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 March
31,
2009





OR





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





For the
transition period from ____________ to _______________





Commission
File Number:0-51176





KENTUCKY FIRST FEDERAL BANCORP


(Exact
name of registrant as specified in its charter)





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





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


(606) 436-3860


(Registrant’s
telephone number, including area code)




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




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months or such shorter period that the issuer was required to file
such reports and (2) has been subject to such filing requirements for the past
ninety days:  Yes xNo
 ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).  Yes  ̈     No
 ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a 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 o
              Accelerated
      filer oNon-accelerated
      filer o
              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 May 8, 2009, the
Corporation had 7,867,134 shares of $.01 par value common stock
outstanding.








INDEX





PagePART
      I-
                        ITEM
      1
                        FINANCIAL
      INFORMATIONCondensed
      Consolidated Statements of Financial Condition
                        3Condensed
      Consolidated Statements of Earnings
                        4Condensed
      Consolidated Statements of Comprehensive Income
                        5Condensed
      Consolidated Statements of Cash Flows
                        6Notes
      to Condensed Consolidated Financial Statements
                        8ITEM
      2
                        Management’s
      Discussion and Analysis ofFinancial
      Condition and Results of Operations
                        13ITEM
      3
                        Quantitative
      and Qualitative DisclosuresAbout
      Market Risk
                        20ITEM
      4T
                        Controls
      and Procedures
                        20PART
      II-
                        OTHER
      INFORMATION
                        21SIGNATURES
                        23




2





PART
I


ITEM 1:
Financial
Information


Kentucky
First Federal Bancorp





CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION





(In
thousands, except per share data)


March 31,
                                
                                
                                June 30,2009
                                
                                
                                2008(Unaudited)ASSETSCash
      and due from banks
                                
                                $
                                1,194
                                
                                
                                $
                                790Interest-bearing
      deposits in other financial institutions
                                
                                
                                2,334
                                
                                
                                
                                15,176Cash
      and cash equivalents
                                
                                
                                3,528
                                
                                
                                
                                15,966Interest-bearing
      deposits
                                
                                
                                100
                                
                                
                                
                                100Available-for-sale
      securities
                                
                                
                                5,504
                                
                                
                                
                                5,480Held-to-maturity
      securities, at amortized cost - approximatefair
      value of $15,873 and $16,409 atMarch
      31, 2009 and June 30, 2008, respectively
                                
                                
                                15,486
                                
                                
                                
                                16,959Loans
      available for sale
                                
                                
                                -
                                
                                
                                
                                86Loans
      receivable
                                
                                
                                188,724
                                
                                
                                
                                182,717Allowance
      for loan losses
                                
                                
                                (667
                                )
                                
                                
                                (666
                                )Real
      estate acquired through foreclosure
                                
                                
                                99
                                
                                
                                
                                21Office
      premises and equipment, net
                                
                                
                                2,884
                                
                                
                                
                                2,727Federal
      Home Loan Bank stock
                                
                                
                                5,641
                                
                                
                                
                                5,566Accrued
      interest receivable
                                
                                
                                673
                                
                                
                                
                                628Bank-owned
      life insurance
                                
                                
                                2,407
                                
                                
                                
                                2,339Goodwill
                                
                                
                                14,507
                                
                                
                                
                                14,507Intangible
      assets, net
                                
                                
                                382
                                
                                
                                
                                480Prepaid
      expenses and other assets
                                
                                
                                274
                                
                                
                                
                                266Prepaid
      federal income taxes
                                
                                
                                352
                                
                                
                                
                                479Total
      assets
                                
                                $
                                239,894
                                
                                
                                $
                                247,655LIABILITIES
      AND SHAREHOLDERS’ EQUITYDeposits
                                
                                $
                                138,428
                                
                                
                                $
                                137,634Advances
      from the Federal Home Loan Bank
                                
                                
                                40,297
                                
                                
                                
                                47,801Advances
      by borrowers for taxes and insurance
                                
                                
                                219
                                
                                
                                
                                331Accrued
      interest payable
                                
                                
                                222
                                
                                
                                
                                245Deferred
      federal income taxes
                                
                                
                                1,258
                                
                                
                                
                                1,234Other
      liabilities
                                
                                
                                638
                                
                                
                                
                                617Total
      liabilities
                                
                                
                                181,062
                                
                                
                                
                                187,862Commitments
      and contingencies
                                
                                
                                -
                                
                                
                                
                                -Shareholders’
      equityPreferred
      stock, 500,000 shares authorized, $.01 parvalue;
      no shares issued
                                
                                
                                -
                                
                                
                                
                                -Common
      stock, 20,000,000 shares authorized $.01par
      value; 8,596,064 shares issued
                                
                                
                                86
                                
                                
                                
                                86Additional
      paid-in capital
                                
                                
                                36,187
                                
                                
                                
                                35,834Retained
      earnings
                                
                                
                                32,392
                                
                                
                                
                                32,291Shares
      acquired by stock benefit plans
                                
                                
                                (2,597
                                )
                                
                                
                                (2,735
                                )Treasury
      shares at cost, 723,930 and 559,330 shares at March 31,
    2009
                                
                                
                                (7,326
                                )
                                
                                
                                (5,700
                                )and
      June 30, 2008, respectivelyAccumulated
      other comprehensive income
                                
                                
                                90
                                
                                
                                
                                17Total
      shareholders’ equity
                                
                                
                                58,832
                                
                                
                                
                                59,793Total
      liabilities and shareholders’ equity
                                
                                $
                                239,894
                                
                                
                                $
                                247,655





See Notes
to Condensed Consolidated Financial Statements.


3


Kentucky
First Federal Bancorp





CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS





(Unaudited)


(In
thousands, except per share data)





Nine
      months ended
                              
                              
                              Three
      months endedMarch
      31,
                              
                              
                              March
      31,2009
                              
                              
                              2008
                              
                              
                              2009
                              
                              
                              2008Interest
      incomeLoans
                              
                              $
                              8,342
                              
                              
                              
                              7,873
                              
                              
                              $
                              2,787
                              
                              
                              $
                              2,669Mortgage-backed
      securities
                              
                              
                              433
                              
                              
                              
                              507
                              
                              
                              
                              141
                              
                              
                              
                              165Investment
      securities
                              
                              
                              202
                              
                              
                              
                              1,305
                              
                              
                              
                              67
                              
                              
                              
                              319Interest-bearing
      deposits and other
                              
                              
                              271
                              
                              
                              
                              303
                              
                              
                              
                              64
                              
                              
                              
                              98Total
      interest income
                              
                              
                              9,248
                              
                              
                              
                              9,988
                              
                              
                              
                              3,059
                              
                              
                              
                              3,251Interest
      expenseDeposits
                              
                              
                              3,137
                              
                              
                              
                              3,729
                              
                              
                              
                              1,002
                              
                              
                              
                              1,205Borrowings
                              
                              
                              1,350
                              
                              
                              
                              2,206
                              
                              
                              
                              428
                              
                              
                              
                              622Total
      interest expense
                              
                              
                              4,487
                              
                              
                              
                              5,935
                              
                              
                              
                              1,430
                              
                              
                              
                              1,827Net
      interest income
                              
                              
                              4,761
                              
                              
                              
                              4,053
                              
                              
                              
                              1,629
                              
                              
                              
                              1,424Provision
      for losses on loans
                              
                              
                              15
                              
                              
                              
                              12
                              
                              
                              
                              -
                              
                              
                              
                              12Net
      interest income after provision for losses on loans
                              
                              
                              4,746
                              
                              
                              
                              4,041
                              
                              
                              
                              1,629
                              
                              
                              
                              1,412Other
      operating incomeEarnings
      on bank-owned life insurance
                              
                              
                              69
                              
                              
                              
                              64
                              
                              
                              
                              22
                              
                              
                              
                              21Gain
      on sale of loans
                              
                              
                              40
                              
                              
                              
                              10
                              
                              
                              
                              22
                              
                              
                              
                              7Other
      operating
                              
                              
                              66
                              
                              
                              
                              59
                              
                              
                              
                              17
                              
                              
                              
                              17Total
      other income
                              
                              
                              175
                              
                              
                              
                              133
                              
                              
                              
                              61
                              
                              
                              
                              45General,
      administrative and other expenseEmployee
      compensation and benefits
                              
                              
                              2,155
                              
                              
                              
                              2,200
                              
                              
                              
                              737
                              
                              
                              
                              710Occupancy
      and equipment
                              
                              
                              319
                              
                              
                              
                              259
                              
                              
                              
                              116
                              
                              
                              
                              90Franchise
      taxes
                              
                              
                              132
                              
                              
                              
                              117
                              
                              
                              
                              41
                              
                              
                              
                              39Data
      processing
                              
                              
                              123
                              
                              
                              
                              117
                              
                              
                              
                              42
                              
                              
                              
                              45Other
      operating
                              
                              
                              733
                              
                              
                              
                              567
                              
                              
                              
                              234
                              
                              
                              
                              188Total
      general, administrative and other expense
                              
                              
                              3,462
                              
                              
                              
                              3,260
                              
                              
                              
                              1,170
                              
                              
                              
                              1,072Earnings
      before income taxes
                              
                              
                              1,459
                              
                              
                              
                              914
                              
                              
                              
                              520
                              
                              
                              
                              385Federal
      income taxesCurrent
                              
                              
                              487
                              
                              
                              
                              137
                              
                              
                              
                              552
                              
                              
                              
                              68Deferred
                              
                              
                              (14
                              )
                              
                              
                              153
                              
                              
                              
                              (383
                              )
                              
                              
                              56Total
      federal income taxes
                              
                              
                              473
                              
                              
                              
                              290
                              
                              
                              
                              169
                              
                              
                              
                              124NET
      EARNINGS
                              
                              $
                              986
                              
                              
                              $
                              624
                              
                              
                              $
                              351
                              
                              
                              $
                              261EARNINGS
      PER SHAREBasic
                              
                              $
                              0.13
                              
                              
                              $
                              0.08
                              
                              
                              $
                              0.05
                              
                              
                              $
                              0.03Diluted
                              
                              $
                              0.13
                              
                              
                              $
                              0.08
                              
                              
                              $
                              0.05
                              
                              
                              $
                              0.03DIVIDENDS
      PER SHARE
                              
                              $
                              0.30
                              
                              
                              $
                              0.30
                              
                              
                              $
                              0.10
                              
                              
                              $
                              0.10




See Notes
to Condensed Consolidated Financial Statements.


4


Kentucky
First Federal Bancorp





CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME





(Unaudited)


(In
thousands)








Nine months ended
                      
                      
                      Three months endedMarch 31,
                      
                      
                      March 31,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Net
      earnings
                      
                      $
                      986
                      
                      
                      $
                      624
                      
                      
                      $
                      351
                      
                      
                      $
                      261Other
      comprehensive income, net of taxes (benefits):Unrealized
      holding gains (losses) on securities duringthe
      period, net of taxes (benefits) of $38, $193, $(5)and
      $79 during the respective periods
                      
                      
                      73
                      
                      
                      
                      375
                      
                      
                      
                      (9
                      )
                      
                      
                      153Comprehensive
      income
                      
                      $
                      1,059
                      
                      
                      $
                      999
                      
                      
                      $
                      342
                      
                      
                      $
                      414Accumulated
      comprehensive income
                      
                      $
                      90
                      
                      
                      $
                      88
                      
                      
                      $
                      90
                      
                      
                      $
                      88


See Notes
to Condensed Consolidated Financial Statements.


5


Kentucky
First Federal Bancorp





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS





For the
nine months ended March 31,


(Unaudited)


(In
thousands)


2009
                      
                      
                      2008Cash
      flows from operating activities:Net
      earnings for the period
                      
                      $
                      986
                      
                      
                      $
                      624Adjustments
      to reconcile net earnings to net cashprovided
      by operating activities:Amortization
      of discounts and premiums on loans,investments
      and mortgage-backed securities – net
                      
                      
                      4
                      
                      
                      
                      1Amortization
      of deferred loan origination fees
                      
                      
                      12
                      
                      
                      
                      (34
                      )Amortization
      of premiums on FHLB advances
                      
                      
                      (377
                      )
                      
                      
                      (397
                      )Amortization
      of core deposit intangibles
                      
                      
                      98
                      
                      
                      
                      98Depreciation
      and amortization
                      
                      
                      131
                      
                      
                      
                      108Amortization
      of stock benefit plans
                      
                      
                      425
                      
                      
                      
                      420Provision
      for losses on loans
                      
                      
                      15
                      
                      
                      
                      12Federal
      Home Loan Bank stock dividends
                      
                      
                      (75
                      )
                      
                      
                      (71
                      )Bank-owned
      life insurance earnings
                      
                      
                      (68
                      )
                      
                      
                      (64
                      )Mortgage
      loans originated for sale
                      
                      
                      (3,512
                      )
                      
                      
                      (1,100
                      )Gain
      on sale of loans
                      
                      
                      (40
                      )
                      
                      
                      (10
                      )Proceeds
      from sale of mortgage loans
                      
                      
                      3,638
                      
                      
                      
                      845Increase
      (decrease) in cash, due to changes in:Accrued
      interest receivable
                      
                      
                      (45
                      )
                      
                      
                      130Prepaid
      expenses and other assets
                      
                      
                      (8
                      )
                      
                      
                      15Accrued
      interest payable
                      
                      
                      (23
                      )
                      
                      
                      (63
                      )Other
      liabilities
                      
                      
                      87
                      
                      
                      
                      (8
                      )Federal
      income taxesCurrent
                      
                      
                      127
                      
                      
                      
                      68Deferred
                      
                      
                      (14
                      )
                      
                      
                      56Net
      cash provided by operating activities
                      
                      
                      1,361
                      
                      
                      
                      630Cash
      flows provided by (used in) investing activities:Investment
      securities maturities, prepayments and calls:Held
      to maturity
                      
                      
                      1,473
                      
                      
                      
                      42,078Available
      for sale
                      
                      
                      83
                      
                      
                      
                      207Proceeds
      from sale of real estate acquired through foreclosure
                      
                      
                      8
                      
                      
                      
                      -Loan
      principal repayments
                      
                      
                      39,857
                      
                      
                      
                      29,401Loan
      disbursements
                      
                      
                      (45,976
                      )
                      
                      
                      (40,239
                      )Purchase
      of office equipment
                      
                      
                      (288
                      )
                      
                      
                      (91
                      )Net
      cash provided by (used in)  investing activities
                      
                      
                      (4,843
                      )
                      
                      
                      31,356Cash
      flows provided by (used in) financing activities:Net
      increase (decrease) in deposit accounts
                      
                      
                      794
                      
                      
                      
                      (2,577
                      )Proceeds
      from Federal Home Loan Bank advances
                      
                      
                      17,800
                      
                      
                      
                      21,600Repayment
      of Federal Home Loan Bank advances
                      
                      
                      (24,927
                      )
                      
                      
                      (32,771
                      )Advances
      by borrowers for taxes and insurance
                      
                      
                      (112
                      )
                      
                      
                      (143
                      )Dividends
      paid on common stock
                      
                      
                      (885
                      )
                      
                      
                      (881
                      )Purchase
      of shares for treasury
                      
                      
                      (1,626
                      )
                      
                      
                      (2,081
                      )Net
      cash used in financing activities
                      
                      
                      (8,956
                      )
                      
                      
                      (16,853
                      )Net
      decrease in cash and cash equivalents
                      
                      
                      (12,438
                      )
                      
                      
                      15,133Cash
      and cash equivalents at beginning of period
                      
                      
                      15,966
                      
                      
                      
                      2,720Cash
      and cash equivalents at end of period
                      
                      $
                      3,528
                      
                      
                      $
                      17,853





See Notes
to Condensed Consolidated Financial Statements.


6


Kentucky
First Federal Bancorp





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)





For the
nine months ended March 31,


(Unaudited)


(In
thousands)





2009
                  
                  
                  2008Supplemental
      disclosure of cash flow information:Cash
      paid during the period for:Federal
      income taxes
                  
                  $
                  360
                  
                  
                  $
                  165Interest
      on deposits and borrowings
                  
                  $
                  4,887
                  
                  
                  $
                  6,493Transfers
      from loans to real estate acquiredthrough
      foreclosure, net
                  
                  $
                  86
                  
                  
                  $
                  27





See Notes
to Condensed Consolidated Financial Statements.




7


Kentucky
First Federal Bancorp





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





Nine- and
three-month periods ended March 31, 2009 and 2008





(Unaudited)





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





1.  Basis of
Presentation





The
accompanying unaudited condensed consolidated financial statements, which
represent the condensed consolidated financial condition and results of
operations of the Company, were prepared in accordance with the instructions for
Form 10-Q and, therefore, do not include information or footnotes necessary for
a complete presentation of financial position, results of operations and cash
flows in conformity with accounting principles generally accepted in the United
States of America.  However, in the opinion of management, all
adjustments (consisting of only normal recurring accruals) which are necessary
for a fair presentation of the consolidated financial statements have been
included.  The results of operations for the nine- and three-month
periods ended March 31, 2009, are not necessarily indicative of the results
which may be expected for an entire fiscal year.  The condensed
consolidated statement of financial condition as of June 30, 2008 has been
derived from the audited consolidated statement of financial condition as of
that date.  Certain information and note disclosures normally included
in the Company’s annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted.  These condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company’s Form 10-K annual report for 2008 filed with the
Securities and Exchange Commission.





2.  Principles of
Consolidation





The
condensed consolidated financial statements include the accounts of the Company,
Frankfort First, and its wholly-owned banking subsidiaries, First Federal of
Hazard and First Federal of Frankfort (collectively hereinafter “the
Banks”).  All intercompany transactions and balances have been
eliminated in consolidation.


8


Kentucky
First Federal Bancorp





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





Nine- and
three-month periods ended March 31, 2009 and 2008





(Unaudited)





3.  Earnings Per
Share





Basic
earnings per share is computed based upon the weighted-average common shares
outstanding during the period less shares in the Company’s ESOP that are
unallocated and not committed to be released.  Weighted average common
shares deemed outstanding give effect to 263,572 unallocated ESOP shares for the
nine- and three-month periods ended March 31, 2009, and 282,484 unallocated ESOP
shares for the nine- and three-month periods ended March 31, 2008.




Nine months ended March 31,2009
                    
                    
                    2008Weighted-average
      common shares outstanding (basic)
                    
                    
                    7,574,784
                    
                    
                    
                    7,752,619Dilutive
      effect of:Non-vested
      restricted stock awards
                    
                    
                    -
                    
                    
                    
                    -Assumed
      exercise of stock options
                    
                    
                    -
                    
                    
                    
                    -Weighted-average
      common shares outstanding (diluted)
                    
                    
                    7,574,784
                    
                    
                    
                    7,752,619





Three months ended March 31,2009
                  
                  
                  2008Weighted-average
      common shares outstanding (basic)
                  
                  
                  7,546,058
                  
                  
                  
                  7,693,955Dilutive
      effect of:Non-vested
      restricted stock awards
                  
                  
                  -
                  
                  
                  
                  -Assumed
      exercise of stock options
                  
                  
                  -
                  
                  
                  
                  -Weighted-average
      common shares outstanding (diluted)
                  
                  
                  7,546,058
                  
                  
                  
                  7,693,955





There
were 391,000 and 416,900 share-based awards representing non-dilutive shares
outstanding for the nine- and three-month periods ended March 31, 2009 and 2008,
respectively.





4.  Recent Accounting
Pronouncements




In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (FAS
157).  This Statement defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements. This
Statement emphasizes that fair value is a market-based measurement and should be
determined based on assumptions that a market participant would use when pricing
an asset or liability. This Statement clarifies that market participant
assumptions should include assumptions about risk as well as the effect of a
restriction on the sale or use of an asset. Additionally, this Statement
establishes a fair value hierarchy that provides the highest priority to quoted
prices in active markets and the lowest priority to unobservable data. This
Statement is effective for fiscal years beginning after November 15, 2007,
or July 1, 2008 for the Company, and interim periods within that year. The
adoption of this Statement did not have a material adverse effect on the
Company’s financial position or results of operations.


9


Kentucky
First Federal Bancorp





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





Nine- and
three-month periods ended March 31, 2009 and 2008





(Unaudited)





4.  Recent Accounting
Pronouncements (continued)





In
December 2007, the FASB issued SFAS No 141 (revised 2007), “Business
Combinations,” which replaces SFAS 141.  This Statement applies to all
transactions or other events in which one entity obtains control of one or more
businesses.  It requires all assets acquired, liabilities assumed and
any noncontrolling interest to be measured at fair value at the acquisition
date.  The Statement requires certain costs such as
acquisition-related costs that were previously recognized as a component of the
purchase price, and expected restructuring costs that were previously recognized
as an assumed liability, to be recognized separately from the acquisition as an
expense when incurred.





FAS
141(R) applies prospectively to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008 and may not be applied before that
date.  The initial adoption of this statement is not expected to have
a material adverse effect on the Company’s financial position or results of
operations.





Concurrent
with SFAS No. 141 (R), the FASB issued SFAS No. 160, “Noncontrolling Interests
in Condensed consolidated financial Statements, an Amendment of ARB
51.”  SFAS No. 160 amends ARB 51 to establish accounting and reporting
standards for the noncontrolling interest (formerly known as minority interest)
in a subsidiary and for the deconsolidation of a subsidiary.  A
subsidiary, as defined by SFAS No. 160, includes a variable interest entity that
is consolidated by a primary beneficiary.





A
noncontrolling interest in a subsidiary, previously reported in the statement of
financial position as a liability or in the mezzanine section outside of
permanent equity, will be included within consolidated equity as a separate line
item upon adoption of SFAS No. 160.  Further, consolidated net income
will be reported at amounts that include both the parent (or primary
beneficiary) and the noncontrolling interest with separate disclosure on the
face of the consolidated statement of income of the amounts attributable to the
parent and to the noncontrolling interest.  SFAS No. 160 is effective
for fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008.  The initial adoption of this statement is
not expected to have a material adverse effect on the Company’s financial
position or results of operations.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – Including Amendment of FASB
Statement No. 115.”  This Statement allows companies the choice to
measure many financial instruments and certain other items at fair
value.  The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions.  This Statement is expected to
expand the use of fair value measurement, which is consistent with the Board’s
long-term measurement objectives for accounting for financial
instruments.  This Statement is effective as of the beginning of an
entity’s first fiscal year that begins after November 15, 2007, or July 1, 2008,
as to the Company, and interim periods within that fiscal year.  The
adoption of this statement did not have a material adverse effect on the
Company’s financial position or results of operations.


10


Kentucky
First Federal Bancorp





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





Nine- and
three-month periods ended March 31, 2009 and 2008





(Unaudited)





4.  Recent Accounting
Pronouncements (continued)





On April
9, 2009, the FASB finalized three FASB Staff Positions (“FSPs”) regarding the
accounting treatment for investments including mortgage-backed
securities.  These FSPs changed the method for determining if an
Other-than temporary impairment (“OTTI”) exists and the amount of OTTI to be
recorded through an entity’s income statement.  The changes brought
about by the FSPs provide greater clarity and reflect a more accurate
representation of the credit and noncredit components of an OTTI
event.  The three FSPs are as follows:





·
            FAS
      “SFAS 157-4 Determining
      Fair Value When the Volume and Level of Activity for the Assets or
      Liability Have Significantly Decreased and Identifying Transactions That
      Are Not Orderly” addresses the criteria to be used in the
      determination of an active market in determining whether observable
      transactions are Level 1 or Level 2 under the framework established
      by  SFAS 157, “Fair Value
      Measurements.”  The FSP reiterates that fair value is
      based on the notion of exit price in an orderly transaction between
      willing market participants at the valuation
  date.


·
            FSP
      “SFAS 115-2 and SFAS
      124-2, Recognition and Presentation of Other-than-Temporary Impairments”provide additional guidance designed to create greater clarity and
      consistency in accounting for and presenting impairment losses on debt
      securities.


·
            FSP
      “SFAS 107-1 and APB
      28-1, Interim Disclosures about Fair Value of Financial Instruments”enhances consistency in financial reporting by increasing the
      frequency of fair value
disclosures.





These
staff positions are effective for financial statements issued for periods ending
after June 15, 2009, with early application possible for the quarter ended March
31, 2009.  The Company elected not to adopt any of the above positions
early.  Adoption of these staff positions is not expected to have a
material effect on the Company’s financial position or results of
operations.




5.Commitments




As of
March 31, 2009, loan commitments and unused lines of credit totaled $11.4
million, including $526,000 in undisbursed construction loans, $1.1 million in
one- to four-family mortgage loans and $9.8 million in unused lines of credit
secured by equity in real property.




6.  Disclosures About Fair Value
of Assets and Liabilities




Effective
July 1, 2008, the Company adopted Statement of Financial Accounting Standards
No. 157, “Fair Value
Measurements” (FAS157).  FAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements.




FAS 157
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.  FAS 157 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:


11


Kentucky
First Federal Bancorp





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





Nine- and
three-month periods ended March 31, 2009 and 2008





(Unaudited)







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




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 markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.




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




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




Securities




Where
quoted market prices are available in an active market, securities are
classified within Level 1 of the valuation hierarchy.  If quoted
market prices are not available, then fair values are estimated by using pricing
models, quoted prices of securities with similar characteristics or discounted
cash flows.  Level 2 securities include mortgage
products.




The
following table presents the fair value measurements of assets and liabilities
measured at fair value on a recurring basis and the level within the FAS 157
fair value hierarchy in which the fair value measurements fall at March 31,
2009:


Fair Value Measurements Using(in thousands)Fair Value
                      
                      
                      Quotes Prices
                        in Active
                        Markets for
                        Identical
                        Assets
                        (Level 1)
                      
                      
                      Significant
                        Other
                        Observable
                        Inputs
                        (Level 2)
                      
                      
                      Significant
                        Unobservable
                        Inputs
      (Level 3)Available-for-sale
      securities
                      
                      $
                      5,504
                      
                      
                      $
                      -
                      
                      
                      $
                      5,504
                      
                      
                      $
                      -




12





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, and
rapidly changing technology affecting financial services.





Critical Accounting
Policies





We
consider accounting policies involving significant judgments and assumptions by
management that have, or could have, a material impact on the carrying value of
certain assets or on income to be critical accounting policies.  We
consider the allowance for loan losses  and accounting for goodwill to
be critical accounting policies.





The
allowance for loan losses is the estimated amount considered necessary to cover
probable incurred credit losses in the loan portfolio at the balance sheet
date.  The allowance is established through the provision for losses
on loans which is charged against income.  In determining the
allowance for loan losses, management makes significant estimates and has
identified this accounting policy as one of the most critical for the
Company.





Management
of the Banks perform monthly and quarterly evaluations of the allowance for loan
losses.  Consideration is given to a variety of factors in
establishing this estimate including, but not limited to, current economic
conditions, delinquency statistics, geographic and industry concentrations, the
adequacy of the underlying collateral, the financial strength of the borrower,
results of internal loan reviews, volume and mix of the loan portfolio and other
relevant factors.  This evaluation is inherently subjective as it
requires material estimates that may be susceptible to
change.  Management considers the economic climate in the lending
areas to be among the factors most likely to have an impact on the level of the
required allowance for loan losses.  However, in view of the fact that
the Banks’ local economies are diverse, without significant dependence on a
single industry or employer, the economic climate in the Banks’ market areas are
considered to be stable.  Nevertheless, management continues to
monitor and evaluate factors which could have an impact on the required level of
the allowance.  Nationally, management will watch for issues that may
negatively affect a significant percentage of homeowners in the Banks’ lending
areas.  These may include significant increases in unemployment or
significant depreciation in home prices.  Management reviews
employment statistics periodically when determining the allowance for loan
losses.  Generally, the unemployment rate in the Banks’ lending areas
remains acceptable in relation to historical and national trends. Given the
aforementioned indicators of economic stability and the relatively strong
performance of the Company’s mortgage loan portfolio during the current downturn
in the real estate market, management does not foresee, in the near term, any
significant increases in the required allowance for loan losses related to
economic factors.  Finally, Company management has no current plans to
alter the type of lending offered or collateral accepted by the Banks, but if
such plans change or market conditions result in large concentrations of certain
types of loans, such as commercial real estate or high loan-to-value ratio
residential loans, management would respond with an increase in the overall
allowance for loan losses.


13


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (continued)





Critical Accounting
Policies (continued)





The
allowance for loan losses analysis has two components, specific and general
allocations.  Specific allocations are made for loans that are
determined to be impaired.  Impairment is measured by determining the
present value of expected future cash flows or, for collateral-dependent loans,
the fair value of the collateral adjusted for market conditions and selling
expenses.  The general allocation is determined by segregating the
remaining loans by type of loan, risk-weighting (if applicable) and payment
history.  Historical loss experience, delinquency trends, general
economic conditions and geographic and industry concentrations are also
analyzed.  This analysis establishes factors that are applied to the
loan groups to determine the amount of the general reserve.  Actual
loan losses may be significantly more than the allowance established, which
could have a material negative effect on the Company’s condensed consolidated
financial results.





The
Company has recorded goodwill and core deposit intangibles as a result of its
acquisition of Frankfort First.  Goodwill represents the excess
purchase price paid over the net fair value of the assets acquired and
liabilities assumed in a merger or acquisition.  Pursuant to SFAS No.
142, “Goodwill and Intangible
Assets,” goodwill is not amortized, but is tested for impairment at the
reporting unit annually or whenever an impairment indicator
arises.  The evaluation involves assigning assets and liabilities to
reporting units and comparing the fair value of each reporting unit to its
carrying value including goodwill.  If the fair value of a reporting
unit exceeds its carrying amount, goodwill is not considered
impaired.  However, if the carrying amount of the reporting unit
exceeds the fair value, goodwill is considered impaired.  The
impairment loss equals the excess of carrying value over fair
value.





Core
deposit intangibles represent the value of long-term deposit relationships and
are amortized over their estimated useful lives.  The Company annually
evaluates these estimated useful lives.  If the Company determines
that events or circumstances warrant a change in these estimated useful lives,
the Company will adjust the amortization of the core deposit intangibles, which
could affect future amortization expense.





Discussion of Financial
Condition Changes from June 30, 2008 to March 31, 2009





Assets:  At
March 31, 2009, the Company’s assets totaled $239.9 million, a decrease of $7.8
million, or 3.1%, from total assets at June 30, 2008.  The primary
reason for the decrease in assets was the reduction in cash and cash
equivalents.  The reduction in cash and cash equivalents was used to
reduce borrowings and to increase loans.  It is management’s intention
to deploy excess liquidity into mortgage loans to the extent
possible.





Cash and cash
equivalents:Cash and cash
equivalents decreased by $12.4 million or 77.9% to $3.5 million at March 31,
2009.  It is the Company’s preference to minimize the level of cash
and cash equivalents and invest liquidity into higher-yielding assets, when
possible.  The cash was primarily used to fund new lending and to pay
down advances.





Loans:  Loans
receivable, net, increased to $188.1 million at March 31, 2009, an increase of
$6.0 million or 3.3% from loans receivable, net at June 30,
2008.  Management believes that the successful redeployment of the
Company’s funds from lower-yielding cash, cash equivalents and investment
securities to higher-yielding mortgage loans is important for the long-term
success of the Company.  The Company will continue to emphasize loan
originations to the extent that it is profitable and
prudent.


14


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, 2008 to March 31, 2009
(continued)





Non-Performing
Loans and Classified Assets: At March 31, 2009,
the Company had approximately $2.4 million, or 1.3% of net loans, in loans 90
days or more past due, compared to $1.3 million, or 0.7%, of net loans at June
30, 2008.  The increase in non-performing loans is primarily related to the
economic downturn in general and a weaker real estate market in
particular.  As with most mortgage lenders, the Company has seen an
increase in the number of loans that have become delinquent.  Some of
these delinquencies are caused by lost jobs, while other delinquencies are the
result of illness, death, divorce or other life
happenings.  Heretofore, delinquencies were easier to resolve with the
voluntary sale of the property.  In the current economic environment
sales of properties take longer and the loans remain on the books for longer
periods.  The March 31, 2009 level of non-performing loans is steady
compared to the December 31, 2008 level, although it is slightly higher than in
other prior quarters. Management believes that the Company’s percentage of
non-performing loans to net loans is low when compared to the historical
delinquency rates in the industry.





At March
31, 2009, the Company’s allowance for loan losses of $667,000 represented 28.3%
of nonperforming loans and 0.4% of total loans.





The
Company had $2.9 million in assets classified as substandard for regulatory
purposes at March 31, 2009. Classified loans as a percentage of net loans were
1.5% and 0.9% at March 31, 2009 and  June 30, 2008,
respectively.  Substandard assets included the following:




·
            32
      single-family, owner occupied home loans with loan-to-value ratios
      (percentage of loan balance to the original or an updated appraisal)
      ranging from 24% to 100% totaling $1.9
million;


·
            three
      home equity loans totaling $34,000, which are second mortgages to the
      previously-mentioned single-family, owner-occupied home
    loans;


·
            one
      loan of $205,000 secured by both an owner-occupied, single-family home and
      a single-family rental home with a combined loan-to-value ratio of
      77%;


·
            two
      loans-a first and second mortgage totaling $43,000-secured by an
      owner-occupied duplex with a loan-to-value of
  71%;


·
            two
      loans, a first and second mortgage totaling $164,000 secured by the home
      of a borrower’s ex-spouse with a loan-to-value of approximately
      79%;


·
            three
      loans totaling $176,000 that are secured by single-family rental homes all
      with loan-to-value ratios of approximately 80%; and one loan totaling
      $250,000 secured by three single-family properties and two duplexes with a
      loan-to-value ratio of 79%; and


·
            three
      single family homes, one with an extra lot, which totaled
      $99,000.





At March
31, 2009, the Company had $670,000 in loans classified as special
mention.  This category includes assets which do not currently expose
us to a sufficient degree of risk to warrant classification, but do possess
credit deficiencies or potential weaknesses deserving our close
attention.





At March
31, 2009, no loans were classified as doubtful or loss for regulatory
purposes.





Investment and
Mortgage-Backed Securities:  At March 31,
2009, the Company’s investment and mortgage-backed securities had decreased $1.4
million or 6.4% to $21.0 million.  Approximately $8.0 million of the
Company’s investment and agency securities are scheduled to mature within the
next fifteen months.


15


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, 2008 to March 31, 2009
(continued)





Liabilities:At March 31, 2009, the
Company’s liabilities totaled $181.1 million, a decrease of $6.8 million, or
3.6%, from total liabilities at June 30, 2008.  The decrease in
liabilities was attributed primarily to a $7.5 million, or 15.7%, decrease in
Federal Home Loan Bank advances, which decreased to $40.3 million at March 31,
2009.  The decrease in Federal Home Loan Bank advances was consistent
with management’s strategy to reduce those borrowings as lower-yielding
investment securities mature.  While this strategy is still in place,
management’s ability to execute it will depend to some degree on the demand for
new loans.  Deposits increased $794,000 or 0.6% to $138.4 million at
March 31, 2009.  At times, the Company has chosen not to meet market
rates if the deposits cannot be invested profitably in interest-earning
assets.





Shareholders’
Equity:  At March 31, 2009, the Company’s shareholders’ equity
totaled $58.8 million, a decrease of $961,000 or 1.6% from the June 30, 2008
total.  The decrease in shareholders’ equity is primarily related to
the acquisition of $1.6 million of treasury shares at an average cost of $9.88
per share and the dividend declarations, which totaled $885,000 for the nine
months ended March 31, 2009.





Comparison of Operating
Results for the Nine-Month Periods Ended March 31, 2009 and
2008





General





Net
earnings totaled $986,000 for the nine months ended March 31, 2009, an increase
of $362,000, or 58.0% from the $624,000 in net earnings for the same period in
2008.  The increase was primarily attributable to an increase in net
interest income.





Net Interest
Income





Net
interest income increased $708,000 or 17.5% to $4.8 million for the nine month
period ended March 31, 2009, compared to the 2008 period, due primarily to
decreased cost of funds.  Interest income decreased by $740,000, or
7.4%, to $9.2 million, while interest expense decreased $1.4 million or 24.4% to
$4.5 million for the nine months ended March 31, 2009.  The decrease
in interest income was due primarily to a decline in interest income from
investments, while the decrease in interest expense was attributable to lower
costs for both deposits and advances.





Interest
income from investment securities decreased $1.1 million or 84.5% to $202,000
for the nine month period ended March 31, 2009, primarily as a result of a
decline in the average balance in investment securities, which declined $41.2
million or 83.5% to $8.2 million for the nine months ended March 31,
2009.  The decline in the outstanding balance was the result of
maturities and calls of the Company’s investments, rather than the sale of those
securities.  Somewhat offsetting the decline in interest income from
investments was an increase in interest income from loans, which increased
$469,000 or 6.0% to $8.3 million for the nine month period just
ended.  The increase in interest income on loans was attributable to
an increase in the average balance of loans outstanding, which increased $15.1
million or 8.8% to $187.8 million for the nine months period ended March 31,
2009.  The average rate earned by the loan portfolio declined 16 basis
points to 5.92% for the most recent nine month period compared to the prior
year.  Interest rates on new loans have continued to decline and
increased refinancing activity is likely to cause the yield on loans to continue
to decline as well.


16


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (continued)





Comparison of Operating
Results for the Nine-Month Periods Ended March 31, 2009 and 2008
(continued)





Net Interest Income
(continued)





Interest
expense on deposits decreased $592,000 or 15.9% to $3.1 million for the nine
months ended March 31, 2009, while interest expense on advances decreased
$856,000, or 38.8%, to $1.4 million for the 2009 period compared to the prior
year period.  The decrease in interest expense on advances was
attributable primarily to a decrease in the average balance outstanding, while
the average rate paid on such advances also declined period to
period.  The average balance of advances outstanding decreased $21.6
million, or 32.8%, from $65.8 million for the nine months ended March 31, 2009
to $44.2 million for the nine month period ended March 31, 2009.  The
average rate paid on advances declined 40 basis points to 4.07% for the nine
month period just ended.  The decrease in interest expense on deposits
was due primarily to a decrease in the average rate paid on deposits, which
declined 63 basis points to 3.04% for the nine-month period ended March 31,
2009.  The average balance of deposits outstanding decreased $1.6
million or 1.2% for the nine month period just ended.  Net interest
margin increased by 73 basis points to 2.88% for the nine months ended March 31,
2009, compared to 2.15% for the comparable 2008 period.





Provision for Losses on
Loans





The
Company charges a provision for losses on loans to earnings to bring the total
allowance for loan losses to a level considered appropriate by management based
on historical experience, the volume and type of lending conducted by the Banks,
the status of past due principal and interest payments, general economic
conditions, particularly as such conditions relate to the Banks’ market areas
and other factors related to the collectibility of the Banks’ loan portfolio.
The Company recorded a provision for losses on loans of $15,000 during the nine
months ended March 31, 2009, compared to a provision of $12,000 for the nine
months ended March 31, 2008.  Based on management’s analysis of the
loan portfolio, it was determined that the Allowance for Loan and Lease Losses
(“ALLL”) was slightly underfunded and an addition during the nine months ended
March 31, 2009 was appropriate.  The Company charged off a total of
$14,000 against the ALLL during the nine months ended March 31, 2009, while
there were no charge-offs for the prior year period.  A total of
$10,000 was charged off in association with the acquisition of two pieces of
Real Estate Owned, while a total of $4,000 was charged off against a borrower’s
home equity loan as a result of judgment in a bankruptcy case.  In the
case of the latter, the Company still holds a first and second mortgage on the
property.  Management does not believe the ALLL was underfunded at
March 31, 2009.  However, the significant turmoil in the general
mortgage market makes this calculation even more
difficult.   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.





Other
Income





Other
income totaled $175,000 for the nine months ended March 31, 2009, an increase of
$42,000 from the same period in 2008.  The increase is attributable
primarily to gain on sale of loans, which totaled $40,000 for the nine month
period just ended, compared to $10,000 in the 2008 nine month
period.


17


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (continued)





Comparison of Operating
Results for the Nine-Month Periods Ended March 31, 2009 and 2008
(continued)





General, Administrative and
Other Expense





General,
administrative and other expense totaled $3.5 million for the nine months ended
March 31, 2009, an increase of $202,000, or 6.2%, compared to the same period in
2008.  The increase was due primarily to an increase of $166,000, or
29.3%, in other operating expenses, which totaled $733,000 for the nine months
ended March 31, 2009.  The increase in other operating expense is
chiefly related to costs associated with the Company’s compliance with Section
404 of the Sarbanes-Oxley Act.





Federal Income
Taxes





The
provision for federal income taxes totaled $473,000 for the nine months ended
March 31, 2009, an increase of $183,000, or 63.1%, compared to the same period
in 2008.  The effective tax rates were 32.4% and 31.7% for the
nine-month periods ended March 31, 2009 and 2008, respectively.





Comparison of Operating
Results for the Three-Month Periods Ended March 31, 2009 and
2008





General





Net
earnings totaled $351,000 for the three months ended March 31, 2009, an increase
of $90,000, or 34.5% from the $261,000 in net earnings for the same period in
2008.  The increase was primarily attributable to an increase in net
interest income.





Net Interest
Income





Net
interest income increased $205,000 or 14.4% to $1.6 million for the three month
period ended March 31, 2009, compared to the 2008 period, due primarily to
decreased cost of funds.  Interest income decreased by $192,000, or
5.9%, to $3.1 million, while interest expense decreased $397,000 or 21.7% to
$1.4 million for the three months ended March 31, 2009.





Interest
income from investment securities decreased $252,000 or 79.0% to $67,000 for the
three month period ended March 31, 2009, primarily as a result of a decline in
the average balance in investment securities, which declined $29.4 million or
78.1% to $8.2 million for the three months ended March 31, 2009.  The
decline in the outstanding balance was the result of maturities and calls of the
Company’s investments, rather than the sale of those
securities.  Somewhat offsetting the decline in interest income from
investments was an increase in interest income from loans, which increased
$118,000 or 4.4% to $2.8 million for the three month period just
ended.  The increase in interest income on loans was primarily
attributable to an increase in the average balance of loans outstanding, which
increased $13.7 million or 7.8% to $189.5 million for the three months period
ended March 31, 2009.  The average rate earned by the loan portfolio
declined 19 basis points to 5.88% for the most recent three month period
compared to the prior year.  Interest rates on new loans have
continued to decline and increased refinancing activity is likely to cause the
yield on loans to continue to decline as well.


18





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 March 31, 2009 and 2008
(continued)





Net Interest Income
(continued)





Interest
expense on deposits decreased $203,000 or 16.8% to $1.0 million, while interest
expense on advances decreased $194,000, or 31.2%, to $428,000 for the 2009
period compared to the prior year period.  The decrease in interest
expense on advances was attributable primarily to a decrease in the average
balance outstanding, while the average rate paid on such advances also declined
period to period.  The average balance of advances outstanding
decreased $18.2 million, or 29.9%, from $61.0 million for the three months ended
March 31, 2008 to $42.8 million for the three month period ended March 31,
2009.  The average rate paid on advances declined 8 basis points to
4.00% for the three month period just ended.  The decrease in interest
expense on deposits was due primarily to a decrease in the average rate paid on
deposits, which declined 60 basis points to 2.90% for the three-month period
ended March 31, 2009.  The average balance of deposits outstanding
increased $496,000 or 0.4% for the three month period just ended.  Net
interest margin increased by 60 basis points to 2.98% for the three months ended
March 31, 2009, compared to 2.38% for the comparable 2008 period.





Provision for Losses on
Loans





The
Company recorded no provision for losses on loans during the three months ended
March 31, 2009 compared to a provision of $12,000 for the 2008
period.  Management does not believe the ALLL was underfunded at March
31, 2009.  However, the significant turmoil in the general mortgage
market makes this calculation even more difficult.  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.





Other
Income





Other
income totaled $61,000 for the three months ended March 31, 2009, an increase of
$16,000 from the same period in 2008.  The increase in the 2009 period
is primarily attributable to gain on sale of loans.  Gain on sale of
loans totaled $22,000 for the three month period just ended compared to $7,000
gain on sale of loans realized in the 2008 period.





General, Administrative and
Other Expense





General,
administrative and other expense totaled $1.2 million for the three months ended
March 31, 2009, an increase of $98,000, or 9.1%, compared to the same period in
2008.  This increase was due primarily to an increase in other
operating expenses, which totaled $234,000 for the three months ended March 31,
2009, an increase of $46,000, or 24.5%, from the same period in
2008.  The increase in other operating expense is chiefly related to
costs associated with the Company’s compliance with Section 404 of the
Sarbanes-Oxley Act.





Federal Income
Taxes





The
provision for federal income taxes totaled $169,000 for the three months ended
March 31, 2009, an increase of $45,000, or 36.3%, compared to the same period in
2008.  The effective tax rates were 32.5% and 32.2% for the
three-month periods ended March 31, 2009 and 2008,
respectively.


19




Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (CONTINUED)





Future assessments of the
Federal Deposit Insurance Corporation





On
February 27, 2009, the Board of Directors of the Federal Deposit Insurance
Corporation (“FDIC”) voted to amend the restoration plan for the Deposit
Insurance Fund.  The changes that are expected to affect the Company
include one or more special assessments, a change in the assessment rates and a
change to the assessment system, which includes higher rates for institutions
that rely significantly on secured liabilities.





The FDIC
proposed to impose a special assessment on insured institutions of 20 basis
points on outstanding deposits as of June 30, 2009.  This assessment
is to be collected on September 30, 2009.  The interim rule would also
permit the Board to impose one or more emergency special assessments after June
30, 2009, of up to 10 basis points on outstanding deposits, if deemed necessary
by the Board.  This interim rule was subject to a 30 day comment
period and is subject to change.  On March 5, 2009, the FDIC announced
its intention to cut the agency’s planned special emergency assessment in half,
from 20 to 10 basis points, provided that Congress clears legislation expanding
the FDIC’s line of credit with the Treasury to $100 billion.





Previously,
most banks in the best risk category paid anywhere from 12 cents per $100 of
deposits to 14 cents per $100 for insurance.  Under the final rule,
beginning April 1, 2009, banks in this category will pay initial base rates
ranging from 12 cents per $100 to 16 cents per $100 on an annual
basis.





Finally,
changes to the assessment system include higher rates for institutions that rely
significantly on secured liabilities.  These liabilities can include
brokered deposits and FHLB advances.  The Company had no brokered
deposits at March 31, 2009, and has not utilized brokered deposits in the
past.  The Company does, however, utilize FHLB advances and, as such,
could experience higher assessments as a result.





At March
31, 2009, the Company had approximately $111,000 of special one-time credit
available to offset future FDIC assessments.





ITEM
3:  Quantitative and Qualitative
Disclosures About Market Risk





There has
been no material change in the Company’s market risk since the disclosure
included under the heading “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Asset and Liability Management” in the
Company’s Form 10-K filed September 28, 2008.





ITEM
4T:  Controls and
Procedures





The
Company’s Chief Executive Officer and Chief Financial Officer have evaluated the
Company’s disclosure controls and procedures (as defined under Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end
of the period covered by this report.  Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that the
Company’s disclosure controls and procedures are effective.  During
the quarterly period ended March 31, 2009, there were no changes in the
Company’s internal control over financial reporting which materially affected,
or are reasonably likely to materially affect, the Company’s internal controls
over financial reporting.


20





Kentucky
First Federal Bancorp





PART
II





ITEM
1. Legal
Proceedings




Not applicable.





ITEM
1A. Risk
Factors





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





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




(c)           The
following table sets forth information regarding Company’s repurchases of its
common stock during the quarter ended March 31, 2009.





Total # ofAverage
                
                
                shares purchased
                
                
                Maximum # of sharesTotal
                
                
                price paid
                
                
                as part of publicly
                
                
                that may yet be# of shares
                
                
                per share
                
                
                announced plans
                
                
                purchased underPeriod
                
                purchased
                
                
                (incl commissions)
                
                
                or programs
                
                
                the plans or programsJanuary
      1-31, 2009
                
                
                15,700
                
                
                $
                10.03
                
                
                
                15,700
                
                
                
                88,000February
      1-28, 2009
                
                
                24,500
                
                
                $
                10.16
                
                
                
                24,500
                
                
                
                63,500March
      1-31, 2009
                
                
                16,000
                
                
                $
                10.23
                
                
                
                16,000
                
                
                
                47,500





(1) 
On October 17, 2008, the Company announced a program (its sixth) for the
repurchase of up to 150,000 shares of its Common Stock.




ITEM
3. Defaults Upon Senior
Securities




Not applicable.





ITEM4. Submission of Matters to a
Vote of Security Holders




None.




21





Kentucky
First Federal Bancorp





PART II
(continued)




ITEM5.
              Other
      Information




None.





ITEM6.
              Exhibits




31.1
            CEO
      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2
            CFO
      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1
            CEO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2
            CFO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002


22


Kentucky
First Federal Bancorp





SIGNATURES





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





KENTUCKY
      FIRST FEDERAL BANCORPDate:
                May 11, 2009
                
                By:  /s/Tony D. WhitakerTony
      D. WhitakerChairman
      of the Board and Chief Executive OfficerDate:
                May 11, 2009
                
                By:  /s/R. Clay HuletteR.
      Clay HuletteVice
      President and Chief Financial Officer




23