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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-26556
KLAMATH FIRST BANCORP, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-1180440
- --------------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) I.D. Number)
540 Main Street, Klamath Falls, Oregon 97601
- --------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (541) 882-3444
- --------------------------------------------------- -------------------
Securities registered pursuant to
Section 12 (b) of the Act: None
- --------------------------------- -------------------
Securities registered pursuant to
Section 12 (g) of the Act: Common Stock, par value $.01 per share
- --------------------------------- --------------------------------------
(Title of Class)
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 for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
As of July 19, 2002, there were issued 6,792,840 shares of the Registrant's
Common Stock. The Registrant's voting common stock is traded over-the-counter
and is listed on the Nasdaq National Market under the symbol "KFBI."
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
TABLE OF CONTENTS
Part I. Financial Information
- ------- ----------------------
Item 1. Financial Statements Page
-------
Unaudited Condensed Consolidated Balance Sheets
(As of June 30, 2002 and September 30, 2001) 3
Unaudited Condensed Consolidated Statements of Earnings (For
the three months and nine months ended June 30, 2002 and 2001) 4
Unaudited Condensed Consolidated Statements of Shareholders'
Equity For the year ended September 30, 2001 and for
the nine months ended June 30, 2002) 5
Unaudited Condensed Consolidated Statements of Cash Flows
(For the nine months ended June 30, 2002 and 2001) 6 - 7
Notes to Condensed Consolidated Financial Statements 8 - 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 17
Part II. Other Information
- -------- -------------------
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
2
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2002 AND SEPTEMBER 30, 2001
(Unaudited)
June 30, 2002 September 30, 2001
ASSETS ------------------ -------------------
Cash and due from banks $40,153,790 $40,446,042
Interest bearing deposits with banks 15,776,634 3,791,252
Federal funds sold and securities purchased under agreements to resell 11,883,283 74,151,272
------------------ ------------------
Total cash and cash equivalents 67,813,707 118,388,566
Investment securities available for sale, at fair value
(amortized cost: $142,212,811 and $154,190,612) 141,266,711 154,675,760
Investment securities held to maturity, at amortized cost (fair
value: $457,000 and $594,429) 457,000 592,388
Mortgage backed and related securities available for sale, at fair
value (amortized cost: $532,363,765 and $419,639,650) 538,725,516 421,637,670
Mortgage backed and related securities held to maturity, at amortized
cost (fair value: $384,874 and $1,642,174) 378,288 1,620,612
Loans receivable, net 626,489,797 679,990,308
Real estate owned and repossessed assets -- 445,855
Premises and equipment, net 23,658,860 16,911,912
Stock in Federal Home Loan Bank of Seattle, at cost 13,309,200 12,698,000
Accrued interest receivable 8,144,553 8,657,586
Core deposit intangible and other intangible assets, net 41,681,194 44,088,926
Other assets 3,958,479 8,864,227
------------------ ------------------
Total assets $1,465,883,305 $1,468,571,810
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposit liabilities $1,148,588,776 $1,152,824,144
Accrued interest on deposit liabilities 774,721 1,574,606
Advances from borrowers for taxes and insurance 4,022,853 6,637,994
Advances from Federal Home Loan Bank of Seattle 158,000,000 168,000,000
Short term borrowings 1,700,000 1,700,000
Accrued interest on borrowings 774,476 801,743
Pension liabilities 1,040,095 942,148
Deferred income taxes 1,711,690 597,345
Other liabilities 6,606,701 6,799,241
------------------ ------------------
Total liabilities 1,323,219,312 1,339,877,221
------------------ ------------------
Mandatorily redeemable preferred securities issued by subsidiary 27,172,358 14,553,684
------------------ ------------------
Commitments and contingent liabilities
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares authorized; none issued -- --
Common stock, $.01 par value, 35,000,000 shares authorized,
June 30, 2002 - 6,792,840 issued, 6,317,481 outstanding
September 30, 2001 - 7,060,667 issued, 6,561,461 outstanding 67,928 70,607
Additional paid-in capital 30,582,242 33,926,796
Retained earnings-substantially restricted 85,735,578 83,816,307
Unearned shares issued to ESOP (3,179,725) (3,913,510)
Unearned shares issued to MRDP (1,072,095) (1,298,859)
Accumulated other comprehensive income, net of tax 3,357,707 1,539,564
------------------ ------------------
Total shareholders' equity 115,491,635 114,140,905
------------------ ------------------
Total liabilities and shareholders' equity $1,465,883,305 $1,468,571,810
================== ==================
See notes to condensed consolidated financial statements.
3
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
-------------- -------------- -------------- --------------
INTEREST INCOME
Loans receivable ...................................... $ 12,618,019 $ 10,638,837 $ 39,907,688 $ 36,810,139
Mortgage backed and related securities ................ 6,742,373 3,384,061 19,683,948 7,856,997
Investment securities ................................. 2,024,664 2,040,965 6,272,989 6,013,399
Federal funds sold .................................... 63,912 502,589 367,474 906,197
Interest bearing deposits ............................. 81,474 215,959 214,789 462,241
--------------- --------------- --------------- ---------------
Total interest income ............................... 21,530,442 16,782,411 66,446,888 52,048,973
--------------- --------------- --------------- ---------------
INTEREST EXPENSE
Deposit liabilities ................................... 6,794,895 7,398,017 23,552,181 22,492,867
FHLB advances ......................................... 2,382,310 2,460,082 7,175,680 7,602,852
Other ................................................. 31,317 58,006 96,278 311,994
--------------- --------------- --------------- ---------------
Total interest expense .............................. 9,208,522 9,916,105 30,824,139 30,407,713
--------------- --------------- --------------- ---------------
Net interest income ................................. 12,321,920 6,866,306 35,622,749 21,641,260
Provision for loan losses ............................... -- 3,000 156,000 384,000
--------------- --------------- --------------- ---------------
Net interest income after provision for
loan losses ....................................... 12,321,920 6,863,306 35,466,749 21,257,260
--------------- --------------- --------------- ---------------
NON-INTEREST INCOME
Fees and service charges .............................. 1,940,957 1,208,271 5,730,489 3,014,285
Gain on sale of investments ........................... 435,315 1,681,584 554,416 4,191,377
Gain on sale of real estate owned ..................... 13,400 33,415 25,852 49,843
Other income .......................................... 664,788 276,456 1,946,615 765,073
--------------- --------------- --------------- ---------------
Total non-interest income ........................... 3,054,460 3,199,726 8,257,372 8,020,578
--------------- --------------- --------------- ---------------
NON-INTEREST EXPENSE
Compensation, employee benefits and related expense ... 5,724,543 3,423,610 16,623,684 9,453,880
Occupancy expense ..................................... 1,214,810 682,389 3,576,596 1,908,358
Data processing expense ............................... 382,571 252,267 1,162,289 740,776
Insurance premium expense ............................. 49,700 32,285 133,458 100,955
Loss on sale of investments ........................... 2,538 -- 2,538 30,632
Amortization of intangible assets ..................... 1,382,205 413,169 4,138,475 1,239,508
Other expense ......................................... 3,647,403 2,058,228 11,292,456 5,379,125
--------------- --------------- --------------- ---------------
Total non-interest expense .......................... 12,403,770 6,861,948 36,929,496 18,853,234
--------------- --------------- --------------- ---------------
Earnings before income taxes ............................ 2,972,610 3,201,084 6,794,625 10,424,604
Provision for income tax ................................ 1,044,375 1,085,447 2,374,176 3,669,120
--------------- --------------- --------------- ---------------
Net earnings ............................................ $ 1,928,235 $ 2,115,637 $ 4,420,449 $ 6,755,484
=============== =============== =============== ===============
Earnings per common share - basic ....................... $ 0.30 $ 0.32 $ 0.69 $ 1.02
Earnings per common share - fully diluted ............... $ 0.30 $ 0.31 $ 0.68 $ 1.02
Weighted average common shares outstanding - basic ...... 6,398,027 6,629,275 6,418,168 6,616,551
Weighted average common shares outstanding - with dilution 6,500,451 6,732,583 6,467,611 6,641,484
See notes to condensed consolidated financial statements.
4
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 2001 AND THE NINE MONTHS ENDED JUNE 30, 2002
(Unaudited)
Unearned Unearned Accumulated
Common Common Additional shares shares Other Total
stock stock paid-in Retained issued issued comprehensive shareholders'
shares amount capital earnings to ESOP to MRDP income (loss) equity
---------- ------- ----------- ----------- ------------ ------------ ----------- ------------
Balance at October 1, 2000 6,692,428 $73,662 $37,701,796 $79,713,255 ($4,893,250) ($2,498,378) ($1,372,524) $108,724,561
Cash dividends -- -- -- (3,467,950) -- -- -- (3,467,950)
Stock repurchased and
retired (550,221) (5,502) (7,393,921) -- -- -- -- (7,399,423)
ESOP contribution 97,974 -- 396,471 -- 979,740 -- -- 1,376,211
MRDP contribution 76,618 -- 13,708 -- -- 1,199,519 -- 1,213,227
Exercise of stock options 244,662 2,447 3,208,742 -- -- -- -- 3,211,189
---------- ------- ----------- ----------- ------------ ------------ ----------- ------------
6,561,461 70,607 33,926,796 76,245,305 (3,913,510) (1,298,859) (1,372,524) 103,657,815
Comprehensive income
Net earnings 7,571,002 7,571,002
Other comprehensive income:
Net unrealized gain on
securities, net of tax
and reclassification
adjustment (1) 2,912,088 2,912,088
------------
Total comprehensive income 10,483,090
---------- ------- ----------- ----------- ------------ ------------ ----------- ------------
Balance at Sept. 30, 2001 6,561,461 70,607 33,926,796 83,816,307 (3,913,510) (1,298,859) 1,539,564 114,140,905
Cash dividends -- -- -- (2,501,178) -- -- -- (2,501,178)
Stock repurchased and retired (297,186) (2,972) (4,006,785) -- -- -- -- (4,009,757)
ESOP contribution -- -- 283,534 -- 733,785 -- -- 1,017,319
MRDP contribution 23,847 -- 9,402 -- -- 226,764 -- 236,166
Exercise of stock options 29,359 293 369,295 -- -- -- -- 369,588
---------- ------- ----------- ----------- ------------ ------------ ----------- ------------
6,317,481 67,928 30,582,242 81,315,129 (3,179,725) (1,072,095) 1,539,564 109,253,043
Comprehensive income
Net earnings 4,420,449 4,420,449
Other comprehensive income:
Net unrealized gain on
securities, net of tax
and reclassification
adjustment (2) 1,818,143 1,818,143
------------
Total comprehensive loss 6,238,592
---------- ------- ----------- ----------- ------------ ------------ ----------- ------------
Balance at June 30, 2002 6,317,481 $67,928 $30,582,242 $85,735,578 ($3,179,725) ($1,072,095) $3,357,707 $115,491,635
========== ======= =========== =========== ============ ============ =========== ============
(1) Net unrealized holding gain on securities of $2,893,883 (net of $1,773,670 tax expense) adjusted for reclassification
adjustment for net losses included in net earnings of $18,205 (net of $11,158 tax benefit).
(2) Net unrealized holding gain on securities of $1,711,506 (net of $1,048,987 tax expense) adjusted for reclassification
adjustment for net losses included in net earnings of $106,637 (net of $65,358 tax benefit).
See notes to condensed consolidated financial statements.
5
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
Nine Months Ended Nine Months Ended
June 30, June 30,
2002 2001
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $4,420,449 $6,755,484
ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization 5,758,925 2,198,018
Provision for loan losses 156,000 384,000
Compensation expense related to ESOP benefit 1,017,319 905,872
Compensation expense related to MRDP Trust 236,166 1,152,775
Net amortization of premiums (discounts) paid on
investment and mortgage backed and related securities 2,569,112 (17,115)
Decrease in deferred loan fees, net of amortization (424,509) (2,670,625)
Net (gain) loss on sale of real estate owned and
premises and equipment (25,081) 8,499
Net gain on sale of investment and mortgage
backed and related securities (551,879) (4,160,745)
FHLB stock dividend (611,200) (601,400)
CHANGES IN ASSETS AND LIABILITIES
Accrued interest receivable 513,033 271,823
Other assets 3,055,005 (2,615,003)
Accrued interest on deposit liabilities (799,885) 6,207
Accrued interest on borrowings (27,267) (51,689)
Pension liabilities 97,947 97,947
Other liabilities 36,600 207,271
-------------- --------------
Net cash provided by operating activities 15,420,735 1,871,319
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of investment securities
held to maturity -- 130,000
Proceeds from maturity of investment securities
available for sale 135,000 33,000,000
Principal repayments received on mortgage
backed and related securities held to maturity 1,236,726 368,568
Principal repayments received on mortgage
backed and related securities available for sale 75,803,542 33,027,344
Principal repayments received on loans 209,974,397 84,457,547
Loan originations (202,059,567) (81,303,592)
Loans purchased (1,683,363) --
Loans sold 47,345,825 18,834,094
Purchase of investment securities available
for sale (19,389,464) (62,725,695)
Purchase of mortgage backed and related
securities available for sale (207,107,177) (84,359,568)
Proceeds from sale of investment securities
available for sale 31,437,125 10,367,746
Proceeds from sale of mortgage backed and related
securities available for sale 16,507,507 144,259,981
Proceeds from sale of real estate owned and
premises and equipment 653,574 801,610
Investment in real estate owned -- (86,741)
Purchases of premises and equipment (8,247,398) (2,532,213)
-------------- --------------
Net cash provided by (used in) investing activities (55,393,273) 94,239,081
-------------- --------------
6
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
(Continued)
Nine Months Ended Nine Months Ended
June 30, June 30,
2002 2001
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in deposit liabilities,
net of withdrawals ($4,235,368) $15,217,371
Proceeds from FHLB advances 52,700,000 2,000,000
Repayments of FHLB advances (62,700,000) (7,000,000)
Proceeds from short term borrowings 200,000 3,400,000
Repayments of short term borrowings (200,000) (4,700,000)
Issuance of mandatorily redeemable preferred securities, net 12,618,674 --
Stock repurchase and retirement (4,009,757) (2,284,216)
Stock options exercised 369,588 --
Advances from borrowers for taxes and insurance (2,615,141) (4,797,928)
Dividends paid (2,730,317) (2,851,267)
-------------- --------------
Net cash used in financing activities (10,602,321) (1,016,040)
-------------- --------------
Net increase (decrease) in cash and cash
equivalents (50,574,859) 95,094,360
Cash and cash equivalents at beginning
of period 118,388,566 29,946,600
-------------- --------------
Cash and cash equivalents at end of period $67,813,707 $125,040,960
============== ==============
SUPPLEMENTAL SCHEDULE OF INTEREST AND
INCOME TAXES PAID
Interest paid $31,651,291 $30,453,195
Income taxes paid 1,455,000 3,930,000
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Mortgage loans securitized and classified as
mortgage-backed securities available for sale $-- $190,300,518
Net unrealized gain (loss) on securities
available for sale $1,818,143 ($119,143)
Dividends declared and accrued in other
liabilities 891,430 932,716
See notes to condensed consolidated financial statements
7
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary for a fair presentation
of Klamath First Bancorp, Inc.'s (the "Company") financial condition as of June
30, 2002 and September 30, 2001, the results of operations for the three and
nine months ended June 30, 2002 and 2001 and cash flows for the nine months
ended June 30, 2002 and 2001. Certain information and note disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K. The results of operations for the three
and nine months ended June 30, 2002 are not necessarily indicative of the
results which may be expected for the entire fiscal year.
2. COMPREHENSIVE INCOME
For the three months ended June 30, 2002, the Company's total comprehensive
income was $7.5 million compared to $454,666 for the three months ended June 30,
2001. Total comprehensive income for the three months ended June 30, 2002 was
comprised of net earnings of $1.9 million and other comprehensive income of $5.6
million, net of tax. Total comprehensive income for the three months ended June
30, 2001 was comprised of net earnings of $2.1 million and other comprehensive
loss of $1.7 million, net of tax.
For the nine months ended June 30, 2002, the Company's total comprehensive
income was $6.2 million compared to total comprehensive income of $1.2 million
for the nine months ended June 30, 2001. Total comprehensive income for the nine
months ended June 30, 2002 was comprised of net earnings of $4.4 million and
other comprehensive income of $1.8 million, net of tax. Total comprehensive
income for the nine months ended June 30, 2001 was comprised of net earnings of
$2.5 million and other comprehensive loss of $3.7 million, net of tax.
The significant fluctuations noted in total comprehensive income comparing the
periods ended June 30, 2002 and 2001 resulted from changes in the market value
of investment and mortgage-backed securities available for sale. There was an
unrealized loss on securities available for sale in 2001 which turned to an
unrealized gain in 2002.
3. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows:
Nine Months Ended Year Ended
June 30, September 30,
2002 2001
-------------- --------------
Balance, beginning of period $7,950,680 $4,082,265
Charge-offs (249,417) (90,173)
Recoveries 7,707 42,406
Provision for loss 156,000 387,000
Acquisitions -- 3,761,024
Allowance reclassified with loan securitization -- (231,842)
-------------- --------------
Balance, end of period $7,864,970 $7,950,680
============== ==============
8
At June 30, 2002 and 2001, impaired loans totaled zero and $2,812, respectively.
Specifically allocated loan loss reserves related to these loans totaled zero
for both periods. The average investment in impaired loans for the three months
and nine months ended June 30, 2002 was zero. The average investment in impaired
loans for the three months and nine months ended June 30, 2001 was $937 and
$44,301, respectively.
At June 30, 2002, troubled debt restructurings totaled $59,000 and consisted of
one commercial loan and one consumer loan. There were no troubled debt
restructurings at June 30, 2001 or for the nine months then ended.
4. ADVANCES FROM FEDERAL HOME LOAN BANK
Borrowings at June 30, 2002 consisted of six long term advances totaling $158.0
million from the Federal Home Loan Bank of Seattle ("FHLB"). The advances are
collateralized in aggregate by certain mortgages or deeds of trust and
securities of the U.S. Government and agencies thereof.
Scheduled maturities of advances from the FHLB were as follows:
June 30, 2002 September 30, 2001
----------------------------------------------------- ------------------------------------------------
Range of Weighted Range of Weighted
interest average interest average
Amount rates interest rate Amount rates interest rate
----------------- --------------- --------------- -------------- -------------- --------------
Due within one year $ -- -- -- $ 10,000,000 3.60% 3.60%
After five but within
ten years 158,000,000 4.77%-7.05% 5.86% 158,000,000 4.77%-7.05% 5.86%
-------------- --------------
$158,000,000 $168,000,000
============== ==============
5. SHORT TERM BORROWINGS
The Company had short term borrowings of $1.7 million at June 30, 2002 and
September 30, 2001. The borrowings consisted of one line of credit at Key Bank
that was fully disbursed. This line carries interest based on one-month LIBOR
plus 1.95% which was 3.83% and 5.58% at June 30, 2002 and September 30, 2001,
respectively.
COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company has various outstanding
commitments and contingencies that are not reflected in the accompanying
consolidated financial statements. In addition, the Company is a defendant in
certain claims and legal actions arising in the ordinary course of business. In
the opinion of management, after consultation with legal counsel, the ultimate
disposition of these matters is not expected to have a material adverse effect
on the consolidated financial condition of the Company.
7. SHAREHOLDERS' EQUITY
On September 27, 2001, the Company announced a five percent stock repurchase
plan to be completed over a twelve month period. Five percent represents
approximately 340,800 shares. As of June 30, 2002, the Company had repurchased
292,000 shares, or 85.68% of the shares to be repurchased, at a weighted average
price per share of $13.49.
9
8. EARNINGS PER SHARE
Earnings per share ("EPS") is computed in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share." Shares held by the
Company's Employee Stock Ownership Plan ("ESOP") that are committed for release
are considered contingently issuable shares and are included in the computation
of basic EPS. Diluted EPS is computed using the treasury stock method, giving
effect to potential additional common shares that were outstanding during the
period. Potential dilutive common shares include shares awarded but not released
under the Company's Management Recognition and Development Plan ("MRDP"), and
stock options granted under the Stock Option Plan. Following is a summary of the
effect of dilutive securities on weighted average number of shares (denominator)
for the basic and diluted EPS calculations. There are no resulting adjustments
to net earnings.
For the Three Months Ended
June 30, June 30,
2002 2001
------------ ------------
Weighted average common shares outstanding - basic 6,398,027 6,629,275
------------ ------------
Effect of Dilutive Securities on Number of Shares:
Stock options 94,584 38,239
MRDP shares 7,840 65,069
------------ ------------
Total Dilutive Securities 102,424 103,308
------------ ------------
Weighted average common shares outstanding - with dilution 6,500,451 6,732,583
============ ============
For the Nine Months Ended
June 30, June 30,
2002 2001
------------ ------------
Weighted average common shares outstanding - basic 6,418,168 6,616,551
------------ ------------
Effect of Dilutive Securities on Number of Shares:
Stock options 41,496 --
MRDP shares 7,947 24,933
------------ ------------
Total Dilutive Securities 49,443 24,933
------------ ------------
Weighted average common shares outstanding - with dilution 6,467,611 6,641,484
outstanding - with dilution ============ ============
10
9. REGULATORY CAPITAL
The following table illustrates the compliance by Klamath First Federal Savings
and Loan Association (the "Association") with currently applicable regulatory
capital requirements at June 30, 2002:
Categorized as "Well
Capitalized" Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
----------------------- ------------------------------- -------------------------------
Amount Ratio Amount Ratio Amount Ratio
As of June 30, 2002: ------------ ----- ------------ ----- ------------ -----
Total Capital: $99,106,111 13.5% $58,652,936 8.0% $73,316,170 10.0%
(To Risk Weighted Assets)
Tier I Capital: 91,241,140 12.4% N/A N/A 43,989,702 6.0%
(To Risk Weighted Assets)
Tier I Capital: 91,241,140 6.5% 56,507,304 4.0% 70,634,130 5.0%
(To Total Assets)
Tangible Capital: 91,241,140 6.5% 21,190,239 1.5% N/A N/A
(To Tangible Assets)
10. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
142, Goodwill and Other Intangible Assets, which will be effective October 1,
2002 for the Company. SFAS No. 142 will require that goodwill no longer be
amortized and instead be tested for impairment at least annually. In addition,
the standard includes provisions for the accounting and reporting of certain
existing recognized intangibles and goodwill. Management is currently evaluating
the effect that SFAS No. 142 may have on its consolidated financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which will be effective October 1, 2002 for the
Company. This statement supersedes SFAS No. 121 and the accounting and reporting
provisions of Accounting Principles Board Opinion No. 30 for the disposal of a
segment of a business. Management is currently evaluating the effect that
adoption of SFAS No. 144 may have on its consolidated financial statements.
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. The standard requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. SFAS No. 146 replaces
previous accounting guidance which was provided by EITF Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring).
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other portions of this report contain certain "forward-looking
statements" concerning the future operations of Klamath First Bancorp, Inc.
Management desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 and is including this statement
for the express purpose of availing the Company of the protections of such safe
harbor with respect to all "forward-looking statements" contained in this
quarterly report. We have used "forward-looking statements" to describe future
plans and strategies, including our expectations of the Company's future
financial results. Management's ability to predict results or the effect of
future plans or strategies is inherently uncertain. Factors which could affect
actual results include interest rate trends, the general economic climate in the
Company's market area and the country as a whole which could affect the
collectibility of loan balances, the ability to increase non-interest income
through expansion of new lines of business, the ability of the Company to
control costs and expenses, competitive products and pricing, loan delinquency
rates, and changes in federal and state regulation. These factors should be
considered in evaluating the "forward-looking statements," and undue reliance
should not be placed on such statements.
Critical Accounting Policies and Estimates
The "Management's Discussion and Analysis of Financial Condition and Results of
Operations," as well as disclosures included elsewhere in this Form 10-Q, are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires management to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. On an ongoing basis, management evaluates
the estimates used, including the adequacy of the allowance for loan losses,
impairment of intangible assets, and contingencies and litigation. Estimates are
based upon historical experience, current economic conditions and other factors
that management considers reasonable under the circumstances. These estimates
result in judgments regarding the carrying values of assets and liabilities when
these values are not readily available from other sources as well as assessing
and identifying the accounting treatments of commitments and contingencies.
Actual results may differ from these estimates under different assumptions or
conditions. The following critical accounting policies involve the more
significant judgments and assumptions used in the preparation of the
consolidated financial statements.
The allowance for loan losses is established to absorb known and inherent losses
attributable to loans outstanding and related off-balance sheet commitments. The
adequacy of the allowance is monitored on an ongoing basis and is based on
management's evaluation of numerous factors. These factors include the quality
of the current loan portfolio, the trend in the loan portfolio's risk ratings,
current economic conditions, loan concentrations, loan growth rates, past-due
and non-performing trends, evaluation of specific loss estimates for all
significant problem loans, historical charge-off and recovery experience and
other pertinent information. Approximately 79 percent of the Company's loan
portfolio is secured by real estate, both residential and commercial properties,
and a significant depreciation in real estate values in Oregon would cause
management to increase the allowance for loan losses.
Retained mortgage servicing rights are
measured by allocating the carrying value of the loans between the assets sold
and the interest retained, based on the relative fair value at the date of the
sale. The fair market values are determined using a discounted cash flow model.
Mortgage servicing assets are amortized over the expected life of the loan and
are evaluated periodically for impairment. The expected life of the loan can
vary from management's estimates due to prepayments by borrowers. Prepayments in
excess of management's estimates would negatively impact the recorded value of
the mortgage servicing rights. The value of the mortgage servicing rights is
also dependent upon the discount rate used in the model. Management reviews this
rate on an ongoing basis based on current market rates. A significant increase
in the discount rate would negatively impact the value of mortgage servicing
rights. At June 30, 2002 there was no impairment of value for mortgage servicing
rights.
12
At June 30, 2002 the Company had approximately $41.7 million in core deposit
intangibles and other intangible assets as a result of business combinations.
Because these intangible assets were generated by purchases of bank branches,
the Company is required to account for them under SFAS No. 72, Accounting for
Certain Acquisitions of Banking or Thrift Institutions, rather than SFAS No.
142, Goodwill and Other Intangible Assets. Ongoing analysis of the fair value of
recorded core deposit intangibles and other intangibles for impairment will
involve a substantial amount of judgment, as will establishing and monitoring
estimated lives of other amortizable intangible assets. The Company is party to
various legal proceedings. These matters have a high degree of uncertainty
associated with them. There can be no assurance that the ultimate outcome will
not differ materially from our assessment of them. There can also be no
assurance that all matters that may be brought against us are known to us at any
point in time. General
The Company, an Oregon corporation, is the unitary savings and loan holding
company for the Association. At June 30, 2002, the Company had total
consolidated assets of $1.5 billion and consolidated shareholders' equity of
$115.5 million. The Company is currently not engaged in any business activity
other than holding the stock of the Association. Accordingly, the information
set forth in this report, including financial statements and related data,
relates primarily to the Association.
The Association is a progressive, community-oriented savings and loan
association that focuses on customer service within its primary market area.
Accordingly, the Association is primarily engaged in attracting deposits from
the general public through its offices and using those and other available
sources of funds to originate permanent residential one- to four-family real
estate loans and loans on commercial real estate, multi-family residential
properties, and to consumers and small businesses within its market area. While
the Association has historically emphasized fixed rate mortgage lending, it has
been diversifying its loan portfolio by focusing on increasing the number of
originations of commercial real estate loans, multi-family residential loans,
residential construction loans, commercial and industrial loans, business loans
and non-mortgage consumer loans. A significant portion of these newer loan
products carry adjustable rates, higher yields, or shorter terms than the
traditional fixed rate mortgages. This lending strategy is designed to enhance
earnings, reduce interest rate risk, and provide a more complete range of
financial services to customers and the local communities served by the
Association. The acquisition of 13 branches from Washington Mutual Bank
("WAMU"), which was completed in September 2001, moved the Company strongly in
this direction.
Net interest income, which is the difference between interest and dividend
income on interest-earning assets, primarily loans and investment securities,
and interest expense on interest-bearing deposits and borrowings, is the major
source of profit for the Company. Because the Company depends primarily on net
interest income for its earnings, the focus of the Company's management is to
create and implement strategies that will provide stable, positive spreads
between the yield on interest-earning assets and the cost of interest-bearing
liabilities. Such strategies include the Association's expansion of its consumer
and commercial loan products. To a lesser degree, the net earnings of the
Company rely on the level of its non-interest income. The Company is
aggressively pursuing strategies to improve its service charge and fee income,
and control its non-interest expense, which includes employee compensation and
benefits, occupancy and equipment expense, deposit insurance premiums and
miscellaneous other expenses.
13
During the last 18 months, new management has been updating many areas of the
Company that had been negatively affected by very conservative historical
spending patterns. Projects to update existing branches and make needed repairs
have been completed. Programs necessary for training employees and updating
phone systems and information technology have been implemented. These
initiatives and the significant growth in the number of branches have resulted
in increased non-interest expense comparing the current period with that of a
year ago. The Company believes these improvements in strategic areas will
contribute to the bottom line in the future. The Company intends to continue to
focus on efficiency issues and the effort to capitalize on the training and
technology put in place.
The Association is regulated by the Office of Thrift Supervision ("OTS") and its
deposits are insured up to applicable limits under the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").
The Association is a member of the Federal Home Loan Bank of Seattle, conducting
its business through 57 office facilities, with the main office located in
Klamath Falls, Oregon. The primary market areas of the Association are the state
of Oregon and adjoining areas of California and Washington.
Market Risk and Asset/Liability Management
Because the majority of the Company's assets have historically been 15 to
30-year fixed rate mortgages which were funded by shorter term liabilities, the
Company's interest rate risk sensitivity has been high. In order to reduce that
sensitivity, the Company completed a loan securitization, reducing the balance
of long term, fixed-rate mortgages in the loan portfolio. The Company has also
been selling the majority of the fixed-rate one-to-four family mortgage loan
production in the secondary market. In addition, the acquisition of 13 WAMU
branches added significant commercial and consumer loan balances to the
portfolio mix, further reducing the interest rate sensitivity. The effects of
these strategies were reflected in the market risk as reported at September 30,
2001, and the market risk and sensitivity profile at June 30, 2002 is consistent
with that reported in the Annual Report.
Changes in Financial Condition
At June 30, 2002, the consolidated assets of the Company totaled $1.5 billion,
unchanged from $1.5 billion at September 30, 2001.
Net loans receivable decreased by $53.5 million to $626.5 million at June 30,
2002, from $680.0 million at September 30, 2001. The decrease is the result of
sale of $47.3 million in single family mortgage loans during the nine months
ended June 30, 2002 as well as loan repayments exceeding loan originations.
Investment securities decreased $13.5 million, or 8.72% from $155.3 million at
September 30, 2001 to $141.7 million at June 30, 2002. This decrease was the
combined result of purchase of $19.4 million in securities, sale of $31.4
million of investment securities available for sale and a $1.4 million increase
in the mark to market adjustment for available for sale securities. During the
quarter ended June 30, 2002, the company restructured the investment portfolio
by selling securities whose balances had paid down to the extent that they were
no longer highly liquid.
During the nine months ended June 30, 2002, the Company purchased $207.1 million
of mortgage-backed securities ("MBS"), primarily agency-backed collateralized
mortgage obligations ("CMO's") of short duration. In addition, $77.0 million was
received in principal repayments on MBS, resulting in a $115.8 million increase
in the balance of MBS from $423.3 million at September 30, 2001 to $539.1
million at June 30, 2002.
Other assets decreased by $4.9 million, or 55.34%, from $8.9 million at
September 30, 2001 to $4.0 million at June 30, 2002. The balance at September
30, 2001 included a $4.1 million receivable from Washington Mutual Bank related
to the final settlement for the branch acquisition in September 2001. This
receivable was settled in October 2001, resulting in the decrease in the balance
of other assets.
Deposit liabilities remained unchanged at $1.15 billion at September 30, 2001
and June 30, 2002.
14
Advances from borrowers for taxes and insurance decreased $2.6 million from
September 30, 2001 to June 30, 2002. The decrease is the result of using the
reserves to pay the required real estate taxes due on the Association's loans
receivable portfolio in November.
The Company's total borrowings decreased by $10.0 million from September 30,
2001 to June 30, 2002 due to the maturity of an FHLB advance.
In April 2002, the Company issued $13 million of mandatorily redeemable
preferred securities through a subsidiary grantor trust. The Trust holds debt
instruments of the parent company purchased with the proceeds of the securities
issuance. The capital qualifying securities bear interest at a floating rate
indexed to six-month LIBOR and mature in April 2032. At June 30, 2002, the
interest rate was 5.92%. The Company has the right to redeem the securities at a
premium up to five years from issuance, and after five years at par. Certain
changes in tax law or Office of Thrift Supervision regulations regarding the
treatment of the capital securities as core capital could result in early
redemption, at par, or a shortening in the maturity of the securities. The
Company had issued $15 million of mandatorily redeemable preferred securities
during the fiscal year ended September 30, 2001.
Total shareholders' equity increased $1.4 million, or 1.18%, from $114.1 million
at September 30, 2001 to $115.5 million at June 30, 2002. This increase was the
combined result of earnings of $4.4 million and a $1.8 million increase in
unrealized gain on securities available for sale which were partially offset by
a $4.0 million reduction due to repurchase and retirement of shares and payment
of $2.5 million in common stock dividends for the nine month period.
Results of Operations
Comparison of Nine Months Ended June 30, 2002 and 2001
General. Over the last 12 months, the Company has grown from 37 branches to 57
branches. The impact of this growth is seen in interest income, non-interest
income, and non-interest expense.
Interest Income. Interest income increased by $14.4 million, showing the
combined effects of a $407.0 million increase in average interest earning assets
and a 75 basis point decrease in yield from June 30, 2001 to June 30, 2002.
Interest income on loans receivable increased $3.1 million, or 8.41%, from $36.8
million for the nine months ended June 30, 2001 to $39.9 million for the same
period of 2002. This increase was a result of the $42.6 million increase in
average loans receivable due to the loans acquired with Washington Mutual Bank
branches in September 2001. The average yield on interest earning assets
decreased 75 basis points to 6.47% for the nine months ended June 30, 2002
compared to 7.22% for the same period ended June 30, 2001. Interest rate spread
(the difference between the rates earned on interest earning assets and the
rates paid on interest bearing liabilities) increased from 2.29% to 3.03% and
interest rate margin (net interest income divided by average interest earning
assets) increased from 3.00% to 3.47% comparing the nine month periods. The
increases in interest rate spread and margin are primarily a result of the
decreased cost of deposits due to (1) the addition of significant balances in
non-interest bearing accounts with the WAMU acquisition, (2) the Company's
strategy to reduce interest rates paid on deposits, and (3) a general downward
shift in interest rates from June 2001 to June 2002.
15
Interest Expense. Total interest expense increased $416,426, or 1.37%, for the
nine months ended June 30, 2002 compared to the same period in 2001. That
increase was the combined result of a $1.1 million increase in interest on
deposit liabilities and a $642,888 decrease in interest expense on FHLB advances
and other liabilities. The average balance of deposit liabilities increased
$378.3 million as a result of the addition of $423.5 million in deposit
liabilities with the WAMU branch acquisition in September 2001 and the average
rate paid on deposits decreased by 158 basis points due to the factors noted
above. The composition of the acquired deposits, with 18.38% non-interest
bearing demand deposits and an additional 33.66% of interest-bearing demand
deposits with low rates of interest, reduced the overall cost of deposits
significantly. The result is evident in the modest 4.71% increase in interest
expense on deposits coupled with a 58.48% increase in the average balance of
deposits, comparing the nine month periods ended June 30, 2002 and 2001. The
average balance of borrowings decreased $5.9 million from $175.2 million for the
nine months ended June 30, 2001 to $169.3 million for the same period ended June
30, 2002. In addition, the rate paid on borrowings decreased by 28 basis points
from 5.97% for the nine months ended June 30, 2001 to 5.69% for the same period
in 2002.
Provision for Loan Losses. The provision for loan losses was $156,000 and there
were $249,417 of charge offs and $7,707 of recoveries during the nine months
ended June 30, 2002 compared to a $384,000 provision with $75,594 of charge offs
and $42,406 of recoveries during the nine months ended June 30, 2001.
At June 30, 2002, the allowance for loan losses was equal to 718% of total
non-performing assets compared to 420% at June 30, 2001. The increase in the
coverage ratio was the result of a constant level of non-performing assets and a
higher allowance which incorporates the risk factors associated with the
significant increase in commercial and consumer loans over the last 12 months.
The ratio of non-performing assets to total assets decreased from 0.10% at June
30, 2001 to 0.07% at June 30, 2002. The decrease primarily relates to a decrease
in real estate owned, which is included in non-performing assets.
Non-Interest Income. Non-interest income increased $236,794, or 2.95%, to $8.3
million for the nine months ended June 30, 2002 from $8.0 million for the nine
months ended June 30, 2001. During the nine months ended June 30, 2001, the
Company recorded the sale of MBS resulting from the loan securitization at a
gain of $4.2 million which is compared to a $554,416 gain on sale of securities
recorded in the period ended June 30, 2002. Disregarding the gains on sales of
securities, non-interest income increased from $3.8 million for the nine months
ended June 30, 2001 to $7.7 million for the same period in 2002, a 101.16%
increase. Fees and service charges improved significantly, increasing by 90.11%
over the same period last year due to the acquisition of deposit accounts
subject to service charges and increased loan servicing income. Increased income
from sale of mortgage loans and retail investment activities can be seen in the
154.44% increase in other non-interest income from $765,073 for the nine months
ended June 30, 2001 to $1.9 million for the nine months ended June 30, 2002.
Non-Interest Expense. In large part due to the September 2001 branch acquisition
and the opening of seven de novo branches during the past year, non-interest
expense increased $18.0 million, or 95.88%, to $36.9 million for the nine months
ended June 30, 2002, from $18.9 million for the comparable period in 2001. The
growth was accompanied by an increase in employees from 268 full-time
equivalents at June 30, 2001 to 515 a year later, a 92.16% increase.
Correspondingly, compensation, employee benefits, and related expense increased
$7.2 million, or 75.84% from $9.5 million for the nine months ended June 30,
2001 to $16.6 million for the same period in 2002. Occupancy expense increased
by $1.7 million, or 87.42%, comparing the nine months ended June 30, 2002 with
the same period of 2001 due to the addition of the branches. Insurance premium
expense increased 32.20% as expected due to the increase in deposit balances on
which premiums are based. Amortization of intangible assets increased $2.9
million due to the amortization of intangible assets related to the WAMU branch
acquisition. Because this transaction was an acquisition of branches rather than
of an entire entity, it falls under the accounting guidance in SFAS 72,
"Accounting for Certain Acquisitions of Banking or Thrift Institutions," instead
of SFAS 142, "Goodwill and Other Intangible Assets." Discussions currently in
process by the FASB may result in changes to the guidance as it applies to
intangibles acquired in branch acquisitions, but the exact treatment has not
been determined at this time. Other expense increased $5.9 million, or 109.93%,
from $5.4 million for the nine months ended June 30, 2001 to $11.3 million for
the same period in 2002. The increase in branches, accounts, and employees was
followed by significant increases in most expense categories, including
telephone, postage, office supplies, advertising, license and maintenance fees,
ATM expense, and checking department expense.
16
Income Taxes. The provision for income taxes decreased $1.3 million for the nine
months ended June 30, 2002 compared with the prior year. The effective tax rate
was 34.94% for the nine months ended June 30, 2002 compared to 35.20% for the
same period of 2001. The decrease in effective tax rate is primarily due to an
increase in income on tax-exempt municipal securities.
Comparison of Three Months Ended June 30, 2002 and 2001
General. As noted for the nine months ended June 30, 2002, the WAMU branch
acquisition had significant impact on the results of the quarter ended June 30,
2002 compared to the same quarter a year ago. Net income decreased $187,402, or
8.86%, from $2.1 million for the three months ended June 30, 2001 to $1.9
million for the three months ended June 30, 2002. This decrease resulted
primarily from the $1.7 million gain on sale of MBS recorded for the quarter
ended June 30, 2001 which compares with $435,315 gain on sale in the current
quarter.
Interest Income. The Company recorded interest income of $21.5 million in the
third quarter ended June 30, 2002, an increase of 28.29% from $16.8 million for
the same period last year. Average interest earning assets increased by $402.1
million, or 41.83%, primarily due to the branch acquisition. Yield decreased
from 6.98% for the quarter ended June 30, 2001 to 6.32% for the same period of
2002. Yields on loans, MBS, investment securities, and cash balances decreased
as rates declined over the year. Also, funds obtained in the acquisition were
invested during a period of low rates, reducing the overall yield of
interest-earning assets.
Interest Expense. Total interest expense decreased 7.14%, from $9.9 million for
the quarter ended June 30, 2001 to $9.2 million for the quarter ended June 30,
2002. Average deposits increased by $365.5 million comparing the three months
ended June 30, 2001 to 2002, while the average interest paid on interest-bearing
deposits decreased 188 basis points from 4.56% for the three months ended June
30, 2001 to 2.68% for the same period ended June 30, 2002. The increase in
average balance resulted primarily from the branch acquisition. The decrease in
rates paid on deposits is the combined result of the larger proportion of non-
interest or low-interest-rate deposits obtained in the branch acquisition, the
Company's strategy to reduce interest rates paid on deposits and the downward
shift in the general interest rate environment over the last 12 months. The
average balance of borrowings decreased $1.7 million, from $169.8 million for
the three months ended June 30, 2001 to $168.1 million for the same period ended
June 30, 2002, resulting in a decrease in interest on borrowings of $97,772 for
the three months ended June 30, 2002 compared with the same period ended June
30, 2001. The rate paid on borrowings decreased by 15 basis points from 5.86%
for the quarter ended June 30, 2001 to 5.71% for the same period in 2002.
Provision for Loan Losses. The provision for loan losses was zero and there were
$176,433 of charge offs, and $3,759 of recoveries during the three months ended
June 30, 2002 compared to a $3,000 provision with $28,347 of charge offs and
$7,540 of recoveries during the three months ended June 30, 2001. Based on the
Company's analysis of the allowance for loan losses, the allowance is adequate
to cover anticipated losses in the loan portfolio and additional provision for
losses was not considered necessary during the current quarter.
Non-Interest Income. Non-interest income decreased $145,266, or 4.54%, to $3.1
million for the three months ended June 30, 2002 from $3.2 million for the three
months ended June 30, 2001. The $1.7 million gain on sale in the prior year
compared to the $435,315 gain on sale recorded this quarter caused a decrease in
non-interest income. However, income from fees and service charges showed
significant growth, offsetting the decrease in the non-recurring gains. Fees and
service charges increased by 60.64% from $1.2 million for the quarter ended June
30, 2001 to $1.9 million for the current quarter. Excluding the effect of the
gain on sale of investments, non-interest income increased 72.52% from $1.5
million for the third quarter of 2001 to $2.6 million for the same period in
2002.
17
Non-Interest Expense. Non-interest expense increased $5.5 million, or 80.76%, to
$12.4 million for the three months ended June 30, 2002, from $6.9 million in the
comparable period in 2001. All categories of non-interest expense increased due
to the WAMU branch acquisition and addition of seven de novo branches over the
last 12 months. Compensation, employee benefits and related expense showed an
increase of 67.21% which reflects the addition of staff both at the acquired
branches and de novo branches, as well as in support and back office areas. The
number of full-time equivalent employees increased from 268 at June 30, 2001 to
515 at June 30, 2002. The acquired and newly-built branches were operating for
the entire quarter ended June 30, 2002, pushing occupancy expense up by 78.02%
compared to the same quarter a year ago. Data processing expense increased
51.65% due to the additional accounts and locations. Other expense increased by
$1.6 million, or 77.21%, primarily due to increased costs across all categories
with the growth in branches.
Income Taxes. The provision for income taxes was consistent for the three months
ended June 30, 2002 compared with the prior year. The effective tax rate was
35.13% for the quarter ended June 30, 2002 compared to 33.91% for the same
period of 2001.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various claims and legal actions arising in
the normal course of business. Management believes that these
proceedings will not result in a material loss to the Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Not applicable.
b) No Current Reports on Form 8-K were filed during the quarter
ended June 30, 2002.
19
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.
KLAMATH FIRST BANCORP, INC.
Date: August 14, 2002 By: /s/ Kermit K. Houser
----------------------------------
Kermit K. Houser, President and
Chief Executive Officer
Date: August 14, 2002 By: /s/ Marshall Jay Alexander
----------------------------------
Marshall Jay Alexander, Executive
Vice President and Chief Financial Officer
20
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
OF KLAMATH FIRST BANCORP, INC.
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned hereby certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and in connection with this Quarterly Report on Form
10-Q, that:
o the report fully complies with the requirements of Sections 13(a) and 15(d)
of the Securities Exchange Act of 1934, as amended, and
o the information contained in the report fairly presents, in all material
respects, the company's financial condition and results of operations.
/s/ Kermit K. Houser /s/ Marshall Jay Alexander
___________________________________ ___________________________________
Kermit K. Houser Marshall J. Alexander
Chief Executive Officer Chief Financial Officer
Dated: _____________ ____, 200_