortizedvalue
                  
                  
                  cost
                  
                  
                  value
                  
                  
                  cost(In thousands)Available-for-saleWithin
      one year
                  
                  $
                  5,104
                  
                  
                  $
                  5,000
                  
                  
                  $
                  5,136
                  
                  
                  $
                  5,000One
      year through five years
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -5,104
                  
                  
                  
                  5,000
                  
                  
                  
                  5,136
                  
                  
                  
                  5,000Mortgage-backed
      securities
                  
                  
                  270
                  
                  
                  
                  269
                  
                  
                  
                  315
                  
                  
                  
                  314Totals
                  
                  $
                  5,374
                  
                  
                  $
                  5,269
                  
                  
                  $
                  5,451
                  
                  
                  $
                  5,314Held-to-maturityWithin
      one year
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  3,002
                  
                  
                  $
                  3,000One
      year through five years
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  --
                  
                  
                  
                  -
                  
                  
                  
                  3,002
                  
                  
                  
                  3,000Mortgage-backed
      securities
                  
                  
                  12,032
                  
                  
                  
                  11,506
                  
                  
                  
                  12,315
                  
                  
                  
                  11,999Totals
                  
                  $
                  12,032
                  
                  
                  $
                  11,506
                  
                  
                  $
                  15,317
                  
                  
                  $
                  14,999





There
were no sales of investment securities during the fiscal year ended June 30,
2009 or the three month period ended September 30, 2009.





We
evaluated securities in unrealized loss positions for evidence of
other-than-temporary impairment, considering duration, severity, financial
condition of the issuer, our intention to sell or requirement to
sell.  Management does not believe other-than-temporary impairment is
evident.


12





Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Three-months
ended September 30, 2009 and 2008


(unaudited)





6.
              Loans
      Receivable





The
composition of the loan portfolio is as follows:





September 30,
                      
                      
                      June 30,2009
                      
                      
                      2009(In
      thousands)Residential
      real estateOne-
      to four-family
                      
                      $
                      164,622
                      
                      
                      $
                      163,108Multi-family
                      
                      
                      6,481
                      
                      
                      
                      7,303Construction
                      
                      
                      712
                      
                      
                      
                      735Nonresidential
      real estate and land
                      
                      
                      10,516
                      
                      
                      
                      11,460Loans
      on deposits
                      
                      
                      2,823
                      
                      
                      
                      2,909Consumer
      and other
                      
                      
                      5,142
                      
                      
                      
                      4,497190,296
                      
                      
                      
                      190,012Less:Undisbursed
      portion of loans in process
                      
                      
                      310
                      
                      
                      
                      404Deferred
      loan origination fees (cost)
                      
                      
                      9
                      
                      
                      
                      (1
                      )Allowance
      for loan losses
                      
                      
                      1,599
                      
                      
                      
                      678$
                      188,378
                      
                      
                      $
                      188,931





Impaired
loans were as follows:





September 30,
                      
                      
                      June 30,2009
                      
                      
                      2009(In
      thousands)Loans
      with no allocated allowance for loan losses
                      
                      $
                      2,858
                      
                      
                      $
                      4,086Loans
      with allocated allowance for loan losses
                      
                      
                      4,292
                      
                      
                      
                      1,153Total
                      
                      $
                      7,150
                      
                      
                      $
                      5,239Amount
      of allowance for loan losses allocated
                      
                      $
                      977
                      
                      
                      $
                      56





7.
            Allowance for Loan
      Losses





The
activity in the allowance for loan losses is summarized as follows for the years
ended June 30:





For
      the Three Months EndedSeptember
      30,
                      
                      
                      September
      30,2009
                      
                      
                      2008(In
      thousands)Beginning
      balance
                      
                      $
                      678
                      
                      
                      $
                      666Provision
      for losses on loans
                      
                      
                      968
                      
                      
                      
                      15Charge-offs
                      
                      
                      (47
                      )
                      
                      
                      -Ending
      balance
                      
                      $
                      1,599
                      
                      
                      $
                      681


13





Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Three-months
ended September 30, 2009 and 2008


(unaudited)




8.
            Commitments




As of
September 30, 2009, loan commitments and unused lines of credit totaled $12.2
million, including $310,000 in undisbursed construction loans, $2.1 million in
one- to four-family mortgage loans and $9.8 million in lines of credit secured
by equity in real property.




9.
            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 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 three 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 or discounted
cash flows.  Level 2 securities include mortgage
products.




Impaired
Loans




Impaired
loans are evaluated at the time the loan is identified as impaired and are
recorded at fair value.  Market value is measured based on the value
of the collateral securing these loans and is classified as Level 3 in the fair
value hierarchy.  Fair value is determined using several
methods.  Generally, the fair value of real estate is determined based
on appraisals by qualified licensed appraisers.  If an appraisal is
not available, the fair value of the collateral may be determined by using a
cash flow analysis, a broker’s opinion of value, the net present value of future
cash flows, or an observable market price from an active market.  Fair
value on non-real estate collateral loans is determined using similar
methods.  In addition, business equipment may be valued by using the
net book value from the business’ financial statements.  Impaired
loans are evaluated quarterly for additional impairment.




Other
Real Estate Owned (“OREO”)




OREO is
evaluated at the time of acquisition and recorded at fair value as determined by
independent appraisal or internal market evaluation less cost to
sell.  OREO is further evaluated quarterly for
impairment.  The aggregate fair value of OREO acquired and/or written
down to fair value during the period is disclosed below.


14





Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Three-months
ended September 30, 2009 and 2008


(unaudited)





9.
              Disclosures About Fair
      Value of Assets and Liabilities
  (continued)




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





Fair Value Measurements at September 30, 2009(in thousands)Quotes Pricesin Active
                
                
                SignificantMarkets for
                
                
                Other
                
                
                SignificantIdentical
                
                
                Observable
                
                
                UnobservableAssets
                
                
                Inputs
                
                
                InputsDescription
                
                Fair Value
                
                
                (Level 1)
                
                
                (Level 2)
                
                
                (Level 3)Available-for-sale
      securities:U.S.
      Government and federal agency
                
                $
                5,104
                
                
                $
                -
                
                
                $
                5,104
                
                
                $
                -Agency
      mortgage-backed
                
                
                270
                
                
                
                -
                
                
                
                270
                
                
                
                -Totals
                
                $
                5,374
                
                
                $
                -
                
                
                $
                5,374
                
                
                $
                -





Fair Value Measurements at June 30, 2009(in thousands)Quotes Pricesin Active
                
                
                SignificantMarkets for
                
                
                Other
                
                
                SignificantIdentical
                
                
                Observable
                
                
                UnobservableAssets
                
                
                Inputs
                
                
                InputsDescription
                
                Fair Value
                
                
                (Level 1)
                
                
                (Level 2)
                
                
                (Level 3)Available-for-sale
      securities:U.S.
      Government and federal agency
                
                $
                5,136
                
                
                $
                -
                
                
                $
                5,136
                
                
                $
                -Agency
      mortgage-backed
                
                
                315
                
                
                
                -
                
                
                
                315
                
                
                
                -Totals
                
                $
                5,451
                
                
                $
                -
                
                
                $
                5,451
                
                
                $
                -





Assets
measured at fair value on a non-recurring basis are summarized
below:





Fair Value Measurements at September 30, 2009(in thousands)Quotes Pricesin Active
                
                
                SignificantMarkets for
                
                
                Other
                
                
                SignificantIdentical
                
                
                Observable
                
                
                UnobservableAssets
                
                
                Inputs
                
                
                InputsDescription
                
                Fair Value
                
                
                (Level 1)
                
                
                (Level 2)
                
                
                (Level 3)Impaired
      loans
                
                $
                2,000
                
                
                $
                -
                
                
                $
                -
                
                
                $
                2,000Other
      real estate owned
                
                
                146
                
                
                
                -
                
                
                
                -
                
                
                
                146Totals
                
                $
                2,146
                
                
                $
                -
                
                
                $
                -
                
                
                $
                2,146





Impaired
loans had a carrying amount of $2.9 million and a valuation allowance of
$977,000 at September 30, 2009.  A charge of $921,000 was included in
earnings for the period.


15





Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Three-months
ended September 30, 2009 and 2008


(unaudited)





9.
              Disclosures About Fair
      Value of Assets and Liabilities
  (continued)





Fair Value Measurements at June 30, 2009(in thousands)Quotes Pricesin Active
                
                
                SignificantMarkets for
                
                
                Other
                
                
                SignificantIdentical
                
                
                Observable
                
                
                UnobservableAssets
                
                
                Inputs
                
                
                InputsFair Value
                
                
                (Level 1)
                
                
                (Level 2)
                
                
                (Level 3)Impaired
      loans
                
                $
                1,097
                
                
                $
                -
                
                
                $
                -
                
                
                $
                1,097Other
      real estate owned
                
                
                96
                
                
                
                -
                
                
                
                -
                
                
                
                96Totals
                
                $
                1,193
                
                
                $
                -
                
                
                $
                -
                
                
                $
                1,193





SFAS No.
107, “Disclosures about Fair Value of Financial Instruments,” requires
disclosure of the fair value of financial instruments, both assets and
liabilities, whether or not recognized in the consolidated statement of
financial condition, 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.





The
following methods were used to estimate the fair value of all other financial
instruments recognized in the accompanying statements of financial condition at
amounts other than fair value at June 30, 2009 and 2008:





Cash and cash
equivalents:  The carrying amounts presented in the
consolidated statements of financial condition for cash and cash equivalents are
deemed to approximate fair value.





Held-to-maturity
securities:  For held-to-maturity securities, fair value is
deemed to equal the quoted market price.





Loans held for
sale:  Loans originated and intended for sale in the secondary
market are carried at the lower of cost or fair value, as determined by
outstanding commitments from investors.  When the Bank decides to sell
loans not previously classified as held for sale, such loans are transferred
into a held-for-sale classification, and the recorded loan values are adjusted
to the lower of cost or fair value.





Loans
receivable:  The loan portfolio has been segregated into
categories with similar characteristics, such as one- to four-family
residential, multi-family residential and nonresidential real
estate.  These loan categories were further delineated into fixed-rate
and adjustable-rate loans.  The fair values for the resultant loan
categories were computed via discounted cash flow analysis, using current
interest rates offered for loans with similar terms to borrowers of similar
credit quality.  For loans on deposit accounts and consumer and other
loans, fair values were deemed to equal the historic carrying
values.





Federal Home Loan Bank
stock, interest-earning deposits and accrued interest
receivable:  It is not practicable to determine the fair value
of FHLB stock due to restrictions placed on its
transferability.





16




Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Three-months
ended September 30, 2009 and 2008


(unaudited)





9.
              Disclosures About Fair
      Value of Assets and Liabilities
  (continued)





Deposits:  The
fair value of NOW accounts, passbook accounts, money market deposits and
advances by borrowers for taxes and insurance are deemed to approximate the
amount payable on demand.  Fair values for fixed-rate certificates of
deposit have been estimated using a discounted cash flow calculation using the
interest rates currently offered for deposits of similar remaining
maturities.  The historical carrying amount of accrued interest
payable on deposits is deemed to approximate fair value.





Advances from the Federal
Home Loan Bank:  The fair value of these advances is estimated
using the rates currently offered for similar advances of similar remaining
maturities or, when available, quoted market prices.





Advances by borrowers for
taxes and insurance and accrued interest payable:  The carrying
amount presented in the consolidated statement of financial condition is deemed
to approximate fair value.





Commitments to extend
credit:  For fixed-rate and adjustable-rate loan commitments,
the fair value estimate considers the difference between current levels of
interest rates and committed rates.  The fair value of outstanding
loan commitments at September 30, and June 30, 2009, was not
material.





Based on
the foregoing methods and assumptions, the carrying value and fair value of the
Company’s financial instruments at September 30 and June 30, 2009 are as
follows:





September 30, 2009
                
                
                June 30, 2009Carrying
                
                
                Fair
                
                
                Carrying
                
                
                FairValue
                
                
                value
                
                
                value
                
                
                value(In Thousands)Financial
      assetsCash
      and cash equivalents
                
                $
                3,236
                
                
                $
                3,236
                
                
                $
                4,217
                
                
                $
                4,217Interest-earning
      deposits
                
                
                100
                
                
                
                100
                
                
                
                100
                
                
                
                100Available-for-sale
      securities
                
                
                5,374
                
                
                
                5,374
                
                
                
                5,451
                
                
                
                5,451Held-to-maturity
      securities
                
                
                11,506
                
                
                
                12,032
                
                
                
                14,999
                
                
                
                15,317Loans
      held for sale
                
                
                -
                
                
                
                -
                
                
                
                230
                
                
                
                230Loans
      receivable - net
                
                
                188,378
                
                
                
                192,600
                
                
                
                188,931
                
                
                
                193,165Federal
      Home Loan Bank stock
                
                
                5,641
                
                
                
                n/a
                
                
                
                5,641
                
                
                
                n/aAccrued
      interest receivable
                
                
                709
                
                
                
                709
                
                
                
                750
                
                
                
                750Financial
      liabilitiesDeposits
                
                $
                141,311
                
                
                
                144,374
                
                
                $
                139,743
                
                
                $
                142,772Advances
      from the Federal Home Loan Bank
                
                
                34,005
                
                
                
                35,239
                
                
                
                40,156
                
                
                
                41,613Advances
      by borrowers for taxes and insurance
                
                
                442
                
                
                
                442
                
                
                
                290
                
                
                
                290Accrued
      interest payable
                
                
                189
                
                
                
                189
                
                
                
                189
                
                
                
                189


17


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS





Discussion of Financial
Condition Changes from June 30, 2009 to September 30, 2009





Assets:  At
September 30, 2009, the Company’s assets totaled $235.8 million, a decrease of
$5.1 million, or 2.1%, from total assets at June 30, 2009.  This
decrease was attributed primarily a decrease in cash and cash equivalents and
investment securities as well as an increase in the allowance for loan and lease
losses.





Cash and cash
equivalents:Cash and cash
equivalents decreased $981,000 to $3.2 million at September 30, 2009, primarily
as a result of the Company’s efforts to effectively utilize excess liquidity by
continuing its strategy of funding loans to the extent possible and then paying
down borrowings.  It is management’s intention to continue deploying
excess liquidity into mortgage loans to the extent possible.





Loans:  Loans
receivable, net, decreased by $553,000 or 0.3% to $188.4 million at September
30, 2009, primarily as a result of an increased level of allowance for loan and
lease losses.  A provision for loan and lease losses of $968,000 was
made during the quarter just ended chiefly to establish a specific valuation
allowance in response to deterioration in the financial position of a single
borrower.  Otherwise, gross loans receivable increased $368,000 or
0.2% to $190.0 million at September 30, 2009.  Management believes
that the successful redeployment of the Company’s funds from lower-yielding
cash, cash equivalents and investment securities to higher-yielding mortgage
loans is important for the long-term success of the Company.  The
Company will continue to emphasize loan originations to the extent that it is
profitable and prudent.





Non-Performing
Loans: At September 30,
2009, the Company had approximately $3.3 million, or 1.7% of net loans, in loans
90 days or more past due, compared to $3.9 million or 2.0%, of net loans at June
30, 2009.  At September 30, 2009, the Company’s allowance for loan losses
of $1.6 million represented 49.3% of nonperforming loans and 0.8% of total
loans.





The
Company had $7.3 million in assets classified as substandard for regulatory
purposes at September 30, 2009, including loans and real estate acquired through
foreclosure (“REO”).  Classified assets as a percentage of net loans
was 3.9% and 4.2% at September 30, and June 30, 2009,
respectively.  REO at September 30, 2009, included four single-family
homes with an aggregate carrying value of $146,000.  All substandard
loans were secured by residential property on which the banks have priority lien
position.  The table below summarizes substandard loans at September
30, 2009:





Numberof
                  
                  
                  CarryingLoans
                  
                  
                  ValueSingle
      family, owner occupied
                  
                  
                  36
                  
                  
                  $
                  2,326Single
      family, non-owner occupied
                  
                  
                  5
                  
                  
                  
                  353More
      than one single family, non-owner occupied
                  
                  
                  3
                  
                  
                  
                  2,5842-4
      family, owner occupied
                  
                  
                  2
                  
                  
                  
                  412-4
      family, non-owner occupied
                  
                  
                  10
                  
                  
                  
                  1,4495
      or more family, non-owner occupied
                  
                  
                  1
                  
                  
                  
                  397Total
      substandard loans
                  
                  
                  57
                  
                  
                  $
                  7,150


18


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, 2009 to September 30, 2009
(continued)





Included
in classified loans is one credit relationship which had recently experienced
significant deterioration and is responsible for most of the provision for
losses during that period.  The loans to this borrower total $4.7
million and all of the underlying collateral is comprised of 1-4 family
residential rental units.  Management determined this loan to be
impaired under ASC 310 “Receivables” and that it would be unable to collect all
amounts due according to the contractual terms of the loan
agreement.  At September 30, 2009, a specific reserve of $925,000 was
established based on the estimated fair value of the underlying collateral less
cost to sell.





At
September 30, 2009, the Company had $538,000 in loans classified as special
mention.  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.  At September 30, 2009, no loans were classified as
doubtful or loss for regulatory purposes.





Investment and
Mortgage-Backed Securities:  At September 30,
2009, the Company’s investment and mortgage-backed securities had decreased $3.6
million or 17.4% to $16.9 million.  Approximately $5.0 million of the
Company’s remaining investment and agency securities are scheduled to mature in
the current fiscal year.





Liabilities:At September 30, 2009,
the Company’s liabilities totaled $178.0 million, a decrease of $4.5 million, or
2.4%, from total liabilities at June 30, 2009.  The decrease in
liabilities was attributed primarily to a $6.2 million, or 15.3%, decrease in
Federal Home Loan Bank advances, which decreased to $34.0 million at September
30, 2009.  Approximately $25.0 million in advances will mature within
the next eighteen months.   Management plans to refinance a
portion of its advances utilizing longer-term products at prevailing interest
rates, which are lower than the rates currently being paid on the
advances.





Shareholders’
Equity:  At September 30, 2009, the Company’s shareholders’
equity totaled $57.8 million, a decrease of $592,000 or 1.0% from the June 30,
2009 total.  The primary reasons for the decline were the net loss for
the quarter of $362,000 and dividends paid of $283,000.





Comparison of Operating
Results for the Three-Month Periods Ended September 30, 2009 and
2008





General





Net loss
totaled $(362,000) for the three months ended September 30, 2009, a decrease of
$674,000 from the $312,000 in net income for the same period in
2008.  The decrease was primarily attributable to a provision for loan
loss of $968,000 during the period.  Also contributing to the decrease
in net income was a decrease in net interest income and an increase in FDIC
insurance premiums from quarter to quarter.





Net Interest
Income





Net
interest income decreased $43,000 or 2.7% to $1.5 million for the three month
period ended September 30, 2009, compared to the 2008 period, due to interest
income decreasing at a faster pace than interest expense.  Interest
income decreased by $237,000, or 7.6%, to $2.9 million, while interest expense
decreased $194,000 or 12.4% to $1.4 million for the three months ended September
30, 2009.


19


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (continued)





Comparison of Operating
Results for the Three-Month Periods Ended September 30, 2009 and 2008
(continued)





Net Interest Income
(continued)





Interest
income on loans decreased $131,000 or 4.7% to $2.6 million, due primarily to a
decrease in the average rate earned on the loan portfolio.  The
average balance of loans outstanding for the quarter increased $7.9 million or
4.3% quarter over quarter to an average of $189.8 million for the most recent
quarter end, while the average rate earned declined 53 basis points to 5.58% for
the quarter just ended.  Interest income on interest-bearing deposits
and other decreased $65,000 or 48.1% to $70,000 for the three months ended
September 30, 2009, primarily as a result of a reduced volume.  The
average balance outstanding declined $7.5 million or 43.8% to $9.7 million for
the quarter ended September 30, 2009, while the average rate earned on those
assets declined 25 basis points to 2.89%.





Interest
expense on deposits and borrowings both declined quarter over
quarter.  Interest expense on deposits decreased $130,000 or 12.0% to
$950,000 for the three-month period ended September 30, 2009, while interest
expense on borrowings declined $64,000 or 13.3% to $416,000 for the same
period.  The decline in interest expense on deposits was attributed
primarily to a reduction in the average rate paid on the deposits, as the
average balance of deposits increased period to period.  The average
rate paid on deposits decreased 46 basis points to 3.15% for the most recent
quarter, while the average balance of deposits increased $3.9 million or 2.8% to
$141.1 million.  The decline in interest expense on borrowings was
attributed to lower borrowings outstanding, as the average balance of borrowings
declined $9.4 million or 20.8% to $35.9 million for the most recent
quarter.  The average rate paid on borrowings increased 40 basis
points to 4.64% for the recently ended quarter.





Provision for Losses on
Loans





The
Company charges a provision for losses on loans to earnings to bring the total
allowance for loan losses to a level considered appropriate by management based
on historical experience, the volume and type of lending conducted by the Banks,
the status of past due principal and interest payments, general economic
conditions, particularly as such conditions relate to the Banks’ market areas
and other factors related to the collectibility of the Banks’ loan portfolio.
The Company recorded a provision for losses on loans of $968,000 during the
three months ended September 30, 2009, compared to a provision of $15,000 for
the three months ended September 30, 2008.  Management determined that
a specific valuation allowance of $925,000 was appropriate in response to
deterioration in the financial position of a single borrower.  There
can be no assurance that the loan loss allowance will be adequate to absorb
unidentified losses on loans in the portfolio, which could adversely affect the
Company’s results of operations.





Non-interest
Income





Non-interest
income totaled $67,000 for the three months ended September 30, 2009, an
increase of $12,000 from the same period in 2008.


20


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (continued)





Non-interest
Expense





Non-interest
expense totaled $1.2 million for the three months ended September 30, 2009, an
increase of $31,000, or 2.7%, compared to the same period in
2008.  The increase was due primarily to an increase in FDIC insurance
premiums, which totaled $42,000 for the three months ended September 30, 2009,
an increase of $36,000, or 600.0%, from the same period in
2008.  Employee compensation and benefits increased $45,000 or 6.4% to
$745,000, due chiefly to a lower level of lending activity and, thus, a lower
level of deferred costs for the recent quarter.  Somewhat offsetting
higher levels of expense in other areas, other operating expense decreased
$51,000 or 18.9% to $219,000 for the quarter ended September 30,
2009.  During the quarter ended September 30, 2008, the Company
incurred outside expenses associated with the Company’s costs to comply with the
Sarbanes-Oxley Act Section 404, while Management performed the requisite
services.





Federal Income Tax Expense
(Benefit)





As a
result of the net loss for the period, the benefit of federal income taxes
totaled $188,000 for the three months ended September 30, 2009, a decrease of
$341,000, compared to a provision of $153,000 for federal income tax expense in
the same period in 2008.  The effective tax rates were (34.2%) and
32.9% for the three-month periods ended September 30, 2009 and 2008,
respectively.





Forward-Looking
Statements





Certain
statements contained in this report that are not historical facts are
forward-looking statements that are subject to certain risks and
uncertainties.  When used herein, the terms “anticipates,” “plans,”
“expects,” “believes,” and similar expressions as they relate to Kentucky First
Federal Bancorp or its management are intended to identify such forward looking
statements.  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, interest rate environment, competitive conditions in the financial
services industry, 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, 2009..





ITEM
3:  Quantitative and Qualitative
Disclosures About Market Risk





There has
been no material change in the Company’s market risk since the disclosure
included under the heading “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Asset and Liability Management” in the
Company’s Form 10-K filed September 30, 2009.





ITEM
4:  Controls
and Procedures





The
Company’s Chief Executive Officer and Chief Financial Officer have evaluated 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.  Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that the
Company’s disclosure controls and procedures are effective.  During
the quarterly period ended September 30, 2009, there were no changes in the
Company’s internal control over financial reporting which materially affected,
or are reasonably likely to materially affect, the Company’s internal controls
over financial reporting.


21





Kentucky
First Federal Bancorp





PART
II





ITEM
      1.
            Legal
      Proceedings




Not
applicable.





ITEM
      1A.
            Risk
      Factors





The
Registrant’s risk factors have not changed from those set forth in the Annual
Report on Form 10-K.





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 September 30, 2009.





Total # ofAverage
                
                
                shares purchased
                
                
                Maximum # of sharesTotal
                
                
                price paid
                
                
                as part of publicly
                
                
                that may yet be# of shares
                
                
                per share
                
                
                announced plans
                
                
                purchased underPeriod
                
                purchased
                
                
                (incl commissions)
                
                
                or programs
                
                
                the plans or programsJuly
      1-31, 2009
                
                
                —
                
                
                $
                —
                
                
                
                —
                
                
                
                42,500August
      1-31, 2009
                
                
                —
                
                
                $
                —
                
                
                
                —
                
                
                
                42,500September
      1-30, 2009
                
                
                —
                
                
                $
                —
                
                
                
                —
                
                
                
                42,500





(1) 
On October 17, 2008, the Company announced the completion of the stock
repurchase program begun on February 13, 2008 and initiated another program for
the repurchase of up to 150,000 shares of its Common Stock




ITEM
      3.
            Defaults Upon Senior
      Securities




Not
applicable.





ITEM
      4.
            Submission of Matters
      to a Vote of Security
Holders




None.


22





Kentucky
First Federal Bancorp





PART II
(continued)




ITEM
      5.
            Other
      Information




None.





ITEM
      6.
            Exhibits





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


23


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 BANCORPDate: November 16, 2009
                    By:
                    /s/Tony D. WhitakerTony
      D. WhitakerChairman
      of the Board and Chief Executive OfficerDate: November 16, 2009
                    By:
                    /s/R. Clay HuletteR.
      Clay HuletteVice
      President and Chief Financial
Officer


24