UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q/A


(Amendment
No. 1)


(Mark
One)


x
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period ended December
31,
2009




OR


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





For the
transition period from ____________ to _______________





Commission
File Number:0-51176





KENTUCKY FIRST FEDERAL
    BANCORP(Exact
      name of registrant as specified in its
charter)





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





479 Main Street, Hazard,
      Kentucky  41702(Address
      of principal executive offices)(Zip Code)(606) 436-3860(Registrant’s
      telephone number, including area code)(Former
      name, former address and former fiscal year, if changed since last
      report)





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





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




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





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





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.) Yes  ̈      No
x





APPLICABLE
ONLY TO CORPORATE ISSUERS





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:  At February 9, 2010, the
latest practicable date, the Corporation had 7,853,934 shares of $.01 par value
common stock outstanding.





Kentucky
First Federal Bancorp


Explanatory
Note





This
amendment to the Quarterly report on Form 10-Q (“Amended Report”) for Kentucky
First Federal Bancorp (the “Company”) for the period ended December 31, 2009, is
being filed to amend portions of the Company’s Quarterly Report filed on Form
10-Q for the period ended December 31, 2009, which was originally filed with the
Securities and Exchange Commission (“SEC”) on February 12, 2010.





The
Company amended the June 30, 2009 audited financial statements in the Annual
Report on Form 10-K/A filed on September 30, 2010 to reflect certain adjustments
to its accrued income tax liability.  The adjustments are more fully
described in Notes to Consolidated Financial Statements, Note 10 Prior Period
Adjustment.  The Company is amending the December 31, 2009 unaudited
financial statements to reflect the impact of this restatement and its impact on
the December 31, 2009 unaudited financial statements and the June 30, 2009
financial statements included in the filing.





The
Company is amending Item 1. “Financial Information”, and Item 2. “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” to
reflect the restatement of financial statements in connection with the following
adjustment:





The
increase of retained earnings by $144,000 from $31.216 million to $31.360
million as of December 31, 2009 to reflect the impact of amending the 2009
Annual report on Form 10-K/A on September 30, 2010.  The restatements
also reduced prepaid federal income tax from $473,000 to $393,000 and reduced
deferred federal income taxes from $1.449 million to $1.225 million as of
December 31, 2009.





In
connection with the restatement as described above, the Company has reevaluated
the effectiveness of its internal controls over financial reporting and its
disclosure controls and procedures accordingly.  See Item 4. “Controls
and Procedures” for additional discussion on internal controls.


2


INDEX





PagePART
      I -
                      ITEM
      1
                      FINANCIAL
      INFORMATIONConsolidated
      Balance Sheets
                      4Consolidated
      Statements of Income
                      5Consolidated
      Statements of Comprehensive Income (Loss)
                      6Consolidated
      Statements of Cash Flows
                      7Notes
      to Consolidated Financial Statements
                      9ITEM
      2
                      Management’s
      Discussion and Analysis of Financial
      Condition and Results of Operations
                      21ITEM
      4
                      Controls
      and Procedures
                      27PART
      II -
                      OTHER
      INFORMATION
                      28SIGNATURES
                      29


3


PART
I


ITEM 1:
Financial
Information


Kentucky
First Federal Bancorp





CONSOLIDATED
BALANCE SHEETS


(Unaudited)


(Dollars
in thousands, except per share data)


Restated
                
                
                RestatedDecember 31,
                
                
                June
      30,2009
                
                
                2009ASSETSCash
      and due from financial institutions
                
                $
                968
                
                
                $
                1,548Interest-bearing
      demand deposits
                
                
                3,133
                
                
                
                2,669Cash
      and cash equivalents
                
                
                4,101
                
                
                
                4,217Interest-bearing
      deposits
                
                
                100
                
                
                
                100Available-for-sale
      securities
                
                
                5,327
                
                
                
                5,451Held-to-maturity
      securities, at amortized cost- approximate fair value of $11,316 and
      $15,317 at December 31, and June 30, 2009, respectively
                
                
                10,972
                
                
                
                14,999Loans
      held for sale
                
                
                105
                
                
                
                230Loans
      receivable
                
                
                192,520
                
                
                
                189,609Allowance
      for loan losses
                
                
                (1,618
                )
                
                
                (678
                )Real
      estate acquired through foreclosure
                
                
                110
                
                
                
                109Office
      premises and equipment, net
                
                
                2,794
                
                
                
                2,844Federal
      Home Loan Bank stock
                
                
                5,641
                
                
                
                5,641Accrued
      interest receivable
                
                
                613
                
                
                
                750Bank-owned
      life insurance
                
                
                2,473
                
                
                
                2,428Goodwill
                
                
                14,507
                
                
                
                14,507Other
      intangible assets, net
                
                
                284
                
                
                
                349Advances
      to borrowers for taxes and insurance
                
                
                22
                
                
                
                —Prepaid
      federal income taxes
                
                
                393
                
                
                
                —Prepaid
      expenses and other assets
                
                
                1,049
                
                
                
                345Total
      assets
                
                $
                239,393
                
                
                $
                240,901LIABILITIES
      AND SHAREHOLDERS’ EQUITYDeposits
                
                $
                142,552
                
                
                $
                139,743Advances
      from the Federal Home Loan Bank
                
                
                36,837
                
                
                
                40,156Advances
      by borrowers for taxes and insurance
                
                
                —
                
                
                
                290Accrued
      interest payable
                
                
                173
                
                
                
                189Accrued
      federal income taxes
                
                
                —
                
                
                
                147Deferred
      federal income taxes
                
                
                1,225
                
                
                
                1,115Other
      liabilities
                
                
                478
                
                
                
                723Total
      liabilities
                
                
                181,265
                
                
                
                182,363Commitments
      and contingencies
                
                
                -
                
                
                
                -Shareholders’
      equityPreferred
      stock, 500,000 shares authorized, $.01 par value;  no shares
      issued
                
                
                -
                
                
                
                -Common
      stock, 20,000,000 shares authorized, $.01 par value; 8,596,064 shares
      issued and outstanding
                
                
                86
                
                
                
                86Additional
      paid-in capital
                
                
                36,537
                
                
                
                36,223Retained
      earnings
                
                
                31,360
                
                
                
                32,074Shares
      acquired by stock benefit plans
                
                
                (2,457
                )
                
                
                (2,557
                )Treasury
      shares at cost, 734,930 and 728,930 common shares at December 31, and June
      30, 2009, respectively
                
                
                (7,446
                )
                
                
                (7,379
                )Accumulated
      other comprehensive income
                
                
                48
                
                
                
                91Total
      shareholders’ equity
                
                
                58,128
                
                
                
                58,538Total
      liabilities and shareholders’ equity
                
                $
                239,393
                
                
                $
                240,901





See
accompanying notes.


4


Kentucky
First Federal Bancorp





CONSOLIDATED
STATEMENTS OF INCOME


(Unaudited)


(Dollars
in thousands, except per share data)




Six
      months ended
                
                
                Three
      months endedDecember
      31,
                
                
                December
      31,2009
                
                
                2008
                
                
                2009
                
                
                2008Interest
      incomeLoans
                
                $
                5,282
                
                
                $
                5,555
                
                
                $
                2,634
                
                
                $
                2,776Mortgage-backed
      securities
                
                
                252
                
                
                
                292
                
                
                
                123
                
                
                
                143Investment
      securities
                
                
                91
                
                
                
                135
                
                
                
                44
                
                
                
                67Interest-bearing
      deposits and other
                
                
                134
                
                
                
                207
                
                
                
                64
                
                
                
                72Total
      interest income
                
                
                5,759
                
                
                
                6,189
                
                
                
                2,865
                
                
                
                3,058Interest
      expenseDeposits
                
                
                1,841
                
                
                
                2,135
                
                
                
                891
                
                
                
                1,055Borrowings
                
                
                807
                
                
                
                922
                
                
                
                391
                
                
                
                442Total
      interest expense
                
                
                2,648
                
                
                
                3,057
                
                
                
                1,282
                
                
                
                1,497Net
      interest income
                
                
                3,111
                
                
                
                3,132
                
                
                
                1,583
                
                
                
                1,561Provision
      for losses on loans
                
                
                1,028
                
                
                
                15
                
                
                
                60
                
                
                
                -Net
      interest income after provision for losses on loans
                
                
                2,083
                
                
                
                3,117
                
                
                
                1,523
                
                
                
                1,561Non-interest
      incomeEarnings
      on bank-owned life insurance
                
                
                45
                
                
                
                47
                
                
                
                22
                
                
                
                29Gain
      on sale of loans
                
                
                59
                
                
                
                18
                
                
                
                31
                
                
                
                6Loss
      on sale of real estate acquired through foreclosure
                
                
                (27
                )
                
                
                -
                
                
                
                (15
                )
                
                
                -Other
      operating
                
                
                51
                
                
                
                49
                
                
                
                23
                
                
                
                24Total
      non-interest income
                
                
                128
                
                
                
                114
                
                
                
                61
                
                
                
                59Non-interest
      expenseEmployee
      compensation and benefits
                
                
                1,526
                
                
                
                1,412
                
                
                
                780
                
                
                
                712Occupancy
      and equipment
                
                
                145
                
                
                
                204
                
                
                
                74
                
                
                
                116Franchise
      taxes
                
                
                92
                
                
                
                87
                
                
                
                46
                
                
                
                47Data
      processing
                
                
                112
                
                
                
                81
                
                
                
                59
                
                
                
                39FDIC
      insurance premiums
                
                
                93
                
                
                
                12
                
                
                
                51
                
                
                
                6Amortization
      of intangible assets
                
                
                65
                
                
                
                33
                
                
                
                65
                
                
                
                33Other
      operating
                
                
                403
                
                
                
                463
                
                
                
                184
                
                
                
                196Total
      non-interest expense
                
                
                2,436
                
                
                
                2,292
                
                
                
                1,259
                
                
                
                1,146Income
      (loss) before income taxes
                
                
                (225
                )
                
                
                939
                
                
                
                325
                
                
                
                474Federal
      income tax expense (benefit)Current
                
                
                (210
                )
                
                
                (66
                )
                
                
                (30
                )
                
                
                148Deferred
                
                
                132
                
                
                
                370
                
                
                
                140
                
                
                
                3Total
      federal income tax expense (benefit)
                
                
                (78
                )
                
                
                304
                
                
                
                110
                
                
                
                151NET
      INCOME (LOSS)
                
                $
                (147
                )
                
                $
                635
                
                
                $
                215
                
                
                $
                323EARNINGS
      (LOSS) PER SHAREBasic
                
                $
                (0.02
                )
                
                $
                0.08
                
                
                $
                0.03
                
                
                $
                0.04Diluted
                
                $
                (0.02
                )
                
                $
                0.08
                
                
                $
                0.03
                
                
                $
                0.04DIVIDENDS
      PER SHARE
                
                $
                0.20
                
                
                $
                0.20
                
                
                $
                0.10
                
                
                $
                0.10





See
accompanying notes.


5


Kentucky
First Federal Bancorp





CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)





(Unaudited)


(In
thousands)





Six
      months ended
                  
                  
                  Three
      months endedDecember
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Net
      income (loss)
                  
                  $
                  (147
                  )
                  
                  $
                  635
                  
                  
                  $
                  215
                  
                  
                  $
                  323Other
      comprehensive income (loss), net of taxes (benefits):Unrealized
      holding gains (losses) on securities designated as available for sale, net
      of taxes (benefits) of $(22), $42, $(11) and $46 during the respective
      periods
                  
                  
                  (43
                  )
                  
                  
                  82
                  
                  
                  
                  (21
                  )
                  
                  
                  90Comprehensive
      income (loss)
                  
                  $
                  (190
                  )
                  
                  $
                  717
                  
                  
                  $
                  194
                  
                  
                  $
                  413





See
accompanying notes.


6


Kentucky
First Federal Bancorp





CONSOLIDATED
STATEMENTS OF CASH FLOWS





(Unaudited)


(In
thousands)


Six
      months endedDecember
      31,2009
                
                
                2008Cash
      flows from operating activities:Net
      income (loss) for the period
                
                $
                (147
                )
                
                $
                635Adjustments
      to reconcile net earnings to net cash provided by operating
      activities:Amortization
      of discounts and premiums on loans, investments and mortgage-backed
      securities – net
                
                
                —
                
                
                
                1Amortization
      of deferred loan origination fees
                
                
                (1
                )
                
                
                33Amortization
      of premiums on FHLB advances
                
                
                (226
                )
                
                
                (255
                )Amortization
      of core deposit intangibles
                
                
                65
                
                
                
                65Depreciation
      and amortization
                
                
                85
                
                
                
                76Amortization
      of stock benefit plans
                
                
                283
                
                
                
                284Provision
      for losses on loans
                
                
                1,028
                
                
                
                15Federal
      Home Loan Bank stock dividends
                
                
                —
                
                
                
                (75
                )Bank-owned
      life insurance earnings
                
                
                (45
                )
                
                
                (47
                )Mortgage
      loans originated for sale
                
                
                (2,141
                )
                
                
                (1,210
                )Gain
      on sale of loans
                
                
                (59
                )
                
                
                (18
                )Loss
      on sale of real estate acquired through foreclosure
                
                
                27
                
                
                
                —Proceeds
      from sale of mortgage loans
                
                
                2,325
                
                
                
                1,314Increase
      (decrease) in cash, due to changes in:Accrued
      interest receivable
                
                
                137
                
                
                
                (43
                )Prepaid
      expenses and other assets
                
                
                (726
                )
                
                
                50Accrued
      interest payable
                
                
                (16
                )
                
                
                (13
                )Other
      liabilities
                
                
                (114
                )
                
                
                69Federal
      income taxesCurrent
                
                
                (540
                )
                
                
                (262
                )Deferred
                
                
                132
                
                
                
                370Net
      cash provided by operating activities
                
                
                67
                
                
                
                989Cash
      flows provided by (used in) investing activities:Investment
      securities maturities, prepayments and calls:Held
      to maturity
                
                
                4,027
                
                
                
                975Available
      for sale
                
                
                59
                
                
                
                50Proceeds
      from sale of real estate acquired through foreclosure
                
                
                223
                
                
                
                8Loan
      principal repayments
                
                
                18,403
                
                
                
                26,495Loan
      disbursements
                
                
                (21,652
                )
                
                
                (35,589
                )Purchase
      of office equipment
                
                
                (35
                )
                
                
                (212
                )Net
      cash provided by (used in)  investing activities
                
                
                1,025
                
                
                
                (8,273
                )Cash
      flows provided by (used in) financing activities:Net
      increase (decrease) in deposit accounts
                
                
                2,809
                
                
                
                (1,717
                )Proceeds
      from Federal Home Loan Bank advances
                
                
                4,000
                
                
                
                15,800Repayment
      of Federal Home Loan Bank advances
                
                
                (7,093
                )
                
                
                (16,091
                )Advances
      by borrowers for taxes and insurance
                
                
                (290
                )
                
                
                (329
                )Dividends
      paid on common stock
                
                
                (567
                )
                
                
                (582
                )Treasury
      stock repurchases
                
                
                (67
                )
                
                
                (1,056
                )Net
      cash used in financing activities
                
                
                (1,208
                )
                
                
                (3,975
                )Net
      decrease in cash and cash equivalents
                
                
                (116
                )
                
                
                (11,259
                )Cash
      and cash equivalents at beginning of period
                
                
                4,217
                
                
                
                15,966Cash
      and cash equivalents at end of period
                
                $
                4,101
                
                
                $
                4,707





See
accompanying notes.


7


Kentucky
First Federal Bancorp





CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)





(Unaudited)


(In
thousands)


Six
      months endedDecember
      31,2009
                
                
                2008Supplemental
      disclosure of cash flow information:Cash
      paid during the period for:Federal
      income taxes
                
                $
                330
                
                
                $
                205Interest
      on deposits and borrowings
                
                $
                2,890
                
                
                $
                3,325





See
accompanying notes.


8


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





Six-
and three-months ended December 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 of Reorganization
culminated with Kentucky First Federal Bancorp issuing 4,727,938 common shares,
or 55% of its common shares, to First Federal Mutual Holding Company (“First
Federal MHC”), a federally chartered mutual holding company, with 2,127,572
common shares, or 24.8% of its shares offered for sale at $10.00 per share to
the public and a newly formed Employee Stock Ownership Plan
(“ESOP”).  The Company received net cash proceeds of $16.1 million
from the public sale of its common shares.  The Company’s remaining
1,740,554 common shares were issued as part of the $31.4 million cash and stock
consideration paid for 100% of the common shares of Frankfort First Bancorp
(“Frankfort First”) and its wholly-owned subsidiary, First Federal Savings Bank
of Frankfort (“First Federal of Frankfort”).  The acquisition was
accounted for using the purchase method of accounting and resulted in the
recordation of goodwill and other intangible assets totaling $15.4
million.





1.  Basis of
Presentation





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





2.  Principles of
Consolidation





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


9


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Six- and
three-months ended December 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 and 282,484 unallocated ESOP
shares for the  six- and three-month periods ended December 31, 2009,
and 2008, respectively.





Six
      months ended December 31,2009
                      
                      
                      2008Weighted-average
      common shares outstanding (basic)
                      
                      
                      7,562,968
                      
                      
                      
                      7,663,001Dilutive
      effect of:Assumed
      exercise of stock options
                      
                      
                      -
                      
                      
                      
                      -Weighted-average
      common shares outstanding (diluted)
                      
                      
                      7,562,968
                      
                      
                      
                      7,663,001Three
      months ended December 31,2009
                      
                      
                      2008Weighted-average
      common shares outstanding (basic)
                      
                      
                      7,561,360
                      
                      
                      
                      7,643,602Dilutive
      effect of:Assumed
      exercise of stock options
                      
                      
                      36,566
                      
                      
                      
                      -Weighted-average
      common shares outstanding (diluted)
                      
                      
                      7,597,926
                      
                      
                      
                      7,643,602





There
were 339,200 stock option shares outstanding for both of the six- and
three-month periods ended December 31, 2009 and 2008, but the stock option
shares in the 2008 and year-to-date 2009 periods were not considered in
computing diluted earnings per share, because they were
anti-dilutive.





4.  New Accounting
Standards





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





In
connection with our adoption of FSP ASC 260-10, weighted average voting and
unvested common shares outstanding include unvested shares issued through the
year 2010 incentive compensation plan shares of 25,900 and 51,800 at December
31, 2009 and 2008, respectively.  This FSP requires share-based
compensation awards that qualify as participating securities to be included in
basis EPS using the two-class method.  Adoption of this FSP had no
effect on the basic and diluted EPS for either of the six- or three-month
periods ended December 31, 2008.


10


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Six- and
three-months ended December 31, 2009 and 2008


(unaudited)





4.  New Accounting Standards
(continued)





In April
2009, the FASB issued FSP No. 107-1 and APB 28-1, “Interim Disclosures about
Fair Value of Financial Instruments,” which was subsequently incorporated into
ASC Topic 825, “Financial Instruments.”  This guidance amended FASB
Statement No. 107, “Disclosures about Fair Value of Financial Instruments,” to
require disclosures about fair value of financial instruments for interim
reporting periods of publicly traded companies that were previously only
required in annual financial statements.  The adoption of this
guidance at December 31, 2009, did not impact our results of operations or
financial position, as it only required disclosures, which are included in the
following section.





In May
2009, the FASB issued ASC 855, “Subsequent Events,” which establishes general
standards of accounting for and disclosures of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued.  In particular, this Statement sets forth the period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet
date.  In accordance with this Statement, an entity should apply the
requirements to interim or annual financial periods ending after June 15,
2009.  Subsequent events were evaluated through February 12, 2010,
which is the date the financial statements were issued.  The impact of
the adoption did not have a material impact on the results of operations or
financial position of the Company.





In June
2009 the FASB issued Statement No. 168 (ASC 105-10), “The FASB Accounting
Standards Codification and Hierarchy of Generally Accepted Accounting
Principles-a replacement of FASB Statement No. 162,” Which was subsequently
incorporated into ASC 405.  This Statement has become the source of
authoritative U.S. generally accepted accounting principles (“GAAP”) recognized
by the FASB to be applied by nongovernmental entities.  Rules and
interpretive releases of the Securities and Exchange Commission (“SEC”) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants.  On the effective date of this Statement, the
Codification superseded all then-existing non-SEC accounting and reporting
standards.  All other non-grandfathered non-SEC accounting literature
not included in the Codification will become
non-authoritative.  Management has adopted this Statement for the
period ended December 31, 2009.  All authoritative language has been
updated to comply with ASC 405.





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


11


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Six- and
three-months ended December 31, 2009 and 2008


(unaudited)





4.  New Accounting Standards
(continued)





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





5.  Investment
Securities





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





December 31, 2009Amortized
                          
                          
                          Gross
                            unrealized
                          
                          
                          Gross
                            unrealized
                          
                          
                          Estimated
                            faircost
                          
                          
                          gains
                          
                          
                          losses
                          
                          
                          value(In thousands)Available-for-sale
      SecuritiesU.S.
      Government and federal agency
                          
                          $
                          5,000
                          
                          
                          $
                          70
                          
                          
                          $
                          -
                          
                          
                          $
                          5,070Agency
      residential mortgage-backed securities
                          
                          
                          255
                          
                          
                          
                          3
                          
                          
                          
                          (1
                          )
                          
                          
                          257$
                          5,255
                          
                          
                          $
                          73
                          
                          
                          $
                          (1
                          )
                          
                          $
                          5,327Held-to-maturity
      SecuritiesU.S.
      Government and federal agency
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -Agency
      residential mortgage-backed securities
                          
                          
                          10,972
                          
                          
                          
                          344
                          
                          
                          
                          -
                          
                          
                          
                          11,316$
                          10,972
                          
                          
                          $
                          344
                          
                          
                          $
                          -
                          
                          
                          $
                          11,316June
      30, 2009Amortized
                          
                          
                          Gross
                            unrealized
                          
                          
                          Gross
                            unrealized
                          
                          
                          Estimated
                            faircost
                          
                          
                          gains
                          
                          
                          losses
                          
                          
                          value(In
      thousands)Available-for-sale
      SecuritiesU.S.
      Government and federal agency
                          
                          $
                          5,000
                          
                          
                          $
                          136
                          
                          
                          $
                          -
                          
                          
                          $
                          5,136Agency
      residential mortgage-backed securities
                          
                          
                          314
                          
                          
                          
                          2
                          
                          
                          
                          (1
                          )
                          
                          
                          315$
                          5,314
                          
                          
                          $
                          138
                          
                          
                          $
                          (1
                          )
                          
                          $
                          5,451Held-to-maturity
      SecuritiesU.S.
      Government and federal agency
                          
                          $
                          3,000
                          
                          
                          $
                          2
                          
                          
                          $
                          -
                          
                          
                          $
                          3,002Agency
      residential mortgage-backed securities
                          
                          
                          11,999
                          
                          
                          
                          316
                          
                          
                          
                          -
                          
                          
                          
                          12,315$
                          14,999
                          
                          
                          $
                          318
                          
                          
                          $
                          -
                          
                          
                          $
                          15,317


12


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Six- and
three-months ended December 31, 2009 and 2008


(unaudited)





5.  Investment Securities
(continued)





The
amortized cost and estimated fair value of investment securities by contractual
maturity are shown below.  Actual maturities may differ from
contractual maturities, because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.





December
      31,
                  
                  
                  June
      30,2009
                  
                  
                  2009Estimated
                  
                  
                  
                  
                  
                  Estimatedfair
                  
                  
                  Amortized
                  
                  
                  fair
                  
                  
                  Amortizedvalue
                  
                  
                  cost
                  
                  
                  value
                  
                  
                  cost(In
      thousands)Available-for-saleWithin
      one year
                  
                  $
                  5,070
                  
                  
                  $
                  5,000
                  
                  
                  $
                  5,136
                  
                  
                  $
                  5,000One
      year through five years
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -5,070
                  
                  
                  
                  5,000
                  
                  
                  
                  5,136
                  
                  
                  
                  5,000Mortgage-backed
      securities
                  
                  
                  257
                  
                  
                  
                  255
                  
                  
                  
                  315
                  
                  
                  
                  314Totals
                  
                  $
                  5,327
                  
                  
                  $
                  5,255
                  
                  
                  $
                  5,451
                  
                  
                  $
                  5,314Held-to-maturityWithin
      one year
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  3,002
                  
                  
                  $
                  3,000One
      year through five years
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  --
                  
                  
                  
                  -
                  
                  
                  
                  3,002
                  
                  
                  
                  3,000Mortgage-backed
      securities
                  
                  
                  11,316
                  
                  
                  
                  10,972
                  
                  
                  
                  12,315
                  
                  
                  
                  11,999Totals
                  
                  $
                  11,316
                  
                  
                  $
                  10,972
                  
                  
                  $
                  15,317
                  
                  
                  $
                  14,999





There
were no sales of investment securities during the fiscal year ended June 30,
2009 or the six- and three- month periods ended December 31, 2009.





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


13


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Six- and
three-months ended December 31, 2009 and 2008


(unaudited)





6.Loans
Receivable





The
composition of the loan portfolio is as follows:


December
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2009(In
      thousands)Residential
      real estateOne-
      to four-family
                    
                    $
                    164,625
                    
                    
                    $
                    163,108Multi-family
                    
                    
                    8,728
                    
                    
                    
                    7,303Construction
                    
                    
                    1,175
                    
                    
                    
                    735Nonresidential
      real estate and land
                    
                    
                    11,139
                    
                    
                    
                    11,460Loans
      on deposits
                    
                    
                    2,736
                    
                    
                    
                    2,909Consumer
      and other
                    
                    
                    4,698
                    
                    
                    
                    4,497193,101
                    
                    
                    
                    190,012Less:Undisbursed
      portion of loans in process
                    
                    
                    576
                    
                    
                    
                    404Deferred
      loan origination fees (cost)
                    
                    
                    5
                    
                    
                    
                    (1
                    )Allowance
      for loan losses
                    
                    
                    1,618
                    
                    
                    
                    678$
                    190,902
                    
                    
                    $
                    188,931





Impaired
loans were as follows:


December
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2009(In
      thousands)Loans
      with no allocated allowance for loan losses
                    
                    $
                    1,884
                    
                    
                    $
                    4,086Loans
      with allocated allowance for loan losses
                    
                    
                    5,385
                    
                    
                    
                    1,153Total
                    
                    $
                    7,269
                    
                    
                    $
                    5,239Amount
      of allowance for loan losses allocated
                    
                    $
                    993
                    
                    
                    $
                    56





7.  Allowance for Loan
Losses





The
activity in the allowance for loan losses is summarized as follows:





For
      the Six Months EndedDecember
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008(In
      thousands)Beginning
      balance
                    
                    $
                    678
                    
                    
                    $
                    666Provision
      for losses on loans
                    
                    
                    1,028
                    
                    
                    
                    15Charge-offs
                    
                    
                    (88
                    )
                    
                    
                    -Ending
      balance
                    
                    $
                    1,618
                    
                    
                    $
                    681


14


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Six- and
three-months ended December 31, 2009 and 2008


(unaudited)




7.  Allowance for Loan Losses
(continued)


For
      the Three Months EndedDecember
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008(In
      thousands)Beginning
      balance
                    
                    $
                    1,599
                    
                    
                    $
                    681Provision
      for losses on loans
                    
                    
                    60
                    
                    
                    
                    -Charge-offs
                    
                    
                    (41
                    )
                    
                    
                    -Ending
      balance
                    
                    $
                    1,618
                    
                    
                    $
                    681




8.  Commitments





As of
December 31, 2009, loan commitments and unused lines of credit totaled $10.9
million, including $576,000 in undisbursed construction loans, $936,000 in one-
to four-family mortgage loans and $9.4 million in lines of credit secured by
equity in real property.





9.  Disclosures About Fair Value
of Assets and Liabilities





ASC topic
820 defines fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  ASC topic 820 also establishes
a fair value hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value.  The standard describes three levels of inputs that may be
used to measure fair value:




Level 1 - Quoted prices
in active markets for identical assets or liabilities.




Level 2 - Observable
inputs other than Level 1 prices, such as quoted prices for similar assets or
liabilities; quoted prices in active markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.




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




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




Securities




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


15


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Six- and
three-months ended December 31, 2009 and 2008


(unaudited)





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




Impaired
Loans




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




Other
Real Estate Owned (“OREO”)




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




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





Fair Value Measurements at December 31,
      2009(in
      thousands)Quotes
      Pricesin
      Active
                              
                              
                              SignificantMarkets
      for
                              
                              
                              Other
                              
                              
                              SignificantIdentical
                              
                              
                              Observable
                              
                              
                              UnobservableAssets
                              
                              
                              Inputs
                              
                              
                              InputsDescription
                              
                              Fair Value
                              
                              
                              (Level 1)
                              
                              
                              (Level 2)
                              
                              
                              (Level 3)Available-for-sale
      securities:U.S.
      Government and federal agency
                              
                              $
                              5,070
                              
                              
                              $
                              -
                              
                              
                              $
                              5,070
                              
                              
                              $
                              -Agency
      residential mortgage-backed securities
                              
                              
                              257
                              
                              
                              
                              -
                              
                              
                              
                              257
                              
                              
                              
                              -Totals
                              
                              $
                              5,327
                              
                              
                              $
                              -
                              
                              
                              $
                              5,327
                              
                              
                              $
                              -Fair Value Measurements at June 30,
      2009(in
      thousands)Quotes
      Pricesin
      Active
                              
                              
                              SignificantMarkets
      for
                              
                              
                              Other
                              
                              
                              SignificantIdentical
                              
                              
                              Observable
                              
                              
                              UnobservableAssets
                              
                              
                              Inputs
                              
                              
                              InputsDescription
                              
                              Fair Value
                              
                              
                              (Level 1)
                              
                              
                              (Level 2)
                              
                              
                              (Level 3)Available-for-sale
      securities:U.S.
      Government and federal agency
                              
                              $
                              5,136
                              
                              
                              $
                              -
                              
                              
                              $
                              5,136
                              
                              
                              $
                              -Agency
      residential mortgage-backed securities
                              
                              
                              315
                              
                              
                              
                              -
                              
                              
                              
                              315
                              
                              
                              
                              -Totals
                              
                              $
                              5,451
                              
                              
                              $
                              -
                              
                              
                              $
                              5,451
                              
                              
                              $
                              -


16


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Six- and
three-months ended December 31, 2009 and 2008


(unaudited)





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





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





Fair Value Measurements at December 31,
      2009(in
      thousands)Quotes
      Pricesin
      Active
                    
                    
                    SignificantMarkets
      for
                    
                    
                    Other
                    
                    
                    SignificantIdentical
                    
                    
                    Observable
                    
                    
                    UnobservableAssets
                    
                    
                    Inputs
                    
                    
                    InputsDescription
                    
                    Fair Value
                    
                    
                    (Level 1)
                    
                    
                    (Level 2)
                    
                    
                    (Level 3)Impaired
      loans
                    
                    $
                    6,276
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    6,276Other
      real estate owned
                    
                    
                    110
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    110Totals
                    
                    $
                    6,386
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    6,386





Impaired
loans had a carrying amount of $5.4 million and a valuation allowance of
$993,000 at December 31, 2009.  A charge of $16,000 was included in
earnings for the period.





Fair Value Measurements at June 30,
      2009(in
      thousands)Quotes
      Pricesin
      Active
                    
                    
                    SignificantMarkets
      for
                    
                    
                    Other
                    
                    
                    SignificantIdentical
                    
                    
                    Observable
                    
                    
                    UnobservableAssets
                    
                    
                    Inputs
                    
                    
                    InputsFair Value
                    
                    
                    (Level 1)
                    
                    
                    (Level 2)
                    
                    
                    (Level 3)Impaired
      loans
                    
                    $
                    5,183
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    5,183Other
      real estate owned
                    
                    
                    109
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    109Totals
                    
                    $
                    5,292
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    5,292





ASC 829,
“Disclosures about Fair Value of Financial Instruments,” requires disclosure of
the fair value of financial instruments, both assets and liabilities, whether or
not recognized in the consolidated statement of financial condition, for which
it is practicable to estimate that value.  For financial instruments
where quoted market prices are not available, fair values are based on estimates
using present value and other valuation methods.





The
methods used are greatly affected by the assumptions applied, including the
discount rate and estimates of future cash flows.  Therefore, the fair
values presented may not represent amounts that could be realized in an exchange
for certain financial instruments.





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





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





Held-to-maturity
securities:  For held-to-maturity securities, fair value is
deemed to equal the quoted market price, which is level 2
pricing.


17


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Six- and
three-months ended December 31, 2009 and 2008


(unaudited)





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





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





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





Federal Home Loan Bank
stock, interest-earning deposits and accrued interest
receivable:  It is not practicable to determine the fair value
of FHLB stock due to restrictions placed on its transferability.  The
carrying amounts presented in the consolidated statements of financial condition
for interest-earning deposits and accrued interest receivable are deemed to
approximate fair value.





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





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





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





Commitments to extend
credit:  For fixed-rate and adjustable-rate loan commitments,
the fair value estimate considers the difference between current levels of
interest rates and committed rates.  The fair value of outstanding
loan commitments at December 31, and June 30, 2009, was not
material.


18


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Six- and
three-months ended December 31, 2009 and 2008


(unaudited)





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





Based on
the foregoing methods and assumptions, the carrying value and fair value of the
Company’s financial instruments at December 31 and June 30, 2009 are as
follows:





December 31, 2009
                  
                  
                  June 30, 2009Carrying
                  
                  
                  Fair
                  
                  
                  Carrying
                  
                  
                  Fairvalue
                  
                  
                  value
                  
                  
                  value
                  
                  
                  value(In
      Thousands)Financial
      assetsCash
      and cash equivalents
                  
                  $
                  4,101
                  
                  
                  $
                  4,101
                  
                  
                  $
                  4,217
                  
                  
                  $
                  4,217Interest-earning
      deposits
                  
                  
                  100
                  
                  
                  
                  100
                  
                  
                  
                  100
                  
                  
                  
                  100Available-for-sale
      securities
                  
                  
                  5,327
                  
                  
                  
                  5,327
                  
                  
                  
                  5,451
                  
                  
                  
                  5,451Held-to-maturity
      securities
                  
                  
                  10,972
                  
                  
                  
                  11,316
                  
                  
                  
                  14,999
                  
                  
                  
                  15,317Loans
      held for sale
                  
                  
                  105
                  
                  
                  
                  105
                  
                  
                  
                  230
                  
                  
                  
                  230Loans
      receivable - net
                  
                  
                  190,902
                  
                  
                  
                  196,123
                  
                  
                  
                  188,931
                  
                  
                  
                  193,165Federal
      Home Loan Bank stock
                  
                  
                  5,641
                  
                  
                  
                  n/a
                  
                  
                  
                  5,641
                  
                  
                  
                  n/aAccrued
      interest receivable
                  
                  
                  613
                  
                  
                  
                  613
                  
                  
                  
                  750
                  
                  
                  
                  750Advances
      to borrowers for taxes and insurance
                  
                  
                  22
                  
                  
                  
                  22
                  
                  
                  
                  -
                  
                  
                  
                  -Financial
      liabilitiesDeposits
                  
                  $
                  142,552
                  
                  
                  $
                  145,046
                  
                  
                  $
                  139,743
                  
                  
                  $
                  142,772Advances
      from the Federal Home Loan Bank
                  
                  
                  36,837
                  
                  
                  
                  36,762
                  
                  
                  
                  40,156
                  
                  
                  
                  41,613Advances
      by borrowers for taxes and insurance
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  290
                  
                  
                  
                  290Accrued
      interest payable
                  
                  
                  173
                  
                  
                  
                  173
                  
                  
                  
                  189
                  
                  
                  
                  189


19


Kentucky
First Federal Bancorp





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





Six- and
three-months ended December 31, 2009 and 2008


(unaudited)





10.     Prior Period
Adjustment





On
September 30, 2010, the Company amended its Form 10-K (“Amended Report”) to
restate the financial statements to revise the federal deferred and current
income taxes.  The restatement reduced the deferred federal income tax
liability by $224,000 to eliminate an unsupported excess of the liability from
the Company’s adoption of accounting guidance for uncertain tax
positions.  In addition, the restatement increased the income tax due
by $80,000 from a 4th quarter
fiscal year 2009 dividend distribution from one of the Company’s bank
subsidiaries, which exceeded the Bank’s accumulated earnings and profits and, as
a consequence, resulted in a distribution of the bank’s thrift
reserve.  The financial statements have been restated to revise the
reported liability, prepaid taxes and retained earnings associated with this
restatement.  As a result of the restatement, the following financial
statement line items were adjusted (in thousands):





Consolidated Balance Sheets
                  
                  Restated
                  
                  
                  Previously
                    Reported
                  
                  
                  Effect of
                    ChangeDecember
      31, 2009:Prepaid
      federal income taxes
                  
                  $
                  393
                  
                  
                  $
                  473
                  
                  
                  $
                  (80
                  )Total
      assets
                  
                  
                  239,393
                  
                  
                  
                  239,473
                  
                  
                  
                  (80
                  )Deferred
      federal income taxes
                  
                  
                  1,225
                  
                  
                  
                  1,449
                  
                  
                  
                  (224
                  )Total
      liabilities
                  
                  
                  181,265
                  
                  
                  
                  181,489
                  
                  
                  
                  (224
                  )Retained
      earnings
                  
                  
                  31,360
                  
                  
                  
                  31,216
                  
                  
                  
                  144Total
      shareholders’ equity
                  
                  
                  58,128
                  
                  
                  
                  57,984
                  
                  
                  
                  144Total
      liabilities and shareholders’ equity
                  
                  
                  239,393
                  
                  
                  
                  239,473
                  
                  
                  
                  (80
                  )June
      30, 2009:Accrued
      federal income taxes
                  
                  
                  147
                  
                  
                  
                  67
                  
                  
                  
                  80Deferred
      federal income taxes
                  
                  
                  1,115
                  
                  
                  
                  1,339
                  
                  
                  
                  (224
                  )Total
      liabilities
                  
                  
                  182,363
                  
                  
                  
                  182,507
                  
                  
                  
                  (144
                  )Retained
      earnings
                  
                  
                  32,074
                  
                  
                  
                  31,930
                  
                  
                  
                  144Total
      shareholders’ equity
                  
                  
                  58,538
                  
                  
                  
                  58,394
                  
                  
                  
                  144


20


Kentucky
First Federal Bancorp





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


AND
RESULTS OF OPERATIONS





Forward-Looking
Statements





Certain
statements contained in this report that are not historical facts are
forward-looking statements that are subject to certain risks and
uncertainties.  When used herein, the terms “anticipates,” “plans,”
“expects,” “believes,” and similar expressions as they relate to Kentucky First
Federal Bancorp or its management are intended to identify such forward looking
statements.  Kentucky First Federal Bancorp’s actual results,
performance or achievements may materially differ from those expressed or
implied in the forward-looking statements.  Risks and uncertainties
that could cause or contribute to such material differences include, but are not
limited to, general economic conditions, prices for real estate in the Company’s
market areas, interest rate environment, competitive conditions in the financial
services industry, changes in law, governmental policies and regulations,
rapidly changing technology affecting financial services and the other matters
mentioned in Item 1A of the Company’s Annual Report on Form 10-K/A for the year
ended June 30, 2009.





Discussion of Financial
Condition Changes from June 30, 2009 to December 31, 2009
(RESTATED)





Assets:  At
December 31, 2009, the Company’s assets totaled $239.4 million, a decrease of
$1.5 million, or 0.6%, from total assets at June 30, 2009.  This
decrease was attributed primarily a decrease in investment securities as well as
an increase in the allowance for loan losses, offset by an increase in loans
receivable, net.





Cash and cash
equivalents:Cash and cash
equivalents slightly decreased by $116,000 to $4.1 million at December 31,
2009.  It is management’s intention to continue deploying excess
liquidity into mortgage loans to the extent possible.





Loans:  Loans
receivable, net, increased by $2.0 million or 1.0% to $190.9 million at December
31, 2009, despite an increased level of allowance for loan losses.  A
provision for loan losses of $1.0 million was made during the six months just
ended, chiefly to establish a specific valuation allowance in response to
deterioration in the financial position of a single
borrower.  Otherwise, gross loans receivable increased $2.9 million or
1.5% to $192.5 million at December 31, 2009.  Management believes that
the successful redeployment of the Company’s excess liquidity to higher-yielding
mortgage loans is important for the long-term success of the
Company.  The Company will continue to emphasize loan originations to
the extent that it is profitable and prudent.





Non-Performing
Loans: At December 31,
2009, the Company had approximately $3.3 million, or 1.7% of net loans, in loans
90 days or more past due, compared to $3.9 million or 2.0%, of net loans at June
30, 2009.  At December 31, 2009, the Company’s allowance for loan losses of
$1.6 million represented 48.8% of nonperforming loans and 0.8% of net loans
compared to an allowance balance of $678,000 at June 30, 2009, representing
17.5% of nonperforming loans and 0.4% of net loans..





The
Company had $7.4 million in assets classified as substandard for regulatory
purposes at December 31, 2009, including loans and real estate acquired through
foreclosure (“REO”).  Classified assets as a percentage of net loans
was 3.8% and 4.2% at December 31, and June 30, 2009,
respectively.  REO at December 31, 2009, included four single-family
homes with an aggregate carrying value of $110,000.  All substandard
loans were secured by residential property on which the banks have priority lien
position.  The table below summarizes substandard loans at December
31, 2009:


21


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (continued)





Discussion of Financial
Condition Changes from June 30, 2009 to December 31, 2009 (RESTATED)
(continued)





Numberof
                  
                  
                  CarryingLoans
                  
                  
                  ValueSingle
      family, owner occupied
                  
                  
                  39
                  
                  
                  $
                  2,376Single
      family, non-owner occupied
                  
                  
                  5
                  
                  
                  
                  339More
      than one single family, non-owner occupied
                  
                  
                  3
                  
                  
                  
                  2,6382-4
      family, owner occupied
                  
                  
                  2
                  
                  
                  
                  412-4
      family, non-owner occupied
                  
                  
                  10
                  
                  
                  
                  1,4725
      or more family, non-owner occupied
                  
                  
                  1
                  
                  
                  
                  403Total
      substandard loans
                  
                  
                  60
                  
                  
                  $
                  7,269





Included
in classified loans is one credit relationship which, within the last six
months, experienced significant deterioration and is responsible for most of the
provision for losses during that period.  The loans to this borrower
totaled $4.7 million at December 31, 2009, and all of the underlying collateral
is comprised of 1-4 family residential rental units.  Management
determined this loan to be impaired under ASC 310 “Receivables” and that it
would be unable to collect all amounts due according to the contractual terms of
the loan agreement.  During the six month period ended December 31,
2009, a specific reserve of $925,000 was established based on the estimated fair
value of the underlying collateral less cost to sell.





At
December 31, 2009, the Company had $481,000 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 December 31, 2009, no loans were classified as doubtful
or loss for regulatory purposes.





Investment and
Mortgage-Backed Securities:  At December 31,
2009, the Company’s investment and mortgage-backed securities had decreased $4.2
million or 20.3% to $16.3 million.  Approximately $5.0 million of the
Company’s remaining investment and agency securities are scheduled to mature in
the current fiscal year.





Liabilities:At December 31, 2009,
the Company’s liabilities totaled $181.3 million, a decrease of $1.1 million, or
0.6%, from total liabilities at June 30, 2009.  The decrease in
liabilities was attributed primarily to a $3.3 million, or 8.3%, decrease in
Federal Home Loan Bank advances, which decreased to $36.8 million at December
31, 2009.  Approximately $25.0 million in advances will mature within
the next twelve months.   Management plans to refinance a portion
of its advances utilizing longer-term products at prevailing interest rates,
which are lower than the rates currently being paid on the
advances.





Shareholders’
Equity:  At December 31, 2009, the Company’s shareholders’
equity totaled $58.1 million, a decrease of $410,000 or 0.7% from the June 30,
2009 total.  The primary reasons for the decline were the net loss for
the six months of $147,000 and dividends paid of $567,000.


22


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (continued)





Comparison of Operating
Results for the Six-Month Periods Ended December 31, 2009 and
2008





General





Net loss
totaled $(147,000) for the six months ended December 31, 2009, a decrease of
$782,000 from the $635,000 in net income for the same period in
2008.  The decrease was primarily attributable to a provision for loan
loss of $1.0 million during the period.  Also contributing to the
decrease in net income was a decrease in net interest income and an increase in
FDIC insurance premiums from quarter to quarter.





Net Interest
Income





Net
interest income decreased $21,000 or 0.7% to $3.1 million for the six month
period ended December 31, 2009, compared to the 2008 period, due to interest
income decreasing at a faster pace than interest expense.  Interest
income decreased by $430,000, or 6.9%, to $5.8 million, while interest expense
decreased $409,000 or 13.4% to $2.6 million for the six months ended December
31, 2009.





Interest
income on loans decreased $273,000 or 4.9% to $5.3 million, due primarily to a
decrease in the average rate earned on the loan portfolio.  The
average balance of loans outstanding for the six month period ended December 31,
2009, increased $2.9 million or 1.5% to an average of $189.8 million for the six
months just ended, while the average rate earned declined 38 basis points to
5.57% for the period just ended.  Interest income on interest-bearing
deposits and other decreased $73,000 or 35.3% to $134,000 for the six months
ended December 31, 2009, primarily as a result of reduced volume.  The
average balance outstanding declined $4.4 million or 34.5% to $8.3 million for
the six month period ended December 31, 2009, while the average rate earned on
those assets declined 4 basis points to 3.22%.





Interest
expense on deposits and borrowings both declined period to
period.  Interest expense on deposits decreased $294,000 or 13.8% to
$1.8 million for the six month period ended December 31, 2009, while interest
expense on borrowings declined $115,000 or 12.5% to $807,000 for the same
period.  The decline in interest expense on deposits was attributed
primarily to a reduction in the average rate paid on the deposits, as the
average balance of deposits increased period to period.  The average
rate paid on deposits decreased 51 basis points to 2.60% for the most recent
period, while the average balance of deposits increased $4.4 million or 3.2% to
$141.5 million.  The decline in interest expense on borrowings was
attributed to lower borrowings outstanding, as the average balance of borrowings
declined $9.3 million or 20.8% to $35.6 million for the most recent
period.  The average rate paid on borrowings increased 43 basis points
to 4.54% for the recently ended six-month 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 $1.0 million during the
six months ended December 31, 2009, compared to a provision of $15,000 for the
six months ended December 31, 2008.  Management determined that a
specific valuation allowance of $925,000 was appropriate in response to
deterioration in the financial position of a single borrower.  There
can be no assurance that the loan loss allowance will be adequate to absorb
unidentified losses on loans in the portfolio, which could adversely affect the
Company’s results of operations.


23


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (continued)





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





Non-interest
Income





Non-interest
income totaled $128,000 for the six months ended December 31, 2009, an increase
of $14,000 from the same period in 2008.





Non-interest
Expense





Non-interest
expense totaled $2.4 million for the six months ended December 31, 2009, an
increase of $144,000, or 6.3%, compared to the same period in
2008.  The increase was due primarily to an increase in employee
compensation and benefits and FDIC insurance premiums.  Employee
compensation and benefits increased 8.1% or $114,000 to $1.5 million for the six
month period just ended primarily as a result of lower levels of deferred loan
origination costs, which was attributed to a lower number of loan originations
during the period.  The Company defers certain costs, which are
attributable to the origination of loans, and amortizes those costs over the
lives of those loans.  When fewer loans are originated during a
period, a lower level of cost is deferred.  FDIC insurance premiums
totaled $93,000 for the six months ended December 31, 2009, an increase of
$81,000, or 675.0%, from the same period in 2008.  As is the case for
most FDIC-insured financial institutions, the two banks owned by the Company are
experiencing higher FDIC insurance premiums, which were mandated to increase
deposit insurance fund levels as a result of the recent increase in bank
failures.    Somewhat offsetting higher levels of expense in
other areas, occupancy and equipment expense decreased $59,000 or 28.9% to
$145,000 for the six months ended December 31, 2009.  During the
quarter ended December 31, 2008, the Company incurred expenses associated with
the conversion of one of its bank’s core data processing systems and those
nonrecurring costs were primarily responsible for the higher level of expense
during that period.





Federal Income Tax Expense
(Benefit)





As a
result of the net loss for the period, the benefit of federal income taxes
totaled $78,000 for the six months ended December 31, 2009, a decrease of
$382,000, compared to a provision of $304,000 for federal income tax expense in
the same period in 2008.  The effective tax rates were (34.7%) and
32.4% for the six month periods ended December 31, 2009 and 2008,
respectively.





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





General





Net
income totaled $215,000 for the three months ended December 31, 2009, a decrease
of $108,000 from the $323,000 in net income for the same period in
2008.  The decrease was primarily attributable to an increase in
non-interest expenses and provision for loan losses during the
period.





Net Interest
Income





Net
interest income increased $22,000 or 1.4% to $1.6 million for the three month
period ended December 31, 2009, compared to the 2008 period, due to interest
expense decreasing at a faster pace than interest income.  Interest
income decreased by $193,000, or 6.3%, to $2.9 million, while interest expense
decreased $215,000 or 14.4% to $1.3 million for the three months ended December
31, 2009.


24


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (continued)





Comparison of Operating
Results for the Three Month Periods Ended December 31, 2009 and 2008
(continued)





Net Interest Income
(continued)





Interest
income on loans decreased $142,000 or 5.1% to $2.6 million, due to a decrease in
the average rate earned on the loan portfolio.  The average balance of
loans outstanding for the three month period ended December 31, 2009, increased
$3.0 million or 1.6% to an average of $190.0 million for the three months just
ended, while the average rate earned declined 40 basis points to 5.55% for the
period just ended.  Interest income on investment securities decreased
$23,000 or 34.3% to $44,000 for the three months ended December 31, 2009,
primarily as a result of reduced volume.  The average balance
outstanding declined $2.9 million or 36.1% to $5.2 million for the three month
period ended December 31, 2009, while the average rate earned on those assets
increased 9 basis points to 3.39%.





Interest
expense on deposits and borrowings both declined period to
period.  Interest expense on deposits decreased $164,000 or 15.5% to
$891,000 for the three month period ended December 31, 2009, while interest
expense on borrowings declined $51,000 or 11.5% to $391,000 for the same
period.  The decline in interest expense on deposits was attributed
primarily to a reduction in the average rate paid on the deposits, as the
average balance of deposits increased period to period.  The average
rate paid on deposits decreased 58 basis points to 2.51% for the most recent
period, while the average balance of deposits increased $5.2 million or 3.8% to
$141.9 million.  The decline in interest expense on borrowings was
attributed to lower borrowings outstanding, as the average balance of borrowings
declined $7.3 million or 17.2% to $35.2 million for the most recent
period.  The average rate paid on borrowings increased 29 basis points
to 4.44% for the recently ended three-month period.





Provision for Losses on
Loans





The
Company recorded a provision for losses on loans of $60,000 during the three
months ended December 31, 2009, compared to no provision for the three months
ended December 31, 2008.  The additional general provision was
necessary to reestablish the appropriate level subsequent to charge-offs related
to foreclosed properties acquired during the period.  There can be no
assurance that the loan loss allowance will be adequate to absorb unidentified
losses on loans in the portfolio, which could adversely affect the Company’s
results of operations.





Non-interest
Income





Non-interest
income totaled $61,000 for the three months ended December 31, 2009, an increase
of $2,000 from the same period in 2008.


25


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (continued)





Comparison of Operating
Results for the Three Month Periods Ended December 31, 2009 and 2008
(continued)





Non-interest
Expense





Non-interest
expense totaled $1.3 million for the three months ended December 31, 2009, an
increase of $113,000, or 9.9%, compared to the same period in
2008.  The increase was due primarily to an increase in employee
compensation and benefits and FDIC insurance premiums.  Employee
compensation and benefits increased 9.6% or $68,000 to $780,000 for the three
month period just ended primarily as a result of lower levels of deferred loan
origination costs, which was attributed to a lower number of loan originations
during the period.  FDIC insurance premiums totaled $51,000 for the
three months ended December 31, 2009, an increase of $45,000, or 750.0%, from
the same period in 2008.  Somewhat offsetting higher levels of expense
in other areas, occupancy and equipment expense decreased $42,000 or 36.2% to
$74,000 for the three months ended December 31, 2009.  During the
quarter ended December 31, 2008, the Company incurred expenses associated with
the conversion of one of its bank’s core data processing systems and those
nonrecurring costs were primarily responsible for the higher level of expense
during that period.





Federal Income Tax Expense
(Benefit)





Federal
income tax expense totaled $110,000 for the three months ended December 31,
2009, a decrease of $41,000, or 27.2% compared to the same period in
2008.  The effective tax rates were 33.8% and 31.9% for the three
month periods ended December 31, 2009 and 2008, respectively.


26


Kentucky
First Federal Bancorp





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND
RESULTS OF OPERATIONS (continued)





ITEM
4:  Controls
and Procedures (Restated)





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 were not effective.





During
the course of our external audit for the fiscal year ended June 30, 2010, our
external auditors identified an adjustment related to the carrying amount of our
deferred tax assets/liabilities, as well as additional income tax due on excess
distribution of dividends from a subsidiary bank to its parent, which resulted
in distribution of thrift reserves.  Based on our assessment and the
foregoing criteria, management has concluded that the Company did not maintain
effective internal control over financial reporting as of December 31,
2009.





In
connection with the above evaluation of our disclosure controls and procedures,
no change was identified that occurred in the Company’s internal control over
financial reporting during the three months ended December 31, 2009 that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.  However,
management has taken remedial steps to address the material weakness described
above.  Those steps include revision of procedures related to
evaluating deferred tax inventories and income tax expense, as well as the
preparation of a schedule of accumulated earnings and profits.


27


Kentucky
First Federal Bancorp





PART
II





ITEM
6.            Exhibits





31.1
            CEO
      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002




31.2
            CFO
      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002




32.1
            CEO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002




32.2
            CFO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002


28


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:
              October 5, 2010
              
              By:
              /s/Tony D. WhitakerTony
      D. WhitakerChairman
      of the Board and Chief Executive OfficerDate:
              October 5, 2010
              
              By:
              /s/R. Clay HuletteR.
      Clay HuletteVice
      President and Chief Financial
Officer


29