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 | December
    31, 2012 | 
|---------------------------------- | --------------------- | 



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)  |  |                                     



|216
    West Main Street, Frankfort, Kentucky 40601   
|------------------------------------------------------
|(Address of principal executive offices)(Zip
    Code)



|(502)
    223-1638                                      
|--------------------------------------------------------
|(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 x	No  ̈



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). YesxNo ̈



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
    Company x
|(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 February 8, 2013, the latest practicable
date, the Corporation had 8,529,192 shares of $.01 par value common stock outstanding.











INDEX



|           |   |                   |                                                                                           |    | Page
|---------- | - | ----------------- | ----------------------------------------------------------------------------------------- | -- | ----
|           |   |                   |                                                                                           |    |     
|PART I     | - | ITEM 1            | FINANCIAL INFORMATION                                                                     |    |     
|           |   |                   |                                                                                           |    |     
|           |   |                   | Consolidated Balance Sheets                                                               |    | 3   
|           |   |                   |                                                                                           |    |     
|           |   |                   | Consolidated Statements of Income                                                         |    | 4   
|           |   |                   |                                                                                           |    |     
|           |   |                   | Consolidated Statements of Comprehensive Income                                           |    | 5   
|           |   |                   |                                                                                           |    |     
|           |   |                   | Consolidated Statements of Cash Flows                                                     |    | 6   
|           |   |                   |                                                                                           |    |     
|           |   |                   | Notes to Consolidated Financial Statements                                                |    | 8   
|           |   |                   |                                                                                           |    |     
|           |   | ITEM 2            | Management’s Discussion and Analysis of Financial Condition
    and Results of Operations |    | 32  
|           |   |                   |                                                                                           |    |     
|           |   | ITEM 3            | Quantitative and Qualitative Disclosures About Market Risk                                |    | 40  
|           |   |                   |                                                                                           |    |     
|           |   | ITEM 4            | Controls and Procedures                                                                   |    | 40  
|           |   |                   |                                                                                           |    |     
|PART II    | - | OTHER INFORMATION |                                                                                           | 41
|           |   |                   |                                                                                           |    |     
|SIGNATURES |   |                   | 42                                                                                       



2







PART I

ITEM 1: Financial Information

Kentucky First Federal Bancorp

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except  share data)



|                                                                                                                                                      |  | December 31, |         |   | June30, |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ------- | -
|                                                                                                                                                      |  | 2012         |         |   | 2012    |  
|ASSETS                                                                                                                                                |  |              |         |   |         |  
|                                                                                                                                                      |  |              |         |   |         |  
|Cash and due from financial institutions                                                                                                              |  | $            | 4,882   |   |         | $
|Interest-bearing demand deposits                                                                                                                      |  |              | 10,444  |   |         |  
|Cash and cash equivalents                                                                                                                             |  |              | 15,326  |   |         |  
|                                                                                                                                                      |  |              |         |   |         |  
|Interest-bearing deposits in other financial institutions                                                                                             |  |              | 100     |   |         |  
|Securities available for sale                                                                                                                         |  |              | 179     |   |         |  
|Securities held-to-maturity, at amortized cost- approximate
    fair value of $29,109 and $5,144 at December 31, 2012 and June 30, 2012, respectively |  |              | 28,769  |   |         |  
|Loans held for sale                                                                                                                                   |  |              | 440     |   |         |  
|Loans, net of allowance of $1,180 and $875 at December
    31, 2012 and June 30, 2012, respectively                                                   |  |              | 271,930 |   |         |  
|Real estate owned, net                                                                                                                                |  |              | 3,558   |   |         |  
|Premises and equipment, net                                                                                                                           |  |              | 4,701   |   |         |  
|Federal Home Loan Bank stock, at cost                                                                                                                 |  |              | 7,732   |   |         |  
|Accrued interest receivable                                                                                                                           |  |              | 899     |   |         |  
|Bank-owned life insurance                                                                                                                             |  |              | 2,742   |   |         |  
|Goodwill                                                                                                                                              |  |              | 14,507  |   |         |  
|Prepaid FDIC assessments                                                                                                                              |  |              | 401     |   |         |  
|Prepaid federal income taxes                                                                                                                          |  |              | 268     |   |         |  
|Deferred federal income taxes                                                                                                                         |  |              | 108     |   |         |  
|Prepaid expenses and other assets                                                                                                                     |  |              | 871     |   |         |  
|                                                                                                                                                      |  |              |         |   |         |  
|Total assets                                                                                                                                          |  | $            | 352,531 |   |         | $
|                                                                                                                                                      |  |              |         |   |         |  
|LIABILITIES AND SHAREHOLDERS’
    EQUITY                                                                                                              |  |              |         |   |         |  
|                                                                                                                                                      |  |              |         |   |         |  
|Deposits                                                                                                                                              |  | $            | 234,342 |   |         | $
|Federal Home Loan Bank advances                                                                                                                       |  |              | 50,948  |   |         |  
|Advances by borrowers for taxes and insurance                                                                                                         |  |              | 168     |   |         |  
|Accrued interest payable                                                                                                                              |  |              | 55      |   |         |  
|Deferred federal income taxes                                                                                                                         |  |              | —       |   |         |  
|Deferred revenue                                                                                                                                      |  |              | 642     |   |         |  
|Other liabilities                                                                                                                                     |  |              | 588     |   |         |  
|Total liabilities                                                                                                                                     |  |              | 286,743 |   |         |  
|                                                                                                                                                      |  |              |         |   |         |  
|Commitments and contingencies                                                                                                                         |  |              | -       |   |         |  
|                                                                                                                                                      |  |              |         |   |         |  
|Shareholders’ equity                                                                                                                                  |  |              |         |   |         |  
|Preferred stock, 500,000 shares authorized, $.01 par
    value; no shares issued and outstanding                                                      |  |              | -       |   |         |  
|Common stock, 20,000,000 shares authorized, $.01 par value; 8,596,064
    shares issued                                                               |  |              | 86      |   |         |  
|Additional paid-in capital                                                                                                                            |  |              | 34,757  |   |         |  
|Retained earnings                                                                                                                                     |  |              | 32,859  |   |         |  
|Unearned employee stock ownership plan (ESOP)                                                                                                         |  |              | (1,720  | ) |         |  
|Treasury shares at cost, 22,886 and 826,375 common
    shares at December 31, 2012 and June 30, 2012, respectively                                    |  |              | (197    | ) |         |  
|Accumulated other comprehensive
    income                                                                                                            |  |              | 3       |   |         |  
|Total shareholders’ equity                                                                                                                            |  |              | 65,788  |   |         |  
|                                                                                                                                                      |  |              |         |   |         |  
|Total liabilities and shareholders’
    equity                                                                                                        |  | $            | 352,531 |   |         | $



See accompanying notes.



3







Kentucky First Federal Bancorp

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share
data)



|                                                        |  | Six months ended December 31, |       |   | Three months ended December 31, |  
|------------------------------------------------------- |  | ----------------------------- | ----- | - | ------------------------------- | -
|                                                        |  | 2012                          |       |   | 2011                            |  
|Interest income                                         |  |                               |       |   |                                 |  
|Loans, including fees                                   |  | $                             | 4,608 |   |                                 | $
|Mortgage-backed securities                              |  |                               | 97    |   |                                 |  
|Other securities                                        |  |                               | -     |   |                                 |  
|Interest-bearing deposits and other                     |  |                               | 134   |   |                                 |  
|                                                        |  |                               |       |   |                                 |  
|Total interest income                                   |  |                               | 4,839 |   |                                 |  
|                                                        |  |                               |       |   |                                 |  
|Interest expense                                        |  |                               |       |   |                                 |  
|Interest-bearing demand deposits                        |  |                               | 14    |   |                                 |  
|Savings                                                 |  |                               | 120   |   |                                 |  
|Certificates of Deposit                                 |  |                               | 446   |   |                                 |  
|Deposits                                                |  |                               | 580   |   |                                 |  
|Borrowings                                              |  |                               | 234   |   |                                 |  
|Total interest expense                                  |  |                               | 814   |   |                                 |  
|Net interest income                                     |  |                               | 4,025 |   |                                 |  
|Provision for loan losses                               |  |                               | 418   |   |                                 |  
|Net interest income after provision for losses on loans |  |                               | 3,607 |   |                                 |  
|                                                        |  |                               |       |   |                                 |  
|Non-interest income                                     |  |                               |       |   |                                 |  
|Earnings on bank-owned life insurance                   |  |                               | 45    |   |                                 |  
|Net gains on sales of loans                             |  |                               | 111   |   |                                 |  
|Net gain (loss) on sales of OREO                        |  |                               | (15   | ) |                                 |  
|Other-than-temp impairment loss-REO                     |  |                               | (25   | ) |                                 |  
|Bargain purchase gain                                   |  |                               | 958   |   |                                 |  
|Other                                                   |  |                               | 52    |   |                                 |  
|Total non-interest income (loss)                        |  |                               | 1,126 |   |                                 |  
|                                                        |  |                               |       |   |                                 |  
|Non-interest expense                                    |  |                               |       |   |                                 |  
|Employee compensation and benefits                      |  |                               | 1,672 |   |                                 |  
|Occupancy and equipment                                 |  |                               | 134   |   |                                 |  
|Outside service fees                                    |  |                               | 228   |   |                                 |  
|Legal fees                                              |  |                               | 89    |   |                                 |  
|Data processing                                         |  |                               | 105   |   |                                 |  
|Auditing and accounting                                 |  |                               | 60    |   |                                 |  
|FDIC insurance premiums                                 |  |                               | 63    |   |                                 |  
|Franchise and other taxes                               |  |                               | 88    |   |                                 |  
|Amortization of intangible assets                       |  |                               | -     |   |                                 |  
|Foreclosure and OREO expenses (net)                     |  |                               | (39   | ) |                                 |  
|Other                                                   |  |                               | 320   |   |                                 |  
|Total non-interest expense                              |  |                               | 2,720 |   |                                 |  
|                                                        |  |                               |       |   |                                 |  
|Income before income taxes                              |  |                               | 2,013 |   |                                 |  
|Federal income taxes                                    |  |                               |       |   |                                 |  
|Current                                                 |  |                               | 661   |   |                                 |  
|Deferred                                                |  |                               | (97   | ) |                                 |  
|Total federal income tax expense                        |  |                               | 564   |   |                                 |  
|                                                        |  |                               |       |   |                                 |  
|NET INCOME                                              |  | $                             | 1,449 |   |                                 | $
|                                                        |  |                               |       |   |                                 |  
|EARNINGS PER SHARE                                      |  |                               |       |   |                                 |  
|Basic and diluted                                       |  | $                             | 0.19  |   |                                 | $
|                                                        |  |                               |       |   |                                 |  
|DIVIDENDS PER SHARE                                     |  | $                             | 0.20  |   |                                 | $



See accompanying notes.



4







Kentucky First Federal Bancorp

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME

(Unaudited)

(In thousands)



|                                                                                                                                                                                                                                |  | Six months ended December 31, |       |  | Three months ended December 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ----- |  | ------------------------------- | -
|                                                                                                                                                                                                                                |  | 2012                          |       |  | 2011                            |  
|                                                                                                                                                                                                                                |  |                               |       |  |                                 |  
|Net income                                                                                                                                                                                                                      |  | $                             | 1,449 |  |                                 | $
|                                                                                                                                                                                                                                |  |                               |       |  |                                 |  
|Other comprehensive income (loss), net of taxes (benefits: Unrealized holding
    gains (losses) on securities designated as available for sale, net of taxes (benefits) of $—, $—, $— and
    $— during the respective periods |  |                               | —     |  |                                 |  
|Comprehensive income                                                                                                                                                                                                            |  | $                             | 1,449 |  |                                 | $



See accompanying notes.



5







Kentucky First Federal Bancorp

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)





|                                                                                                  |  | Six months ended |        
|------------------------------------------------------------------------------------------------- |  | ---------------- | -------
|                                                                                                  |  | December 31,     |        
|                                                                                                  |  | 2012             |        
|                                                                                                  |  |                  |        
|Cash flows from operating activities:                                                             |  |                  |        
|Net income                                                                                        |  | $                | 1,449  
|Adjustments to reconcile net income to net cash provided
    by operating activities Depreciation |  |                  | 65     
|Amortization of deferred loan origination (fees) costs                                            |  |                  | 1      
|Amortization of premiums on Federal Home Loan Bank advances                                       |  |                  | —      
|Amortization of core deposit intangibles                                                          |  |                  | —      
|Net gain on sale of loans                                                                         |  |                  | (111   
|Other than temporary impairment of real estate owned                                              |  |                  | 25     
|Net loss on sale of other real estate owned                                                       |  |                  | 15     
|Deferred gain on sale of other real estate owned                                                  |  |                  | (6     
|ESOP compensation expense                                                                         |  |                  | 52     
|Amortization of stock benefit plans and stock options expense                                     |  |                  | 12     
|Earnings on bank-owned life insurance                                                             |  |                  | (45    
|Provision for loan losses                                                                         |  |                  | 418    
|Origination of loans held for sale                                                                |  |                  | (2,204 
|Proceeds from loans held for sale                                                                 |  |                  | 2,356  
|Bargain purchase gain                                                                             |  |                  | (958   
|Increase (decrease) in cash, due to changes in:                                                   |  |                  |        
|Accrued interest receivable                                                                       |  |                  | 33     
|Prepaid expenses and other assets                                                                 |  |                  | (164   
|Accrued interest payable                                                                          |  |                  | (27    
|Accounts payable and other liabilities                                                            |  |                  | 66     
|Federal income taxes:                                                                             |  |                  |        
|Current                                                                                           |  |                  | (203   
|Deferred                                                                                          |  |                  | (97    
|Net cash provided by operating activities                                                         |  |                  | 677    
|                                                                                                  |  |                  |        
|Cash flows from investing activities:                                                             |  |                  |        
|Acquisition of CKF Bancorp, net                                                                   |  |                  | 3,349  
|Purchase of U.S. Treasury notes                                                                   |  |                  | (14,000
|Securities maturities, prepayments and calls:                                                     |  |                  |        
|Held to maturity                                                                                  |  |                  | 765    
|Available for sale                                                                                |  |                  | 18     
|Loans originated for investment, net of principal collected                                       |  |                  | 4,265  
|Proceeds from sale of real estate owned                                                           |  |                  | (434   
|Additions to premises and equipment, net                                                          |  |                  | (3     
|Net cash used in investing activities                                                             |  |                  | (5,172 
|                                                                                                  |  |                  |        
|Cash flows from financing activities:                                                             |  |                  |        
|Net change in deposits                                                                            |  |                  | (1,687 
|Payments by borrowers for taxes and insurance, net                                                |  |                  | (349   
|Proceeds from Federal Home Loan Bank advances                                                     |  |                  | 21,000 
|Repayments on Federal Home Loan Bank advances                                                     |  |                  | (4,256 
|Dividends paid on common stock                                                                    |  |                  | (561   
|Treasury stock repurchases                                                                        |  |                  | (61    
|Net cash provided by financing activities                                                         |  |                  | 14,086 
|                                                                                                  |  |                  |        
|Net decrease in cash and cash equivalents                                                         |  |                  | 9,591  
|                                                                                                  |  |                  |        
|Beginning cash and cash equivalents                                                               |  |                  | 5,735  
|                                                                                                  |  |                  |        
|Ending cash and cash equivalents                                                                  |  | $                | 15,326 



See accompanying notes.



6







Kentucky First Federal Bancorp

CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)

(Unaudited)

(In thousands)

|                                                                          |  | Six months ended |     
|------------------------------------------------------------------------- |  | ---------------- | ----
|                                                                          |  | December 31,     |     
|                                                                          |  | 2012             |     
|                                                                          |  |                  |     
|Supplemental disclosure of cash flow information:                         |  |                  |     
|Cash paid during the period for:                                          |  |                  |     
|Federal income
    taxes                                                  |  | $                | 945 
|                                                                          |  |                  |     
|Interest on deposits and borrowings                                       |  | $                | 823 
|                                                                          |  |                  |     
|Transfers from loans to real
    estate acquired through foreclosure, net |  | $                | (352
|                                                                          |  |                  |     
|Loans made on sale of real estate
    acquired through foreclosure        |  | $                | 407 
|                                                                          |  |                  |     
|Deferred gain on sale of real
    estate acquired through foreclosure     |  | $                | —   
|                                                                          |  |                  |     
|Capitalization of mortgage servicing
    rights                           |  | $                | 18  



See Note 2 for noncash transactions related to the acquisition.



See accompanying notes.



7







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012

(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.



On December 31, 2012, the Company
completed its acquisition of CKF Bancorp, Inc. (“CKF Bancorp”), the parent company of Central Kentucky Federal Savings
Bank (“Central Kentucky FSB”), pursuant to the provisions of the Agreement of Merger dated as of November 3, 2011
and amended as of September 28, 2012. The acquisition was accounted for using the purchase method of accounting and resulted in
the recordation of bargain purchase gain of $958,000. See additional discussion in Note 2.



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 U.S. generally accepted accounting
principles. However, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) which are
necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the
three- and six-month periods ended December 31, 2012, are not necessarily indicative of the results which may be expected for
an entire fiscal year and do not include any results of operations associated with CKF Bancorp or Central Kentucky FSB. The consolidated
balance sheet as of June 30, 2012 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 2012
filed with the Securities and Exchange Commission.



Loans: Loans that management
has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance
outstanding, net of deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on the unpaid principal
balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using
the level-yield method without anticipating prepayments.



Unsecured consumer loans
are typically charged off no later than 120 days past due. Past due status is based on the contractual terms of the loan.



8







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012

(unaudited)



| | 1. | Basis of presentation (continued)
| | -- | ---------------------------------



Interest income on non-consumer
loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection.
Retail credit, which includes loans to individuals secured by their personal residence, including first mortgage, home equity
and home improvement loans, are placed on nonaccrual status in accordance with the Uniform Retail Credit Classification and Account
Management. Nonaccrual loans and loans past due 90 days still on accrual include both homogeneous loans that are collectively
evaluated for impairment and individually classified impaired loans. A loan is moved to nonaccrual status in accordance with the
Company’s policy, typically after 90 days of non-payment for commercial credits and 180 days for one- to four-family residential
credits.



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



Allowance for Loan Losses:
The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the
allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited
to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of
the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other
factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that,
in management’s judgment, should be charged off.



The allowance consists of specific
and general components. The specific component relates to loans that are individually classified as impaired.



A loan is impaired when, based
on current information and events, it is probable that the Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which
the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. Factors
considered by management in determining impairment include payment status, collateral value, and the probability of collecting
scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls
generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on case-by-case
basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay,
the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal
and interest owed.



Real estate loans are individually
evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at
the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment
is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real
estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.
Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated
future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral
dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently
default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.



9













Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012

(unaudited)



| | 1. | Basis of presentation (continued)
| | -- | ---------------------------------



The general component covers
non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined
by portfolio segment and is based on the loss history experience of the Company over the most recent two years and a rolling average
of the current year’s loss history. This actual loss experience is supplemented with other economic factors based on the
risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in
delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects
of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience,
ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry
conditions; and effects of changes in credit concentrations.



The following portfolio segments
have been identified: residential real estate, nonresidential real estate, farms, commercial (non-mortgage) and consumer and other
loans. The residential real estate segment is our primary lending activity and it enables a borrower to purchase or refinance homes
in the Banks’ respective market areas. We further classify our residential real estate loans as one- to four-family, multi-family
or construction. We originate loans to individuals to finance the construction of residential dwellings for personal use or for
use as rental property. We may lend to builders for construction of speculative or custom residential properties on a limited basis.
We also offer loans secured by nonresidential real estate, primarily commercial office buildings, churches and properties used
for other purposes. Generally, these loans are originated for 25 years or less and do not exceed 75% of the appraised value. Our
consumer loans include home equity lines of credit, auto loans, personal loans, and loans secured by savings deposits. In the acquisition
of CKF, we have acquired a portfolio of non-mortgage commercial loans totaling $3.2 million. Future originations of this type of
loan are expected to be limited in the foreseeable future.



Summary of New Significant
Accounting Policies:



Purchased Credit Impaired
Loans – Purchased credit impaired loans acquired in a business combination are recorded at estimated fair value on their
purchase date with no carryover of the related allowance for loan losses. In determining the estimated fair value of these loans,
management considers a number of factors including the remaining life of the acquired loans, estimated prepayments, estimated future
credit losses, estimated value of the underlying collateral, estimated holding periods and the net present value of the cash flows
expected to be received. To the extent that any smaller dollar purchased credit impaired loan is not specifically reviewed, when
evaluating the net present value of the future estimated cash flows, management applies a loss estimate to that loan based on the
average expected loss rates for the loans that were individually reviewed in that loan portfolio, adjusted for other factors, as
applicable.



The difference between the estimated
value of the loans acquired is divided into accretable and non-accretable portions. The non-accretable difference represents the
difference between the contractually required payments and the cash flows expected to be collected.



Subsequent decreases to the
expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows will result in a reversal
of the provision for loan losses to the extent of prior charges with a corresponding adjustment to the accretable yield, which
would have a positive impact on interest income.



The accretable difference on
purchased credit impaired loans represents the difference between the expected cash flows and the amount paid. Such difference
is accreted into earnings using the level-yield method over the expected cash flow periods of the loans.



10







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012

(unaudited)



| | 1. | Basis of presentation (continued)
| | -- | ---------------------------------



Management will separately monitor
the purchased credit impaired loan portfolio and on a quarterly basis will review loans contained within this portfolio against
the factors and assumptions used in determining the initial fair value adjustment. In addition to its quarterly evaluation, a loan
is typically reviewed (i) when it is modified or extended, (ii) when material information becomes available to the Bank which provides
additional insight pertaining to the loan’s performance, the status of the borrower, or the quality or value of the underlying
collateral, or (iii) in connection with the quarterly review of projected cash flows, which includes a substantial portion of each
acquired loan portfolio.



United States generally accepted
accounting principles (“U.S. GAAP”) provides up to twelve months following the date of acquisition in which management
can finalize the fair values of acquired assets and assumed liabilities. Material events that occur during the measurement period
will be analyzed to determine if the new information reflected facts and circumstances that existed on the acquisition date. The
measurement period ends as soon as the Company receives the information it was seeking about facts and circumstances that existed
as of the acquisition date or learns more information is unobtainable. The measurement period is limited to one year from the acquisition
date. Once management has finalized the fair values of acquired assets and assumed liabilities within this twelve month period,
management considers such values to be the “Day One Fair Values.”



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.



Reclassifications -
Certain amounts presented in prior periods have been reclassified to conform to the current period presentation. Such reclassifications
had no impact on prior years’ net income.



2. Bank Acquisition



On December 31, 2012 (the “Acquisition
Date”), the Company acquired 100% of CKF Bancorp, the savings and loan holding company for
Central Kentucky FSB in exchange for cash and common shares of the Company’s stock. Under the terms of the acquisition CKF
Bancorp shareholders received approximately 811,275 shares of Company common stock and an aggregate of $5.1 million in cash. The
fair value of the common shares issued as part of the consideration paid for CKF Bancorp was determined based on the closing price
of the Company’s common shares on the acquisition date. CKF Bancorp maintained its main headquarters in Danville, Kentucky,
as well as two branches – one in Danville and the other in Lancaster, Kentucky. CKF Bancorp was merged into the Company and
Central Kentucky FSB was merged into First Federal Savings Bank of Frankfort. With the acquisition the Company has expanded its
customer base in the central Kentucky area with an institution that shares its community banking orientation and thrift heritage
and that enjoys a favorable reputation within its local community. Because the acquisition occurred on December 31, 2012, there
are no results of operations of CKF Bancorp included in the Company’s results of operations. Acquisition-related costs of
$281,000 and $118,000 are included in the Company’s consolidated statement of income for the six months ended December 31,
2012 and 2011, respectively. The Company has determined that the acquisition constitutes a business acquisition as defined by the
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business
Combinations. Accordingly, the assets acquired and liabilities assumed are presented at their estimated fair values as required
by the accounting guidance. Fair values were determined based on the requirements of ASC Topic 820, Fair Value Measurements.



11







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012

(unaudited)



2. Bank Acquisition (continued)



In many cases, the determination
of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions
and other future events which are highly subjective in nature and are subject to change. The assets acquired and liabilities assumed
in the transaction are presented at estimated fair value on the Acquisition Date. These fair value estimates are considered preliminary,
and are subject to change for up to one year after the closing date of the acquisition, as additional information relative to Acquisition
Date fair values becomes available. Given the short period of time from our closing date until our Form 10-Q filing date, we have
not yet completed our evaluation of fair values. We continue to work with our third party vendor to finalize these estimates.



The Company paid approximately
$11.1 million ($5.1 million in cash and $6.0 million in stock) for CKF Bancorp. A summary of the net assets acquired as of December
31, 2012, follows:



|(in thousands)                                                             |  | December 31, 2012 |        
|-------------------------------------------------------------------------- |  | ----------------- | -------
|                                                                           |  |                   |        
|Consideration                                                              |  |                   |        
|Kentucky First Federal Bancorp common stock:                               |  |                   |        
|811,275 shares at $7.45/share closing price 12/31/12                       |  | $                 | 6,044  
|Cash                                                                       |  |                   | 5,070  
|Fair Value of Total Consideration Transferred                              |  | $                 | 11,114 
|                                                                           |  |                   |        
|Recognized amounts of identifiable assets acquired and liabilities assumed |  |                   |        
|Assets acquired:                                                           |  |                   |        
|Cash and due from banks                                                    |  | $                 | 895    
|Interest-bearing demand deposits                                           |  |                   | 7,524  
|Securities available for sale                                              |  |                   | 8      
|Securities, held-to-maturity                                               |  |                   | 10,778 
|Loans                                                                      |  |                   | 94,086 
|Real estate owned, net                                                     |  |                   | 1,642  
|Premises and equipment, net                                                |  |                   | 2,119  
|Federal Home Loan Bank stock, at cost                                      |  |                   | 2,091  
|Accrued interest receivable                                                |  |                   | 435    
|Prepaid FDIC assessments                                                   |  |                   | 212    
|Accrued federal income taxes                                               |  |                   | 35     
|Deferred federal income taxes                                              |  |                   | 785    
|Prepaid expenses and other assets                                          |  |                   | 142    
|Total assets acquired                                                      |  | $                 | 120,752
|                                                                           |  |                   |        
|Liabilities assumed                                                        |  |                   |        
|Deposits                                                                   |  | $                 | 101,477
|FHLB Advances                                                              |  |                   | 7,139  
|Advances by borrowers for taxes and insurance                              |  |                   | 30     
|Accrued interest payable                                                   |  |                   | 18     
|Other liabilities                                                          |  |                   | 16     
|Total liabilities assumed                                                  |  |                   | 108,680
|                                                                           |  |                   |        
|Total identifiable net assets                                              |  | $                 | 12,072 
|Bargain purchase gain                                                      |  | $                 | 958    



12







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012

(unaudited)



2. Bank Acquisition (continued)



|Fair value adjustments:                             |  |   |        |  
|--------------------------------------------------- |  | - | ------ | -
|Securities, held-to-maturity                        |  | $ | 369    |  
|Loans                                               |  |   | (1,133 | )
|Other real estate owned                             |  |   | (27    | )
|Real estate premises operated as banking facilities |  |   | 464    |  
|Deposits                                            |  |   | (1,091 | )
|Premium on FHLB Advances                            |  |   | (139   | )
|Total fair value adjustments                        |  | $ | (1,557 | )



The following is a description
of the methods used to determine the fair values of significant assets and liabilities at the Acquisition Date presented above.



Cash and Due from Banks
and Interest-bearing Deposits in Banks – The Company acquired $8.4 million in cash and cash equivalents. The carrying
amount of these assets, adjusted for any cash items deemed uncollectible by management, was determined to be a reasonable estimate
of fair value based on their short-term nature.



Investment Securities
– The Company acquired $10.8 million in securities at fair value. Federal Home Loan Bank stock totaling $2.1 million was
acquired at cost, as it is not practicable to determine its fair value because of restrictions on its marketability.



Loans – The
Company acquired approximately $94.1 million in loans with and without evidence of credit quality deterioration. The loans acquired
consist of residential real estate, commercial real estate, real estate construction, commercial and consumer loans.



At the acquisition date, the
Company recorded $85.1 million of loans without evidence of credit quality deterioration and $9.0 million of purchased credit-impaired
loans subject to nonaccretable difference of $1.8 million. The acquired loans were deemed impaired at the acquisition date if the
Company did not expect to receive all contractually required cash flows due to concerns about credit quality. Fair values for loans
were based on discounted cash flow methodology that considered factors including the type of loan and related collateral, classification
status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and a discount rate reflecting
current market rates for new originations of comparable loans adjusted for the risk inherent in the cash flow estimates. Certain
loans that were determined to be collateral dependent were valued based on the fair value of the underlying collateral. These estimates
were based on the most recently available real estate appraisals with certain adjustments made based on the type of property, age
of appraisal, current status of the property and other related factors to estimate the current value of the collateral.



13







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012

(unaudited)



2. Bank Acquisition (continued)



|(in thousands)                |  | Non-impaired Purchased Loans |        |  | Credit-impaired Purchased Loans |  
|----------------------------- |  | ---------------------------- | ------ |  | ------------------------------- | -
|                              |  |                              |        |  |                                 |  
|Real estate mortgage loans:   |  |                              |        |  |                                 |  
|Residential:                  |  |                              |        |  |                                 |  
|1-4 Family                    |  | $                            | 65,159 |  |                                 | $
|Multi-family                  |  |                              | 2,081  |  |                                 |  
|Construction                  |  |                              | 1,272  |  |                                 |  
|Farm                          |  |                              | 1,911  |  |                                 |  
|Nonresidential and land       |  |                              | 10,775 |  |                                 |  
|Commercial non-mortgage loans |  |                              | 2,241  |  |                                 |  
|Consumer loans                |  |                              | 1,659  |  |                                 |  
|                              |  |                              |        |  |                                 |  
|Total loans                   |  | $                            | 85,098 |  |                                 | $



The composition of acquired loans
at December 31, 2012 follows:



|(in thousands)                |  | ContractualAmount |        |  | Fair ValueAdjustments |   |        | Fair Value | 
|----------------------------- |  | ----------------- | ------ |  | --------------------- | - | ------ | ---------- | 
|                              |  |                   |        |  |                       |   |        |            | 
|Real estate mortgage loans:   |  |                   |        |  |                       |   |        |            | 
|Residential:                  |  |                   |        |  |                       |   |        |            | 
|1-4 Family                    |  | $                 | 71,574 |  |                       | $ | (1,940 | )          | 
|Multi-family                  |  |                   | 2,109  |  |                       |   | (28    | )          | 
|Construction                  |  |                   | 2,450  |  |                       |   | (153   | )          | 
|Farm                          |  |                   | 1,937  |  |                       |   | (26    | )          | 
|Nonresidential and land       |  |                   | 13,799 |  |                       |   | (520   | )          | 
|Commercial non-mortgage loans |  |                   | 3,417  |  |                       |   | (231   | )          | 
|Consumer loans                |  |                   | 1,812  |  |                       |   | (114   | )          | 
|                              |  |                   |        |  |                       |   |        |            | 
|Total loans                   |  | $                 | 97,098 |  |                       | $ | (3,012 | )          | 



Loans purchased in the acquisition
are accounted for using one of two following accounting standards:



| | · | ASC Topic 310-20 is used to value loans
that have not demonstrated post origination credit quality deterioration and the acquirer expect to collect all contractually required
payments from the borrower. For these loans, the difference between fair value of the loan at acquisition and the amortized cost
of the loan would be amortized or accreted into income using the interest method.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | ASC Topic 310-30 is used to value loans
with post origination credit quality deterioration. For these loans, it is probable the acquirer will be unable to collect all
contractually required payments from the borrower. Under ASC 310-30, the expected cash flows that exceed the initial investment
in the loan (fair value) represent the “accretable yield,” which is recognized as interest income on a level-yield
basis over the expected cash flow periods of the loans. The excess of the loan’s contractual principal and interest over
the expected cash flows is the nonaccretable difference.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14











Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012

(unaudited)



2. Bank Acquisition (continued)



The following table presents
the purchased loans that are included within the scope of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated
Credit Quality as of December 31, 2012.



|(in thousands)                                         |  |   |       
|------------------------------------------------------ |  | - | ------
|                                                       |  |   |       
|Contractually-required principal and interest payments |  | $ | 10,858
|Non-accretable difference                              |  |   | (1,752
|Accretable yield                                       |  |   | (118  
|Fair value of loans                                    |  | $ | 8,988 



Core Deposit Intangible
– This intangible asset represents the value of the relationships that Central Ky FSB had with its deposit customers. The
fair value of this intangible asset will be estimated based on a discounted cash flow methodology that gave appropriate consideration
to the type of deposit, deposit retention, cost of the deposit base, and net maintenance cost attributable to customer deposits.
This analysis has not yet been completed, but preliminary calculations indicate that the amounts are not significant.



OREO – The
Company acquired $1.6 million in other real estate owned in the acquisition after a $27,000 fair value adjustment as of the Acquisition
Date. OREO is presented at fair value, which is estimated value that management expects to receive when the property is sold, net
of related costs to sell. These estimates were based on the most recently available real estate appraisals, with certain adjustments
made based on the type of property, age of appraisal, current status of the property and othe related factors to estimate the current
value of the property.



Deposits - The
Company assumed $101.5 million in deposits at estimated fair value. Savings accounts and demand deposit accounts totaled $22.5
million, while certificates of deposit had face value of $77.9 million. The Company recorded a premium associated with the certificates
of deposit of $1.1 million due to the interest rates associated with the time deposits, which caused those deposits to be valued
at $79.0 million.



The following table presents
pro forma information as if the acquisition had occurred at the beginning of the periods presented (July 1, in this case.) The
pro forma information includes adjustments for interest expense on time deposits and the related income tax effects but excluded
any bargain purchase gain or its related income tax effect. Other adjustments are not anticipated to have a material impact on
the pro forma information. The pro forma financial information is not necessarily indicative of the results of operations that
would have occurred had the transactions been effected on the assumed dates.



|                                            |  | Six months ended |       |  | Three months ended |  
|------------------------------------------- |  | ---------------- | ----- |  | ------------------ | -
|                                            |  | December 31,     |       |  | December 31,       |  
|(in thousands, except per share data)       |  | 2012             |       |  | 2011               |  
|                                            |  |                  |       |  |                    |  
|Net interest income                         |  | $                | 6,051 |  |                    | $
|                                            |  |                  |       |  |                    |  
|Net income (loss)                           |  | $                | 791   |  |                    | $
|                                            |  |                  |       |  |                    |  
|Basic and diluted earnings (loss) per share |  | $                | 0.09  |  |                    | $



15







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

December 31, 2012

(unaudited)



3. Earnings Per Share



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



|                                                               |  | Six months ended December 31, |      
|-------------------------------------------------------------- |  | ----------------------------- | -----
|                                                               |  | 2012                          |      
|                                                               |  |                               |      
|Net income                                                     |  | $                             | 1,449
|Less earnings allocated to unvested shares                     |  |                               | —    
|                                                               |  |                               |      
|Net income allocated to common shareholders, basic and diluted |  | $                             | 1,449



|                                                               |  | Three months ended December 31, |    
|-------------------------------------------------------------- |  | ------------------------------- | ---
|                                                               |  | 2012                            |    
|                                                               |  |                                 |    
|Net income                                                     |  | $                               | 927
|Less earnings allocated to unvested shares                     |  |                                 | —  
|                                                               |  |                                 |    
|Net income allocated to common shareholders, basic and diluted |  | $                               | 927





|                                                                            |  | Six months ended December 31, |          
|--------------------------------------------------------------------------- |  | ----------------------------- | ---------
|                                                                            |  | 2012                          |          
|Basic                                                                       |  |                               |          
|Weighted-average common shares including unvested Common shares outstanding |  |                               | 7,544,654
|Less: Weighted-average unvested common shares                               |  |                               | —        
|Weighted-average common shares outstanding                                  |  |                               | 7,544,654
|Diluted                                                                     |  |                               |          
|Add: Dilutive effect of assumed exercise of stock options                   |  |                               | -        
|                                                                            |  |                               |          
|Weighted-average common shares outstanding (diluted)                        |  |                               | 7,544,654



|                                                                            |  | Three months ended December 31, |          
|--------------------------------------------------------------------------- |  | ------------------------------- | ---------
|                                                                            |  | 2012                            |          
|Basic                                                                       |  |                                 |          
|Weighted-average common shares including unvested Common shares outstanding |  |                                 | 7,544,233
|Less: Weighted-average unvested common shares                               |  |                                 | —        
|Weighted-average common shares outstanding                                  |  |                                 | 7,544,233
|Diluted                                                                     |  |                                 |          
|Add: Dilutive effect of assumed exercise of stock options                   |  |                                 | -        
|                                                                            |  |                                 |          
|Weighted-average common shares outstanding (diluted)                        |  |                                 | 7,544,233



16







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

December 31, 2012

(unaudited)



3. Earnings Per Share
(continued)



There were 309,800 stock option
shares outstanding for the three- and six-month periods ended December 31, 2012. There were 325,800 stock option shares outstanding
for the three- and six-month period ended December 31, 2011. The stock option shares outstanding were antidilutive for the respective
periods.



4. Investment Securities



The following table summarizes
the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at December 31, 2012 and June
30, 2012, the corresponding amounts of gross unrealized gains recognized in accumulated other comprehensive income and gross unrecognized
gains:



|                                                      |  | December 31, 2012 |       
|----------------------------------------------------- |  | ----------------- | ------
|                                                      |  |                   |       
|                                                      |  | Carrying          |       
|                                                      |  | Value             |       
|                                                      |  | (In thousands)    |       
|Available-for-sale Securities                         |  |                   |       
|Agency mortgage-backed: residential                   |  | $                 | 166   
|Equity securities                                     |  |                   | 8     
|                                                      |  | $                 | 174   
|                                                      |  |                   |       
|Held-to-maturity Securities                           |  |                   |       
|U.S. Treasury securities and U.S. Government agencies |  | $                 | 21,996
|Agency mortgage-backed: residential                   |  |                   | 6,773 
|                                                      |  | $                 | 28,769



|                                    |  | June 30, 2012 |      
|----------------------------------- |  | ------------- | -----
|                                    |  |               |      
|                                    |  | Amortized     |      
|                                    |  | cost          |      
|Available-for-sale Securities       |  |               |      
|Agency mortgage-backed: residential |  | $             | 185  
|                                    |  |               |      
|Held-to-maturity Securities         |  |               |      
|Agency mortgage-backed: residential |  | $             | 4,756



Our securities holdings consist
of U.S. Treasury securities, U.S. Government agency bonds and agency mortgage-backed securities, which do not have a single maturity
date. Our pledged securities at December 31, 2012, totaled $3.7 million. None of our securities were pledged at June 30, 2012.



There were no sales of investment
securities during the fiscal year ended June 30, 2012 nor the three- or six-month periods ended December 31, 2012.



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.



17







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

December 31, 2012

(unaudited)



5. Loans receivable



The composition of the loan portfolio
was as follows:



|                                        |  | December 31, |         |   | June 30, |  
|--------------------------------------- |  | ------------ | ------- | - | -------- | -
|(in thousands)                          |  | 2012         |         |   | 2012     |  
|                                        |  |              |         |   |          |  
|Residential real estate                 |  |              |         |   |          |  
|One- to four-family                     |  | $            | 211,770 |   |          | $
|Multi-family                            |  |              | 17,957  |   |          |  
|Construction                            |  |              | 3,992   |   |          |  
|Farm                                    |  |              | 1,911   |   |          |  
|Nonresidential real estate and land     |  |              | 24,025  |   |          |  
|Commercial nonmortgage and other        |  |              | 3,186   |   |          |  
|Consumer and loans on deposits          |  |              | 10,702  |   |          |  
|                                        |  |              | 273,543 |   |          |  
|Less:                                   |  |              |         |   |          |  
|Undisbursed portion of loans in process |  |              | 535     |   |          |  
|Deferred loan origination fees (cost)   |  |              | (102    | ) |          |  
|Allowance for loan losses               |  |              | 1,180   |   |          |  
|                                        |  | $            | 271,930 |   |          | $



The following table presents the activity in the
allowance for loan losses by portfolio segment for the six months ended December 31, 2012:



|(in thousands)                      |  | Beginning balance |     |  | Provision for loan losses |   |     | Loans charged off |  |   | Recoveries |  |  | Ending balance |  
|----------------------------------- |  | ----------------- | --- |  | ------------------------- | - | --- | ----------------- |  | - | ---------- |  |  | -------------- | -
|                                    |  |                   |     |  |                           |   |     |                   |  |   |            |  |  |                |  
|Residential real estate:            |  |                   |     |  |                           |   |     |                   |  |   |            |  |  |                |  
|One- to four-family                 |  | $                 | 565 |  |                           | $ | 360 |                   |  | $ | 113        |  |  | $              | —
|Multi-family                        |  |                   | 49  |  |                           |   | 38  |                   |  |   | —          |  |  |                | —
|Construction                        |  |                   | 3   |  |                           |   | 6   |                   |  |   | —          |  |  |                | —
|Farm                                |  |                   | —   |  |                           |   | —   |                   |  |   | —          |  |  |                | —
|Nonresidential real estate and land |  |                   | 35  |  |                           |   | 24  |                   |  |   | —          |  |  |                | —
|Commercial nonmortgage and other    |  |                   | —   |  |                           |   | —   |                   |  |   | —          |  |  |                | —
|Consumer and other                  |  |                   | 23  |  |                           |   | (10 | )                 |  |   | —          |  |  |                | —
|Unallocated                         |  |                   | 200 |  |                           |   | —   |                   |  |   | —          |  |  |                | —
|Totals                              |  | $                 | 875 |  |                           | $ | 418 |                   |  | $ | 113        |  |  | $              | —



18







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

December 31, 2012

(unaudited)



The following table presents the activity in the
allowance for loan losses by portfolio segment for the six months ended December 31, 2011:

|(in thousands)                      |  | Beginning balance |     |  | Provision for loan losses |   |    | Loans charged off |  |   | Recoveries |  |  | Ending balance |  
|----------------------------------- |  | ----------------- | --- |  | ------------------------- | - | -- | ----------------- |  | - | ---------- |  |  | -------------- | -
|                                    |  |                   |     |  |                           |   |    |                   |  |   |            |  |  |                |  
|Residential real estate:            |  |                   |     |  |                           |   |    |                   |  |   |            |  |  |                |  
|One- to four-family                 |  | $                 | 490 |  |                           | $ | 69 |                   |  | $ | 4          |  |  | $              | —
|Multi-family                        |  |                   | 11  |  |                           |   | 18 |                   |  |   | —          |  |  |                | —
|Construction                        |  |                   | 5   |  |                           |   | (4 | )                 |  |   | —          |  |  |                | —
|Nonresidential real estate and land |  |                   | 36  |  |                           |   | (1 | )                 |  |   | —          |  |  |                | —
|Consumer and other                  |  |                   | 22  |  |                           |   | —  |                   |  |   | —          |  |  |                | —
|Unallocated                         |  |                   | 200 |  |                           |   | —  |                   |  |   | —          |  |  |                | —
|Totals                              |  | $                 | 764 |  |                           | $ | 82 |                   |  | $ | 4          |  |  | $              | —



The following table presents the activity in the
allowance for loan losses by portfolio segment for the three months ended December 31, 2012:



|(in thousands)                      |  | Beginning balance |     |  | Provision for loan losses |   |     | Loans charged off |  |   | Recoveries |  |  | Ending balance |  
|----------------------------------- |  | ----------------- | --- |  | ------------------------- | - | --- | ----------------- |  | - | ---------- |  |  | -------------- | -
|                                    |  |                   |     |  |                           |   |     |                   |  |   |            |  |  |                |  
|Residential real estate:            |  |                   |     |  |                           |   |     |                   |  |   |            |  |  |                |  
|One- to four-family                 |  | $                 | 563 |  |                           | $ | 334 |                   |  | $ | 85         |  |  | $              | —
|Multi-family                        |  |                   | 49  |  |                           |   | 38  |                   |  |   | —          |  |  |                | —
|Construction                        |  |                   | 3   |  |                           |   | 6   |                   |  |   | —          |  |  |                | —
|Farm                                |  |                   | —   |  |                           |   | —   |                   |  |   | —          |  |  |                | —
|Nonresidential real estate and land |  |                   | 35  |  |                           |   | 24  |                   |  |   | —          |  |  |                | —
|Commercial nonmortgage and other    |  |                   | —   |  |                           |   | —   |                   |  |   | —          |  |  |                | —
|Consumer and other                  |  |                   | 23  |  |                           |   | (10 | )                 |  |   | —          |  |  |                | —
|Unallocated                         |  |                   | 200 |  |                           |   | —   |                   |  |   | —          |  |  |                | —
|Totals                              |  | $                 | 873 |  |                           | $ | 392 |                   |  | $ | 85         |  |  | $              | —



The following table presents the activity in the
allowance for loan losses by portfolio segment for the three months ended December 31, 2011:



|(in thousands)                      |  | Beginning balance |     |  | Provision for loan losses |   |    | Loans charged off |  |   | Recoveries |  |  | Ending balance |  
|----------------------------------- |  | ----------------- | --- |  | ------------------------- | - | -- | ----------------- |  | - | ---------- |  |  | -------------- | -
|                                    |  |                   |     |  |                           |   |    |                   |  |   |            |  |  |                |  
|Residential real estate:            |  |                   |     |  |                           |   |    |                   |  |   |            |  |  |                |  
|One- to four-family                 |  | $                 | 490 |  |                           | $ | 69 |                   |  | $ | 4          |  |  | $              | —
|Multi-family                        |  |                   | 19  |  |                           |   | 10 |                   |  |   | —          |  |  |                | —
|Construction                        |  |                   | 1   |  |                           |   | —  |                   |  |   | —          |  |  |                | —
|Nonresidential real estate and land |  |                   | 33  |  |                           |   | 2  |                   |  |   | —          |  |  |                | —
|Consumer and other                  |  |                   | 21  |  |                           |   | 1  |                   |  |   | —          |  |  |                | —
|Unallocated                         |  |                   | 200 |  |                           |   | —  |                   |  |   | —          |  |  |                | —
|Totals                              |  | $                 | 764 |  |                           | $ | 82 |                   |  | $ | 4          |  |  | $              | —



19















Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

December 31, 2012

(unaudited)



5. Loans receivable (continued)



The following table presents
the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method
as of December 31, 2012. The recorded investment in loans excludes accrued interest receivable and deferred loan costs, net due
to immateriality.



|(in thousands)                               |  | Recorded investment in loans |         |  | Ending allowance attributed to loans |   |     | Unallocated allowance |  |   | Total allowance | 
|-------------------------------------------- |  | ---------------------------- | ------- |  | ------------------------------------ | - | --- | --------------------- |  | - | --------------- | 
|Loans individually evaluated for impairment: |  |                              |         |  |                                      |   |     |                       |  |   |                 | 
|Residential real estate:                     |  |                              |         |  |                                      |   |     |                       |  |   |                 | 
|One- to four-family                          |  | $                            | 3,918   |  |                                      | $ | 35  |                       |  | $ | —               | 
|Multi-family                                 |  |                              | —       |  |                                      |   | —   |                       |  |   | —               | 
|Construction                                 |  |                              | —       |  |                                      |   | —   |                       |  |   | —               | 
|Nonresidential real estate and land          |  |                              | —       |  |                                      |   | —   |                       |  |   | —               | 
|Loans on deposits                            |  |                              | —       |  |                                      |   | —   |                       |  |   | —               | 
|Consumer and other                           |  |                              | —       |  |                                      |   | —   |                       |  |   | —               | 
|Purchased credit-impaired loans              |  |                              | 8,988   |  |                                      |   | —   |                       |  |   | —               | 
|                                             |  | $                            | 12,906  |  |                                      | $ | 35  |                       |  | $ | —               | 
|                                             |  |                              |         |  |                                      |   |     |                       |  |   |                 | 
|Loans collectively evaluated for impairment: |  |                              |         |  |                                      |   |     |                       |  |   |                 | 
|Residential real estate:                     |  |                              |         |  |                                      |   |     |                       |  |   |                 | 
|One- to four-family                          |  | $                            | 198,614 |  |                                      | $ | 777 |                       |  | $ | —               | 
|Multi-family                                 |  |                              | 17,957  |  |                                      |   | 87  |                       |  |   | —               | 
|Construction                                 |  |                              | 3,992   |  |                                      |   | 9   |                       |  |   | —               | 
|Farm                                         |  |                              | 1,911   |  |                                      |   | —   |                       |  |   | —               | 
|Nonresidential real estate and land          |  |                              | 24,025  |  |                                      |   | 59  |                       |  |   | —               | 
|Commercial nonmortgage and other             |  |                              | 3,186   |  |                                      |   | —   |                       |  |   | —               | 
|Consumer and other                           |  |                              | 10,702  |  |                                      |   | 13  |                       |  |   | —               | 
|Unallocated                                  |  |                              | —       |  |                                      |   | —   |                       |  |   | 200             | 
|                                             |  |                              | 260,387 |  |                                      |   | 945 |                       |  |   | 200             | 
|                                             |  | $                            | 273,293 |  |                                      | $ | 980 |                       |  | $ | 200             | 



20







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

December 31, 2012

(unaudited)



5. Loans receivable (continued)



The following table presents
the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method
as of June 30, 2012. The recorded investment in loans excludes accrued interest receivable and deferred loan costs, net due to
immateriality. There were no loans acquired with deteriorated credit quality at June 30, 2012.



|(in thousands)                               |  | Recorded investment in loans |         |  | Ending allowance attributed to loans |   |     | Unallocated allowance |  |   | Total allowance | 
|-------------------------------------------- |  | ---------------------------- | ------- |  | ------------------------------------ | - | --- | --------------------- |  | - | --------------- | 
|Loans individually evaluated for impairment: |  |                              |         |  |                                      |   |     |                       |  |   |                 | 
|Residential real estate:                     |  |                              |         |  |                                      |   |     |                       |  |   |                 | 
|One- to four-family                          |  | $                            | 2,757   |  |                                      | $ | 97  |                       |  | $ | —               | 
|                                             |  |                              |         |  |                                      |   |     |                       |  |   |                 | 
|Loans collectively evaluated for impairment: |  |                              |         |  |                                      |   |     |                       |  |   |                 | 
|Residential real estate:                     |  |                              |         |  |                                      |   |     |                       |  |   |                 | 
|One- to four-family                          |  | $                            | 146,329 |  |                                      | $ | 468 |                       |  | $ | —               | 
|Multi-family                                 |  |                              | 15,495  |  |                                      |   | 49  |                       |  |   | —               | 
|Construction                                 |  |                              | 964     |  |                                      |   | 3   |                       |  |   | —               | 
|Nonresidential real estate and land          |  |                              | 11,098  |  |                                      |   | 35  |                       |  |   | —               | 
|Loans on deposits                            |  |                              | 2,281   |  |                                      |   | 7   |                       |  |   | —               | 
|Consumer and other                           |  |                              | 4,865   |  |                                      |   | 16  |                       |  |   | —               | 
|Unallocated                                  |  |                              | —       |  |                                      |   | —   |                       |  |   | 200             | 
|                                             |  |                              | 181,032 |  |                                      |   | 578 |                       |  |   | 200             | 
|                                             |  | $                            | 183,789 |  |                                      | $ | 675 |                       |  | $ | 200             | 



The following table presents
loans individually evaluated for impairment by class of loans as of and for the three months ended December 31, 2012:



|(in thousands)                      |  | Unpaid Principal Balance and Recorded Investment |        |  | Allowance for Loan Losses Allocated |   |    | Average Recorded Investment |  |   | Interest Income Recognized |  |  | Cash Basis Income Recognized |   
|----------------------------------- |  | ------------------------------------------------ | ------ |  | ----------------------------------- | - | -- | --------------------------- |  | - | -------------------------- |  |  | ---------------------------- | --
|                                    |  |                                                  |        |  |                                     |   |    |                             |  |   |                            |  |  |                              |   
|With no related allowance recorded: |  |                                                  |        |  |                                     |   |    |                             |  |   |                            |  |  |                              |   
|One- to four-family                 |  | $                                                | 3,253  |  |                                     | $ | —  |                             |  | $ | 2,965                      |  |  | $                            | 33
|Purchased credit-impaired loans     |  |                                                  | 8,988  |  |                                     |   | —  |                             |  |   | —                          |  |  |                              | — 
|                                    |  |                                                  | 12,241 |  |                                     |   | —  |                             |  |   | 2,965                      |  |  |                              | 33
|With an allowance recorded:         |  |                                                  |        |  |                                     |   |    |                             |  |   |                            |  |  |                              |   
|One- to four-family                 |  |                                                  | 665    |  |                                     |   | 35 |                             |  |   | 539                        |  |  |                              | 2 
|                                    |  | $                                                | 12,906 |  |                                     | $ | 35 |                             |  | $ | 3,504                      |  |  | $                            | 35



21







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

December 31, 2012

(unaudited)



5. Loans receivable (continued)



The following table presents
loans individually evaluated for impairment by class of loans as of and for the twelve months ended June 30, 2012:





|(in thousands)                      |  | Unpaid Principal Balance and Recorded Investment |       |  | Allowance for Loan Losses Allocated |   |    | Average Recorded Investment |  |   | Interest Income Recognized |  |  | Cash Basis Income  Recognized |   
|----------------------------------- |  | ------------------------------------------------ | ----- |  | ----------------------------------- | - | -- | --------------------------- |  | - | -------------------------- |  |  | ----------------------------- | --
|                                    |  |                                                  |       |  |                                     |   |    |                             |  |   |                            |  |  |                               |   
|With no related allowance recorded: |  |                                                  |       |  |                                     |   |    |                             |  |   |                            |  |  |                               |   
|One- to four-family                 |  | $                                                | 1,222 |  |                                     | $ | —  |                             |  | $ | 889                        |  |  | $                             | 45
|                                    |  |                                                  |       |  |                                     |   |    |                             |  |   |                            |  |  |                               |   
|With an allowance recorded:         |  |                                                  |       |  |                                     |   |    |                             |  |   |                            |  |  |                               |   
|One- to four-family                 |  |                                                  | 1,535 |  |                                     |   | 97 |                             |  |   | 1,434                      |  |  |                               | 27
|                                    |  | $                                                | 2,757 |  |                                     | $ | 97 |                             |  | $ | 2,323                      |  |  | $                             | 72





The following tables
present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of December
31, 2012, and June 30, 2012:



|                                            |  | December 31, 2012 |       |  | June 30, 2012                              |  
|------------------------------------------- |  | ----------------- | ----- |  | ------------------------------------------ | -
|(in thousands)                              |  | Nonaccrual        |       |  | Loans Past Due Over 90 Days Still Accruing |  
|                                            |  |                   |       |  |                                            |  
|One- to four-family residential real estate |  | $                 | 966   |  |                                            | $
|Purchased credit-impaired loans             |  |                   | 3,286 |  |                                            |  
|                                            |  | $                 | 4,252 |  |                                            | $



Troubled Debt Restructurings:



A Troubled Debt Restructuring
(“TDR”) is the situation where the Bank grants a concession to the borrower that the Bank would not otherwise have
considered due to the borrower’s financial difficulties. All TDRs are considered “impaired.” At December 31,
2012, the Company had $826,000 of loans classified as TDRS of which approximately 40.0% were residential real estate loans involving
the Banks’ conceding to refinance a loan to then-current market interest rates despite poor credit history or a high loan-to-value
ratio and approximately 36.7% were related to the borrower’s completion of Chapter 7 bankruptcy proceedings with no reaffirmation
of his debt to the Banks.



During the period ended December
31, 2012, the terms of three loans were recognized at TDRs because the borrower completed Chapter 7 bankruptcy proceedings without
reaffirming his personal obligation under the mortgage on his principal residence.



22







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

December 31, 2012

(unaudited)



5. Loans receivable (continued)



The following table presents
loans by class modified as TDRs during the three and six months ended December 31, 2012 and the year ended June 30, 2012, and their
performance, by modification type:



|Dollars in thousands                 |  | Number of Loans |    |  | Pre-
Modification Outstanding Recorded Investment |   |     | Post-
Modification Outstanding Recorded Investment |  |   | TDRs Performing to Modified Terms |  |  | TDRs Not Performing to Modified Terms |    
|------------------------------------ |  | --------------- | -- |  | ------------------------------------------------- | - | --- | -------------------------------------------------- |  | - | --------------------------------- |  |  | ------------------------------------- | ---
|                                     |  |                 |    |  |                                                   |   |     |                                                    |  |   |                                   |  |  |                                       |    
|Three months ended December 31, 2012 |  |                 |    |  |                                                   |   |     |                                                    |  |   |                                   |  |  |                                       |    
|Residential Real Estate:             |  |                 |    |  |                                                   |   |     |                                                    |  |   |                                   |  |  |                                       |    
|1-4 Family                           |  |                 | 3  |  |                                                   | $ | 600 |                                                    |  | $ | 600                               |  |  | $                                     | 600
|                                     |  |                 |    |  |                                                   |   |     |                                                    |  |   |                                   |  |  |                                       |    
|Six months ended December 31, 2012   |  |                 |    |  |                                                   |   |     |                                                    |  |   |                                   |  |  |                                       |    
|Residential Real Estate:             |  |                 |    |  |                                                   |   |     |                                                    |  |   |                                   |  |  |                                       |    
|1-4 Family                           |  |                 | 11 |  |                                                   | $ | 668 |                                                    |  | $ | 672                               |  |  | $                                     | 670
|                                     |  |                 |    |  |                                                   |   |     |                                                    |  |   |                                   |  |  |                                       |    
|Twelve months ended June 30, 2012    |  |                 |    |  |                                                   |   |     |                                                    |  |   |                                   |  |  |                                       |    
|Residential Real Estate:             |  |                 |    |  |                                                   |   |     |                                                    |  |   |                                   |  |  |                                       |    
|1-4 Family                           |  |                 | 4  |  |                                                   | $ | 179 |                                                    |  | $ | 188                               |  |  | $                                     | 187



The Company had no allocated
specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2012, and
had $2,000 of specific reserves at June 30, 2012. The Company had no commitments to lend on loans classified as TDRs at December
31, 2012 or June 30, 2012.



The TDRs described above did
not increase the allowance for loan losses and did not result in charge offs during the three or six months ended December 31,
2012. There were no TDRs that defaulted during the three- or six-month periods ended December 31, 2012 or over the previous twelve
months.



At June 30, 2012, the Company
had $820,000 of loans classified as TDRs.



23







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

December 31, 2012

(unaudited)



5. Loans receivable (continued)



The following table presents
the aging of the principal balance outstanding in past due loans as of December 31, 2012, by class of loans:



|(in thousands)                      |  | 30-89 Days Past Due |       |  | Greater than 90 Days Past Due |   |       | Total Past Due |  |   | Loans Not Past Due |  |  | Total |        
|----------------------------------- |  | ------------------- | ----- |  | ----------------------------- | - | ----- | -------------- |  | - | ------------------ |  |  | ----- | -------
|                                    |  |                     |       |  |                               |   |       |                |  |   |                    |  |  |       |        
|Residential real estate:            |  |                     |       |  |                               |   |       |                |  |   |                    |  |  |       |        
|One-to four-family                  |  | $                   | 6,205 |  |                               | $ | 7,362 |                |  | $ | 13,567             |  |  | $     | 197,953
|Multi-family                        |  |                     | —     |  |                               |   | —     |                |  |   | —                  |  |  |       | 17,957 
|Construction                        |  |                     | 19    |  |                               |   | 54    |                |  |   | 73                 |  |  |       | 3,919  
|Farm                                |  |                     | —     |  |                               |   | —     |                |  |   | —                  |  |  |       | 1,911  
|Nonresidential real estate and land |  |                     | —     |  |                               |   | —     |                |  |   | —                  |  |  |       | 24,025 
|Commercial non-mortgage             |  |                     | —     |  |                               |   | 229   |                |  |   | 229                |  |  |       | 2,957  
|Consumer and other                  |  |                     | 102   |  |                               |   | 35    |                |  |   | 137                |  |  |       | 10,565 
|Total                               |  | $                   | 6,326 |  |                               | $ | 7,680 |                |  | $ | 14,006             |  |  | $     | 259,287



The following table presents
the aging of the principal balance outstanding in past due loans as of June 30, 2012, by class of loans:



|(in thousands)                      |  | 30-89 Days Past Due |       |  | Greater than 90 Days Past Due |   |       | Total Past Due |  |   | Loans Not Past Due |  |  | Total |        
|----------------------------------- |  | ------------------- | ----- |  | ----------------------------- | - | ----- | -------------- |  | - | ------------------ |  |  | ----- | -------
|                                    |  |                     |       |  |                               |   |       |                |  |   |                    |  |  |       |        
|Residential real estate:            |  |                     |       |  |                               |   |       |                |  |   |                    |  |  |       |        
|One-to four-family                  |  | $                   | 4,332 |  |                               | $ | 1,794 |                |  | $ | 6,126              |  |  | $     | 142,960
|Multi-family                        |  |                     | —     |  |                               |   | —     |                |  |   | —                  |  |  |       | 15,495 
|Construction                        |  |                     | —     |  |                               |   | —     |                |  |   | —                  |  |  |       | 964    
|Nonresidential real estate and land |  |                     | —     |  |                               |   | —     |                |  |   | —                  |  |  |       | 11,098 
|Loans on deposits                   |  |                     | —     |  |                               |   | —     |                |  |   | —                  |  |  |       | 2,281  
|Consumer and other                  |  |                     | —     |  |                               |   | —     |                |  |   | —                  |  |  |       | 4,865  
|Total                               |  | $                   | 4,332 |  |                               | $ | 1,794 |                |  | $ | 6,126              |  |  | $     | 177,663



24







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

December 31, 2012

(unaudited)



5. Loans receivable (continued)



Credit Quality Indicators:



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



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



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



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



Loans not meeting the criteria
above that are analyzed individually as part of the above-described process are considered to be pass rated loans. Loans listed
that are not rated are included in groups of homogeneous loans and are evaluated for credit quality based on performing status.
See the aging of past due loan table above. As of December 31, 2012, and based on the most recent analysis performed, the risk
category of loans by class of loans is as follows:



|(in thousands)                      |  | Pass |        |  | Special Mention |   |       | Substandard |  |   | Doubtful |  |  | Not rated |  
|----------------------------------- |  | ---- | ------ |  | --------------- | - | ----- | ----------- |  | - | -------- |  |  | --------- | -
|                                    |  |      |        |  |                 |   |       |             |  |   |          |  |  |           |  
|Residential real estate:            |  |      |        |  |                 |   |       |             |  |   |          |  |  |           |  
|One- to four-family                 |  | $    | —      |  |                 | $ | 7,032 |             |  | $ | 11,194   |  |  | $         | —
|Multi-family                        |  |      | 16,200 |  |                 |   | 207   |             |  |   | 1,550    |  |  |           | —
|Construction                        |  |      | 2,967  |  |                 |   | —     |             |  |   | 1,025    |  |  |           | —
|Farm                                |  |      | 1,693  |  |                 |   | 218   |             |  |   | —        |  |  |           | —
|Nonresidential real estate and land |  |      | 18,069 |  |                 |   | 2,143 |             |  |   | 3,813    |  |  |           | —
|Commercial non-mortgage             |  |      | 2,189  |  |                 |   | 51    |             |  |   | 946      |  |  |           | —
|Consumer and other                  |  |      | —      |  |                 |   | 159   |             |  |   | 39       |  |  |           | —
|                                    |  | $    | 41,118 |  |                 | $ | 9,810 |             |  | $ | 18,567   |  |  | $         | —



25







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

December 31, 2012

(unaudited)



5. Loans receivable (continued)



At June 30, 2012, the risk category
of loans by class of loans was as follows:



|(in thousands)                      |  | Pass |        |  | Special Mention |   |     | Substandard |  |   | Doubtful |  |  | Not rated |  
|----------------------------------- |  | ---- | ------ |  | --------------- | - | --- | ----------- |  | - | -------- |  |  | --------- | -
|                                    |  |      |        |  |                 |   |     |             |  |   |          |  |  |           |  
|Residential real estate:            |  |      |        |  |                 |   |     |             |  |   |          |  |  |           |  
|One- to four-family                 |  | $    | —      |  |                 | $ | 64  |             |  | $ | 3,057    |  |  | $         | —
|Multi-family                        |  |      | 12,692 |  |                 |   | —   |             |  |   | 2,803    |  |  |           | —
|Construction                        |  |      | 964    |  |                 |   | —   |             |  |   | —        |  |  |           | —
|Nonresidential real estate and land |  |      | 10,831 |  |                 |   | 267 |             |  |   | —        |  |  |           | —
|Loans on deposits                   |  |      | —      |  |                 |   | —   |             |  |   | —        |  |  |           | —
|Consumer and other                  |  |      | —      |  |                 |   | —   |             |  |   | —        |  |  |           | —
|                                    |  | $    | 24,487 |  |                 | $ | 331 |             |  | $ | 5,860    |  |  | $         | —



6. 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.
Level 2 securities include agency mortgage-backed securities.



26







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

December 31, 2012

(unaudited)



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



Impaired Loans



At the time a loan is considered
impaired, it is evaluated for loss based on the fair value of collateral securing the loan if the loan is collateral dependent.
If a loss is identified, a specific allocation will be established as part of the allowance for loan losses such that the loan’s
net carrying value is at its estimated fair value. Impaired loans carried at fair value generally receive specific allocations
of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals.
These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income
approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between
the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification
of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s
financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market
conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business,
resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and
adjusted accordingly.



Purchased Credit Impaired
Loans



The Company purchased a group
of loans more fully described in Note 2, some of which have shown evidence of credit deterioration since origination. These purchased
credit impaired loans are recorded at the amount paid, such that there is no carryover of the seller’s allowance for loan
losses. After acquisition, losses are recognized by an increase in the allowance for loan losses. Such purchased credit impaired
loans are accounted for individually or aggregated into pools of loans based on common risk characteristics such as credit score,
loan type and date of origination. The Company estimates the amount and timing of expected cash flows for each loan or pool, and
the expected cash flows in excess of amount paid is recorded as interest income ove the remaining life of the loan or pool (accretable
yield.) The excess of the loan’s or pool’s contractual principal and interest over expected cash flows is not recorded
(nonaccretable difference.) Over the life of the loan or pool expected cash flows continue to be estimated. If the present value
of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater
than the carrying amount, it is recognized as part of future interest income.



Other Real Estate



Assets acquired through or instead
of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These
assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based
on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including
comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers
to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and
typically result in a Level 3 classification of the inputs for determining fair value.



27





Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

December 31, 2012

(unaudited)



6. 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 Using |  
|----------------------------------- |  | ---------- | --- |  | ----------------------------- | -
|                                    |  |            |     |  | Quoted Prices                 |  
|                                    |  |            |     |  | in Active                     |  
|                                    |  |            |     |  | Markets for                   |  
|                                    |  |            |     |  | Identical                     |  
|                                    |  |            |     |  | Assets                        |  
|(in thousands)                      |  | Fair Value |     |  | (Level 1)                     |  
|                                    |  |            |     |  |                               |  
|December 31, 2012                   |  |            |     |  |                               |  
|Agency mortgage-backed: residential |  | $          | 171 |  |                               | $
|Equity securities                   |  |            | 8   |  |                               |  
|                                    |  | $          | 179 |  |                               | $
|                                    |  |            |     |  |                               |  
|June 30, 2012                       |  |            |     |  |                               |  
|Agency mortgage-backed: residential |  | $          | 189 |  |                               | $



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



|                             |  |            |     |  | Fair Value Measurements Using |  
|---------------------------- |  | ---------- | --- |  | ----------------------------- | -
|                             |  |            |     |  | Quotes Prices                 |  
|                             |  |            |     |  | in Active                     |  
|                             |  |            |     |  | Markets for                   |  
|                             |  |            |     |  | Identical                     |  
|                             |  |            |     |  | Assets                        |  
|(in thousands)               |  | Fair Value |     |  | (Level 1)                     |  
|                             |  |            |     |  |                               |  
|December 31, 2012            |  |            |     |  |                               |  
|Impaired loans               |  |            |     |  |                               |  
|One- to four-family          |  | $          | 630 |  |                               | $
|Other real estate owned, net |  |            |     |  |                               |  
|One- to four-family          |  |            | 648 |  |                               |  
|                             |  |            |     |  |                               |  
|June 30, 2012                |  |            |     |  |                               |  
|Impaired loans               |  |            |     |  |                               |  
|One- to four-family          |  | $          | 807 |  |                               | $
|Multi-family                 |  |            | 631 |  |                               |  
|Other real estate owned, net |  |            |     |  |                               |  
|One- to four-family          |  |            | 648 |  |                               |  
|Multi-family                 |  |            | 233 |  |                               |  



Impaired loans with allocated
allowance for loan losses had a carrying amount of $665,000 and $1.5 million at December 31, 2012 and June 30, 2012, with specific
valuation allowance of $35,000 and $97,000 at December 31, 2012 and June 30, 2012, respectively. No specific allowance provision
was made for the three month or six month periods ended December 31, 2012. A specific provision of $41,000 was made for the three
and six month periods ended December 31, 2011. Other real estate owned measured at fair value less costs to sell, had a carrying
amount of $648,000 and $881,000 at December 31, 2012 and June 30, 2012. Additional write-down of $25,000 charged for the three
and six months ended December 31, 2012, while a write-down of $58,000 occurred in the year ended June 30, 2012. An other real
estate owned write-down of $38,000 and $48,000 was made for the three and six month periods ended December 31, 2011, respectively.



28







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

December 31, 2012

(unaudited)



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



The following table presents
quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring
basis at December 31, 2012:



|                                   |  |                |     |  |              |                           |              |                                                      | Range    
|---------------------------------- |  | -------------- | --- |  | ------------ | ------------------------- | ------------ | ---------------------------------------------------- | ---------
|                                   |  | Fair Value     |     |  | Valuation    |                           | Unobservable |                                                      | (Weighted
|                                   |  | (in thousands) |     |  | Technique(s) |                           | Input(s)     |                                                      | Average) 
|Impaired Loans:                    |  |                |     |  |              |                           |              |                                                      |          
|Residential real estate            |  |                |     |  |              |                           |              |                                                      |          
|1-4 family                         |  | $              | 630 |  |              | Sales comparison approach |              | Adjustments for differences between comparable sales |          
|                                   |  |                |     |  |              |                           |              |                                                      |          
|Foreclosed and repossessed assets: |  |                |     |  |              |                           |              |                                                      |          
|1-4 family                         |  | $              | 648 |  |              | Sales comparison approach |              | Adjustments for differences between comparable sales |          



The following is a 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 at December 31, 2012 and June 30, 2012:



| |  | Cash and cash equivalents and interest-bearing deposits: 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 estimated by
using pricing models, quoted price of securities with similar characteristics, which is level 2 pricing for the other securities.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Loans held for sale: Loans originated and intended for sale in the secondary market are
determined by FHLB pricing schedules.
| |  | -----------------------------------------------------------------------------------------------------------------------------



| |  | Loans: 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: It is not practicable to determine the fair value of FHLB
stock due to restrictions placed on its transferability.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------



29













Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

December 31, 2012

(unaudited)



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



Accrued
interest receivable: The carrying amount is the estimated fair value.



Deposits: The fair value
of NOW accounts, passbook accounts, and money market deposits 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.



Federal Home Loan Bank advances:
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 December 31, 2012 and June 30, 2011, was
not material.



Based on the foregoing methods
and assumptions, the carrying value and fair value of the Company’s financial instruments at December 31, 2012 and June 30,
2012 are as follows:



|                                              |  | Fair Value Measurements at |        
|--------------------------------------------- |  | -------------------------- | -------
|                                              |  | Carrying                   |        
|                                              |  | Value                      |        
|Financial assets                              |  |                            |        
|Cash and cash equivalents                     |  | $                          | 15,326 
|Interest-earning deposits                     |  |                            | 100    
|Available-for-sale securities                 |  |                            | 179    
|Held-to-maturity securities                   |  |                            | 28,769 
|Loans held for sale                           |  |                            | 440    
|Loans receivable - net                        |  |                            | 271,930
|Federal Home Loan Bank stock                  |  |                            | 7,732  
|Accrued interest receivable                   |  |                            | 899    
|                                              |  |                            |        
|Financial liabilities                         |  |                            |        
|Deposits                                      |  | $                          | 234,342
|Federal Home Loan Bank advances               |  |                            | 50,948 
|Advances by borrowers for taxes and insurance |  |                            | 168    
|Accrued interest payable                      |  |                            | 55     



30







Kentucky First Federal Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

December 31, 2012

(unaudited)



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



Based on the foregoing methods
and assumptions, the carrying value and fair value of the Company’s financial instruments at June 30, 2012 were as follows:



|                                              |  | Fair Value Measurements at |        
|--------------------------------------------- |  | -------------------------- | -------
|(in thousands)                                |  | Carrying                   |        
|                                              |  | Value                      |        
|Financial assets                              |  |                            |        
|Cash and cash equivalents                     |  | $                          | 5,735  
|Interest-earning deposits                     |  |                            | 100    
|Available-for-sale securities                 |  |                            | 189    
|Held-to-maturity securities                   |  |                            | 4,756  
|Loans held for sale                           |  |                            | 481    
|Loans receivable - net                        |  |                            | 182,473
|Federal Home Loan Bank stock                  |  |                            | 5,641  
|Accrued interest receivable                   |  |                            | 497    
|                                              |  |                            |        
|Financial liabilities                         |  |                            |        
|Deposits                                      |  | $                          | 134,552
|Federal Home Loan Bank advances               |  |                            | 27,065 
|Advances by borrowers for taxes and insurance |  |                            | 487    
|Accrued interest payable                      |  |                            | 64     



Loans receivable represents the Company’s most
significant financial asset, which is in Level 3 for fair value measurements. A third party provides financial modeling for the
Company and results are based on assumptions and factors determined by management.



31







Kentucky First Federal Bancorp

ITEM 2: MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS



Forward-Looking Statements



Certain statements contained
in this report 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, 2012.



Average Balance Sheets



The following table represents
the average balance sheets for the three and six month periods ended December 31, 2012 and 2011, along with the related calculations
of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.



|                                                                        |  | Six Months Ended December 31, |        
|----------------------------------------------------------------------- |  | ----------------------------- | -------
|                                                                        |  | 2012                          |        
|                                                                        |  | Average Balance               |        
|                                                                        |  | (Dollars in thousands)        |        
|Interest-earning assets:                                                |  |                               |        
|Loans                                                                   |  | $                             | 181,092
|Mortgage-backed securities                                              |  |                               | 5,559  
|Other securities                                                        |  |                               | 100    
|Other interest-earning assets                                           |  |                               | 10,149 
|Total interest-earning assets                                           |  |                               | 196,900
|                                                                        |  |                               |        
|Less: Allowance for loan losses                                         |  |                               | (864   
|Non-interest-earning assets                                             |  |                               | 24,926 
|Total assets                                                            |  | $                             | 220,962
|                                                                        |  |                               |        
|Interest-bearing liabilities:                                           |  |                               |        
|Demand deposits                                                         |  | $                             | 12,339 
|Savings                                                                 |  |                               | 37,260 
|Certificates of deposit                                                 |  |                               | 82,074 
|Total deposits                                                          |  |                               | 131,673
|Borrowings                                                              |  |                               | 26,416 
|Total interest-bearing liabilities                                      |  |                               | 158,089
|                                                                        |  |                               |        
|Noninterest-Bearing demand deposits                                     |  |                               | 1,487  
|Noninterest-bearing liabilities                                         |  |                               | 2,644  
|Total liabilities                                                       |  |                               | 162,220
|                                                                        |  |                               |        
|Shareholders’ equity                                                    |  |                               | 58,742 
|Total liabilities and shareholders’ equity                              |  | $                             | 220,962
|Net interest income/average yield                                       |  |                               |        
|Net interest margin                                                     |  |                               |        
|Average interest-earning assets to average interest-bearing liabilities |  |                               |        



32







Kentucky First Federal Bancorp

ITEM 2: MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)



|                                                                        |  | Three Months Ended December 31, |        
|----------------------------------------------------------------------- |  | ------------------------------- | -------
|                                                                        |  | 2012                            |        
|                                                                        |  | Average Balance                 |        
|                                                                        |  | (Dollars in thousands)          |        
|Interest-earning assets:                                                |  |                                 |        
|Loans                                                                   |  | $                               | 180,440
|Mortgage-backed securities                                              |  |                                 | 6,322  
|Other securities                                                        |  |                                 | 100    
|Other interest-earning assets                                           |  |                                 | 9,653  
|Total interest-earning assets                                           |  |                                 | 196,515
|                                                                        |  |                                 |        
|Less: Allowance for loan losses                                         |  |                                 | (869   
|Non-interest-earning assets                                             |  |                                 | 28,910 
|Total assets                                                            |  | $                               | 224,556
|                                                                        |  |                                 |        
|Interest-bearing liabilities:                                           |  |                                 |        
|Demand deposits                                                         |  | $                               | 16,195 
|Savings                                                                 |  |                                 | 37,358 
|Certificates of deposit                                                 |  |                                 | 81,126 
|Total deposits                                                          |  |                                 | 134,679
|Borrowings                                                              |  |                                 | 26,795 
|Total interest-bearing liabilities                                      |  |                                 | 161,474
|                                                                        |  |                                 |        
|Noninterest-Bearing demand deposits                                     |  |                                 | 1,487  
|Noninterest-bearing liabilities                                         |  |                                 | 2,609  
|Total liabilities                                                       |  |                                 | 165,570
|                                                                        |  |                                 |        
|Shareholders’ equity                                                    |  |                                 | 58,986 
|Total liabilities and shareholders’ equity                              |  | $                               | 224,556
|Net interest income/average yield                                       |  |                                 |        
|Net interest margin                                                     |  |                                 |        
|Average interest-earning assets to average interest-bearing liabilities |  |                                 |        



Discussion of Financial Condition
Changes from June 30, 2012 to December 31, 2012



Assets: At December
31, 2012, the Company’s assets totaled $352.4 million, an increase of $129.5 million, or 58.1%, from total assets at June
30, 2012. This increase was attributed primarily to the acquisition of CKF Bancorp. See Footnote 2 under “Item 1: Financial
Information.”



Cash and cash equivalents:Cash and cash equivalents increased by $9.6 million or 167.2% to $15.3 million at December 31, 2012.



Loans:
Loans receivable, net, increased by $89.4 million to $271.9 million at December 31, 2012, due primarily to the acquisition of CKF
Bancorp. See Footnote 2 under “Item 1, Financial Information.” Also, due to historically low interest rates, many home
mortgages have been refinanced to long-term, fixed rate loans either with other lenders or with our banks to be sold into the secondary
market. Management continues to look for high-quality loans to add to its portfolio and will continue to emphasize loan originations
to the extent that it is profitable, prudent and consistent with our interest rate risk strategies. However, loan demand continues
in its weakened state as a result of the downturn in the economy and we expect to see a continued decrease in demand for home loans
until the housing market regains a stronger footing.



33







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, 2012 to December 31, 2012 (continued)



Non-Performing Loans: At December 31, 2012, the Company had non-performing loans (loans 90 or more days past due or on nonaccrual status) of
approximately $3.8 million, or 2.1% of total loans (excluding loans purchased in the acquisition referenced in Note 2), compared
to $1.8 million or 0.98%, of total loans at June 30, 2012.  The Company’s allowance for loan losses totaled $1.2 million
and $875,000 at December 31, 2012, and June 30, 2012, respectively. The allowance for loan losses at December 31, 2012, represented
30.8% of nonperforming loans and 0.66% of total loans (excluding loans purchased in the acquisition referenced in Note 2), while
at June 30, 2012, the allowance represented 48.8% of nonperforming loans and 0.48% of total loans.



The Company had $11.7 million
in assets classified as substandard for regulatory purposes at December 31, 2012, including loans ($9.8 million) and real estate
owned (“REO”) ($1.9 million), excluding both loans and REO acquired in the CKF Bancorp transaction. Classified loans
as a percentage of total loans (net of loans acquired on December 31, 2012) was 2.1% and 3.2% at December 31, 2012 and June 30,
2012, respectively. All substandard loans were secured by residential property on which the Banks have priority lien position.



The table below shows the aggregate
amounts of our assets classified for regulatory purposes at the dates indicated and excludes assets purchased in the acquisition
more fully described in Note 2 under “Part I, Financial Information”:



|                        |  | December 31, 2012 |        |  | June 30, 2012 |  
|----------------------- |  | ----------------- | ------ |  | ------------- | -
|                        |  |                   |        |  |               |  
|Substandard assets      |  | $                 | 11,675 |  |               | $
|Doubtful assets         |  |                   | —      |  |               |  
|Loss assets             |  |                   | —      |  |               |  
|Total classified assets |  | $                 | 11,675 |  |               | $



Based on our current evaluation
of the loan portfolio purchased, the Company acquired $8.9 million in net substandard loans and $1.6 million in REO, for an additional
$10.5 million in substandard assets.



All substandard loans
were secured by real property on which the banks have priority lien position. The table below summarizes substandard loans (excluding
substandard loans purchased at December 31, 2012) at the dates indicated:



|                                  |  | December 31,          |    |  | June 30,            |  
|--------------------------------- |  | --------------------- | -- |  | ------------------- | -
|                                  |  | 2012                  |    |  | 2012                |  
|                                  |  | Number of 
Properties |    |  | Net Carrying  Value |  
|(dollars in thousands)            |  |                       |    |  |                     |  
|Single family, owner occupied     |  |                       | 76 |  |                     | $
|Single family, non-owner occupied |  |                       | 2  |  |                     |  
|2-4 family, owner occupied        |  |                       | 1  |  |                     |  
|Multi-family                      |  |                       | 2  |  |                     |  
|Non-residential                   |  |                       | 1  |  |                     |  
|Total substandard loans           |  |                       | 82 |  |                     | $



34







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, 2012 to December 31, 2012 (continued)



The following table presents
the aggregate carrying value of REO (including REO acquired on December 31, 2012) at the dates indicated:



|                                     |  | December 31, 2012 |    |  | June 30, 2012 |  
|------------------------------------ |  | ----------------- | -- |  | ------------- | -
|                                     |  | Number            |    |  |               |  
|                                     |  | of                |    |  | Carrying      |  
|                                     |  | Properties        |    |  | Value         |  
|                                     |  |                   |    |  |               |  
|Single family, non-owner occupied    |  |                   | 6  |  |               | $
|2-4 family, owner-occupied           |  |                   | 9  |  |               |  
|5 or more family, non-owner-occupied |  |                   | —  |  |               |  
|Building lot                         |  |                   | 3  |  |               |  
|Acquired REO                         |  |                   | 40 |  |               |  
|Total REO                            |  |                   | 58 |  |               | $



At December 31 2012, and June
30, 2012, the Company had $1.1 million and $331,000 of loans classified as special mention, respectively excluding CKF. Special
mention loans acquired from CKF total $8.7 million. 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.



Securities:
At December 31, 2012, the Company’s investment securities had increased $24.0 million to $28.9 million, due in part to the
acquisition more fully described in Note 2 under “Item 1, Financial Information” and the purchase of a $14.0 million
short-term U.S. Treasury note. The investment acquired in the CKF Bancorp transaction include primarily U.S. Government agency
bonds and mortgage-backed securities. The Treasury note had matured prior to the filing of this document.



Liabilities:At
December 31, 2012, the Company’s liabilities totaled $286.7 million, an increase of $122.6 million, or 74.7%, from total
liabilities at June 30, 2012. The increase in liabilities was attributed primarily to the acquisition more fully described in Note
2 under “Item 1, Financial Information” as well as short-term borrowing to fund the acquisition of a $14.0 million
U.S. Treasury note. In addition to the liabilities assumed in the acquisition of CKF Bancorp, the Company borrowed $5.1 million
in FHLB Advances to provide funds for the cash portion of the transaction. FHLB Advances increased $23.9 million from $27.1 million
at June 30, 2012 to $50.9 million at December 31, 2012. The $14.0 million advance utilized to fund the purchase of the U.S. Treasury
note was repaid with proceeds received from the maturity of the investment. Deposits increased $99.8 million or 74.2% to $234.3
million at December 31, 2012, primarily as a result of the acquisition more fully described in Note 2. The deposits acquired in
the CKF Bancorp transaction are expected to remain with the Company except for normal run-off, as no hot money deposits have been
identified.



Shareholders’ Equity:
At December 31, 2012, the Company’s shareholders’ equity totaled $65.8 million, an increase of $6.9 million or 11.8%
from the June 30, 2012 total. The change in shareholders’ equity is primarily associated with the acquisition more fully
described in Note 2 under “Item 1, Financial Information”, as a portion of the consideration was paid in stock.



35







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, 2012 to December 31, 2012 (continued)



The Company paid dividends of
$560,000 or 38.6% of net income for the six-month period just ended and $283,000 or 30.5% of net income for the three-month period
just ended. The Company received notice from the Federal Reserve Board on September 27, 2012, that there would be no objection
to a waiver of dividends paid by Kentucky First Federal to First Federal MHC in the next twelve months.  On August 23, 2012,
the members of First Federal MHC approved a dividend waiver on annual dividends of up to $0.40 per share of Kentucky First Federal
Bancorp common stock by casting  64.3% of the eligible votes in favor of the waiver. At December 31, 2012, capital on a consolidated
basis and at each of the banks exceeded the level necessary to be considered “well capitalized” and was sufficient,
in management’s opinion, to support foreseeable growth. Management cannot speculate on future dividend levels. Various factors,
including capital levels, income levels, liquidity levels, regulatory requirements and overall financial condition of the Company
are considered before dividends are declared. However, management continues to believe that a strong dividend is consistent with
the Company’s long-term capital management strategy. See “Risk Factors” in Part II, Item 1A, of the Company’s
Annual Report on Form 10-K for the year ended June 30, 2012 for additional discussion regarding dividends.



Comparison of Operating Results
for the Six-Month Periods Ended December 31, 2012 and 2011



General



Net income totaled $1.4 million
for the six months ended December 31, 2012, an increase of $640,000 or 79.1% from net income of $809,000 for the same period in
2011. The increase was primarily attributable to the bargain purchase gain recorded coincident with the acquisition which occurred
on December 31, 2012.



Net Interest Income



Net interest income before provision
for loan losses increased $35,000 or 0.9% and, therefore, remained at $4.0 million for the six month period just ended, while provision
for loan losses of $418,000 caused net income after provision for loan losses to decrease $301,000 or 7.7% to $3.6 million compared
to $3.9 million for the prior year period. Core earnings remained relatively constant, while interest expense continued to decline
at a faster pace than interest income declined. Interest income decreased by $349,000, or 6.7%, to $4.8 million, while interest
expense decreased $384,000 or 32.1% to $814,000 for the six months ended December 31, 2012.



Interest income on loans decreased
$328,000 or 6.6% to $4.6 million, due primarily to a decrease in the average rate earned on the loan portfolio. The average rate
earned on loans outstanding for the six-month period ended December 31, 2012, decreased 25 basis points to 5.09% for the six months
just ended, while the average balance of loans outstanding decreased $3.6 million to $181.1 million for the period just ended.
Interest income on mortgage-backed residential securities decreased $42,000 or 30.2% to $97,000 for the six months ended December
31, 2012, primarily as a result of reduced volume, as securities matured and principal from mortgage-backed securities flowed back
to the Company. There were no sales of investments during the six-month period just ended.



Interest expense on deposits
and borrowings both declined period to period. Interest expense on deposits decreased $307,000 or 34.6% to $580,000 for the six-month
period ended December 31, 2012, while interest expense on borrowings decreased $77,000 or 24.8% to $234,000 for the same period.
The decline in interest expense on deposits was attributed primarily to a reduction in the average rate paid on deposits. The average
rate paid on deposits decreased 39 basis points to 0.88% for the most recent period, while the average balance of deposits decreased
$7.7 million or 5.5% to $131.7 million. The decrease in interest expense on borrowings was attributed primarily to a lower rate
paid on borrowings outstanding, which decreased 70 basis points to 1.77% for the most recent period, while the average balance
of borrowings outstanding increased $1.2 million to $26.4 million for the recently ended six-month period.



36







Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)



Comparison of Operating Results
for the Six-Month Periods Ended December 31, 2012 and 2011 (continued)



Net Interest Income (continued)



Net interest margin increased
from 3.94% for the prior year six-month period to 4.09% for the period ended December 31, 2012.



Provision for Losses on Loans



The Company recorded $418,000
in provision for losses on loans during the six months ended December 31, 2012, compared to a provision of $82,000 for the six
months ended December 31, 2011. The Company recorded the provision to more closely align the Company’s loan loss reserves
with changes in the composition of the loan portfolio, which includes additional non-owner-occupied one- to four-family residential
loans. 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
$1.1 million for the six months ended December 31, 2012, an increase of $1.1 million from the same period in 2011. The primary
contributor to this increase is the bargain purchase gain, which was recorded in connection with the acquisition of CKF Bancorp
effective December 31, 2012. Please see Note 2 under “Item 1, Financial Information.” Also contributing to the increase
in non-interest income was an increase in net gains on sales of loans, which totaled $111,000 for the recent period ended compared
to $23,000 for the prior year period. In the current low interest rate environment the Company prefers to sell its long-term, fixed
rate mortgage production rather than retain the loans in its portfolio, and the demand for that loan product was strong for the
quarter just ended. Other real estate owned represented charges totaling $40,000 for the six month period just ended, compared
to charges of $61,000 in the 2011 period. Net loss on sale of REO was $15,000 for the current period compared to a loss of $13,000
in the prior year period, while other-than-temporary impairment losses for the current period were $25,000 compared to $48,000
for the 2011 period.



Non-interest Expense



Non-interest expense totaled
$2.7 million for the six months ended December 31, 2012 and 2011, with the current period reflecting a decrease of $40,000, or
1.4%, compared to the same period in 2011. The decrease was due primarily to lower professional fees paid. Legal fees and auditing
and accounting fees (some of which were associated with the Company’s merger/acquisition plans announced November 3, 2011)
decreased $103,000, and $18,000, respectively from period to period, while outside service fees increased $39,000 period to period.
Foreclosure and OREO expenses (net) posted a net gain of $39,000 for the recent period compared to net expense of $32,000 for the
prior year period, as rental income exceeded rental expense and occupancy rates were higher. The core deposit intangible created
when the Company purchased First Federal of Frankfort became completely amortized in the fiscal year ended June 30, 2012. Consequently,
amortization of intangible assets for the recently ended quarter was nil, compared to $65,000 for the prior year period. Employee
compensation and benefits totaled $1.7 million for the recently-ended period compared to $1.5 million for the prior year period,
a $152,000 or 10.0% increase, and was attributed primarily to higher retirement expense.



Federal Income Tax Expense



Federal income taxes expense
totaled $564,000 for the six months ended December 31, 2012, compared to $396,000 in the prior year period. The effective tax rates
were 28.0% and 32.9% for the six-month periods ended December 31, 2012 and 2011, respectively.



37







Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)



Comparison of Operating Results
for the Three-Month Periods Ended December 31, 2012 and 2011



General



Net income totaled $927,000
for the three months ended December 31, 2012, an increase of $539,000 or 138.9% from net income of $388,000 for the same period
in 2011. The increase was primarily attributable to the bargain purchase gain recorded coincident with the acquisition which occurred
on December 31, 2012.



Net Interest Income



Net interest income before provision
for loan losses decreased $1,000 and, therefore, remained at $2.0 million for the three month period just ended, while provision
for loan losses of $392,000 caused net income after provision for loan losses to decrease $311,000 or 15.9% to $1.6 million compared
to $2.0 million for the prior year period. Core earnings remained relatively constant. Interest income decreased by $180,000, or
6.9%, to $2.4 million, while interest expense decreased $179,000 or 32.3% to $375,000 for the three months ended December 31, 2012



Interest income on loans decreased
$175,000 or 7.1% to $2.3 million, due primarily to a decrease in the average rate earned on the loan portfolio. The average rate
earned on loans outstanding for the three-month period ended December 31, 2012, decreased 25 basis points to 5.09% for the three
months just ended, while the average balance of loans outstanding decreased $4.6 million to $180.4 million for the period just
ended. Interest income on mortgage-backed residential securities decreased $21,000 or 31.3% to $46,000 for the three months ended
December 31, 2012, primarily as a result of reduced volume, as securities matured and principal from mortgage-backed securities
flowed back to the Company. There were no sales of investments during the three-month period just ended.



Interest expense on deposits
and borrowings both declined period to period. Interest expense on deposits decreased $127,000 or 31.5% to $276,000 for the three-month
period ended December 31, 2012, while interest expense on borrowings decreased $52,000 or 34.4% to $99,000 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. The
average rate paid on deposits decreased 34 basis points to 0.82% for the most recent period, while the average balance of deposits
decreased $4.1 million or 3.0% to $134.7 million. The decrease in interest expense on borrowings was attributed primarily to a
lower rate paid on borrowings outstanding, which decreased 90 basis points to 1.48% for the most recent period, while the average
balance of borrowings outstanding increased $1.4 to $26.8 million for the recently ended three-month period.



Net interest margin increased
from 4.03% for the prior year quarterly period to 4.15% for the quarter ended December 31, 2012.



Provision for Losses on Loans



The Company recorded $392,000
in provision for losses on loans during the three months ended December 31, 2012, compared to an $82,000 provision for the three
months ended December 31, 2011. The Company recorded the provision to increase the allowance to a level that management determined
appropriate after charging off $85,000 in loans during the quarter and after considering changes in the composition of the loan
portfolio, which include additional non-owner-occupied one- to four-family residential loans. 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.



38







Kentucky First Federal Bancorp

MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)



Comparison of Operating Results
for the Three-Month Periods Ended December 31, 2012 and 2011 (continued)



Non-interest Income



Non-interest income totaled
$1.0 million for the three months ended December 31, 2012, an increase of $986,000 from the same period in 2011. The primary contributor
to this increase was the bargain purchase gain, which was recorded in connection with the acquisition of CKF Bancorp effective
December 31, 2012. Please see Note 2 under “Item 1, Financial Information.” Also contributing to the increae in non-interest
income was an increase in net gains on sales of loans totaled $53,000 for the recent quarterly period ended compared to $23,000
for the prior year quarter. Other real estate owned represented charges of $43,000 for the quarterly period ended December 31,
2012, compared to net charges of $34,000 in the prior year’s quarter. In the quarter ended December 31, 2012, the Company
realized a net loss on the sale of REO of $18,000 as well as other-than-temporary impairment charges of $25,000.



Non-interest Expense



Non-interest expense totaled
$1.4 million for the three months ended December 31, 2012 and 2011, with the current period reflecting an increase of $19,000,
or 1.3%, compared to the same period in 2011. The decrease was primarily related to an increase in employee compensation and benefits,
which increased $45,000 or 5.8% and was linked to higher retirement expense. Foreclosure and OREO expenses (net) was actually a
net gain of $11,000 for the recently ended quarter compared to net expense of $15,000 for the prior year period, as rental income
exceeded rental expense and occupancy rates were higher. The core deposit intangible created when the Company purchased First Federal
of Frankfort became completely amortized in the fiscal year ended June 30, 2012. Consequently, amortization of intangible assets
for the recently ended quarter was nil, compared to $32,000 for the prior year period.



Federal Income Tax Expense



Federal income taxes expense
totaled $307,000 for the three months ended December 31, 2012, compared to $190,000 in the prior year period. The effective tax
rates were 24.9% and 32.9% for the three-month periods ended December 31, 2012 and 2011, respectively.



39







Kentucky First Federal Bancorp



ITEM 3: Quantitative and Qualitative
Disclosures About Market Risk



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



ITEM 4: Controls and Procedures



The Company’s Chief Executive
Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as defined under Rules
13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report,
and have concluded that the Company’s disclosure controls and procedures were effective.



The Company’s Chief Executive
Officer and Chief Financial Officer have also concluded that there were no significant changes during the quarter ended December
31, 2012, in the Company’s internal control over financial reporting or in other factors that have materially affected, or
are reasonably likely to materially affect, the Company’s internal control over financial reporting.



40







Kentucky First Federal Bancorp



PART II



ITEM 1.	           Legal Proceedings



Not applicable.



ITEM 1A.      
  Risk Factors



Not applicable.



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



(c)	The following table
sets forth information regarding Company’s repurchases of its common stock during the quarter ended December 31, 2012.



|                    |  |             |   |  |                    |   |   | Total # of          |  |  |                       | 
|------------------- |  | ----------- | - |  | ------------------ | - | - | ------------------- |  |  | --------------------- | 
|                    |  |             |   |  | Average            |   |   | shares purchased    |  |  | Maximum # of shares   | 
|                    |  | Total       |   |  | price paid         |   |   | as part of publicly |  |  | that may yet be       | 
|                    |  | # of shares |   |  | per share          |   |   | announced plans     |  |  | purchased under       | 
|Period              |  | purchased   |   |  | (incl commissions) |   |   | or programs         |  |  | the plans or programs | 
|                    |  |             |   |  |                    |   |   |                     |  |  |                       | 
|October 1-31, 2012  |  |             | — |  |                    | $ | — |                     |  |  | —                     | 
|November 1-30, 2012 |  |             | — |  |                    | $ | — |                     |  |  | —                     | 
|December 1-31, 2012 |  |             | — |  |                    | $ | — |                     |  |  | —                     | 



(1)  On May 14, 2010, the Company
announced the completion of the stock repurchase program begun on October 17, 2008 and initiated another program for the
repurchase of up to 150,000 shares of its Common Stock. The Company has suspended its repurchase program, as certain
regulations requiring Federal Reserve Bank of Cleveland (“FRB”) approval of stock repurchases became applicable
to the Company upon the completion of its acquisition of CKF Bancorp, Inc. As of the date of this Form 10-Q, the Company has
not determined whether or when to request FRB approval to resume stock repurchases.



ITEM 3.            Defaults Upon Senior Securities





Not applicable.



ITEM 4.	           Mine Safety Disclosures.





Not applicable.



ITEM 5.           	Other Information



None.



ITEM 6.           	Exhibits





| | 3.11 | Charter of Kentucky First Federal Bancorp
| | ---- | -----------------------------------------

| | 3.21 | Bylaws of Kentucky First Federal Bancorp, as amended
and restated
| | ---- | -----------------------------------------------------------------

| | 4.11 | Specimen Stock Certificate of Kentucky First Federal
Bancorp
| | ---- | ------------------------------------------------------------



| | 10.1 | Employment Agreement between Kentucky First Federal Bancorp and William H. Johnson
| | ---- | ----------------------------------------------------------------------------------



| | 10.2 | Employment Agreement between First Federal Savings Bank of Frankfort and William H. Johnson
| | ---- | -------------------------------------------------------------------------------------------



| | 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
| | ---- | ---------------------------------------------------------------------------










(1)	Incorporated
herein by reference to the Company’s Registration Statement on Form S-1 (File No. 333-119041).



41







Kentucky First Federal Bancorp



SIGNATURES



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



|      |                   |  | KENTUCKY FIRST FEDERAL BANCORP
|----- | ----------------- |  | ------------------------------
|      |                   |  |                               
|Date: | February 21, 2013 |  | By:                           
|      |                   |  |                               
|      |                   |  |                               
|      |                   |  |                               
|Date: | February 21, 2013 |  | By:                           
|      |                   |  |                               
|      |                   |  |                               



42