K Fed Bancorp (KFED) 10-Q 2008 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) of

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:  September 30, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 000-50592

K-FED BANCORP

(Exact name of registrant as specified in its charter)

Federal	20-0411486
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)
1359 N. Grand Avenue, Covina, CA	91724
(Address of principal executive offices)	(Zip Code)

(800) 524-2274

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 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 o

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

Large accelerated filer o                                                                           Accelerated filer x                                                      Non-accelerated filer o

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

Yes o 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:

Common Stock, $.01 par value – 13,944,625 shares outstanding as of November 9, 2007.

Form 10-Q

K-FED BANCORP

Table of Contents

		Page
Part I.	Financial Information
Item 1:	Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition at September 30, 2007 and June 30, 2007	1
	Consolidated Statements of Income and Comprehensive Income for the Three Months Ended September 30, 2007 and 2006	2
	Consolidated Statement of Stockholders’ Equity and Other Comprehensive Income for the Three Months Ended September 30, 2007	3
	Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2007 and 2006	4
	Notes to Consolidated Financial Statements	5
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4:	Controls and Procedures	15
Part II.	Other Information
Item 1:	Legal Proceedings	16
Item 1A:	Risk Factors	16
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3:	Defaults upon Senior Securities	16
Item 4:	Submission of Matters to a Vote of Security Holders	16
Item 5:	Other Information	16
Item 6:	Exhibits	16
	SIGNATURES	17

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements

K-FED BANCORP AND SUBSIDIARY

Consolidated Statements of Financial Condition

(Unaudited)

 (Dollars in thousands, except share data)

	September 30 2007			June 30 2007
ASSETS
Cash and due from banks	$	6,422		$	10,982
Federal funds sold		18,725			15,750
Total cash and cash equivalents		25,147			26,732
Interest earning deposits in other financial institutions		2,970			2,970
Securities available-for-sale		13,301			13,579
Securities held-to-maturity, fair value of $19,932 and       $20,514 at September 30, 2007 and June 30, 2007, respectively		20,270			21,096
Federal Home Loan Bank stock, at cost		10,137			9,870
Loans receivable		710,678			701,962
Deferred net loan origination fees		(111	)		(134	)
Net premium on purchased loans		65			120
Allowance for loan losses		(2,942	)		(2,805	)
Loans receivable, net		707,690			699,143
Accrued interest receivable		3,349			3,259
Premises and equipment, net		3,370			3,484
Core deposit intangible		295			323
Goodwill		3,950			3,950
Bank-owned life insurance		11,068			10,954
Other assets		4,232			4,265
Total assets	$	805,779		$	799,625
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits
Noninterest bearing	$	45,199		$	43,169
Interest bearing		463,484			450,959
Total deposits		508,683			494,128
Federal Home Loan Bank advances, short-term		20,000			20,000
Federal Home Loan Bank advances, long-term		180,022			190,016
Accrued expenses and other liabilities		3,817			3,164
Total liabilities		712,522			707,308
Commitments and contingent liabilities		—			—
Stockholders’ equity
Nonredeemable serial preferred stock, $.01 par value;      2,000,000 shares authorized; issued and outstanding — none		—			—
Common stock, $0.01 par value; 18,000,000 authorized;     September 30, 2007 — 14,720,440 shares issued.     June 30, 2007 — 14,724,760 shares issued.		147			147
Additional paid-in capital		57,847			57,626
Retained earnings		49,606			49,084
Accumulated other comprehensive loss, net of tax		(43	)		(126	)
Unearned employee stock ownership plan shares		(2,957	)		(3,071	)
Treasury stock, at cost (September 2007 — 775,815 shares;     June 30, 2007 — 775,815 shares)		(11,343	)		(11,343	)
Total stockholders’ equity		93,257			92,317
Total liabilities and stockholders’ equity	$	805,779		$	799,625
The accompanying notes are an integral part of these unaudited consolidated financial statements

1

K-FED BANCORP AND SUBSIDIARY

Consolidated Statements of Income and Comprehensive Income

 (Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended September 30
	2007			2006
Interest Income
Interest and fees on loans	$	10,273		$	8,904
Interest on securities, taxable		373			347
Federal Home Loan Bank dividends		119			113
Other interest		222			361
Total interest income		10,987			9,725
Interest Expense
Interest on deposits		4,133			3,171
Interest on Federal Home Loan Bank advances		2,327			1,982
Total interest expense		6,460			5,153
Net interest income		4,527			4,572
Provision for loan losses		168			122
Net interest income after provision      for loan losses		4,359			4,450
Noninterest income
Service charges and fees		586			511
ATM fees and charges		366			371
Referral commissions		63			61
Gain (loss) on equity investment		(105	)		20
Bank-owned life insurance		114			106
Other noninterest income		17			7
Total noninterest income		1,041			1,076
Noninterest expense
Salaries and benefits		2,007			1,801
Occupancy and equipment		562			520
ATM expense		317			306
Advertising and promotional		48			67
Professional services		246			201
Postage		69			69
Telephone		126			91
Other operating expense		478			372
Total noninterest expense		3,853			3,427
Income before income tax expense		1,547			2,099
Income tax expense		554			784
Net income	$	993		$	1,315
Comprehensive Income	$	1,076		$	1,398
Earnings per common share:
Basic	$	0.07		$	0.10
Diluted	$	0.07		$	0.10
The accompanying notes are an integral part of these unaudited consolidated financial statements

2

K-FED BANCORP AND SUBSIDIARY

Consolidated Statements of Stockholders’ Equity

And Other Comprehensive Income

(Unaudited)

(Dollars in thousands, except share data)

			Common Stock															Treasury Stock
	Comprehensive Income		Shares		Amount		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss, net			Unearned ESOP Shares			Shares		Amount			Total
Balance June 30, 2007			14,724,760		$	147	$	57,626	$	49,084		$	(126	)	$	(3,071	)	(775,815	)	$	(11,343	)	$	92,317
Comprehensive income
Net income for the three months ended September 30, 2007	$	993	—			—		—		993			—			—		—			—			993
Other comprehensive income – unrealized gain on securities, net of tax		83	—			—		—		—			83			—		—			—			83
Total comprehensive income	$	1,076
Dividends paid ($0.10 per share) *			—			—		—		(471	)		—			—		—			—			(471	)
Stock options earned			—			—		79		—			—			—		—			—			79
Allocation of stock awards			—			—		98		—			—			—		—			—			98
Forfeiture of stock awards			(4,320	)		—		—		—			—			—		—			—			—
Allocation of ESOP common stock			—			—		44		—			—			114		—			—			158
Balance September 30, 2007			14,720,440		$	147	$	57,847	$	49,606		$	(43	)	$	(2,957	)	(755,815	)	$	(11,343	)	$	93,257
* K-Fed Mutual Holding Company waived its receipt of dividends on the 8,861,750 shares it owns.
The accompanying notes are an integral part of these unaudited consolidated financial statements

3

K-FED BANCORP AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

	Three Months Ended September
	2007			2006
Operating Activities
Net income	$	993		$	1,315
Adjustments to reconcile net income to cash provided by operating activities:
Amortization of net premiums on securities		6			12
Amortization of net premiums on loan purchases		55			35
Accretion of net loan origination fees		—			(21	)
Provision for loan losses		168			122
Federal Home Loan Bank stock dividend		(119	)		(113	)
Depreciation and amortization		205			172
Amortization of core deposit intangible		28			32
(Gain) loss on equity investment		105			(20	)
Increase in cash surrender value of bank-owned life insurance		(114	)		(106	)
Accretion of net premiums on purchased certificates of deposits		(37	)		(15	)
Amortization of debt exchange costs		6			27
Allocation of ESOP common stock		158			165
Allocation of stock awards		98			33
Stock options earned		79			89
Net increase in accrued interest receivable		(90	)		(241	)
Net (increase) decrease in other assets		(130	)		35
Net increase in accrued expenses and other liabilities		653			1,133
Net cash provided by operating activities		2,064			2,654
Investing Activities
Proceeds from principal repayments of available-for-sale securities		413			385
Procees from principal repayments of held-to-maturity securities		826			1,047
Purchases of loans		—			(10,356	)
(Increase) decrease in loans, excluding loan purchases		(8,770	)		11,342
Purchase of FHLB stock		(148	)		(71	)
Purchases of premises and equipment		(91	)		(314	)
Net cash (used in) provided by investing activities		(7,770	)		2,033
Financing Activities
Proceeds from FHLB advances		18,501			20,000
Repayment of FHLB advances		(28,501	)		(10,000	)
Dividends paid on common stock		(471	)		(436	)
Purchase of treasury stock		—			(917	)
Net increase in deposits		14,592			5,346
Exercise of stock options		—			64
Net cash provided by financing activities		4,121			14,057
Net (decrease) increase in cash and cash equivalents		(1,585	)		18,744
Cash and cash equivalents, at beginning of year		26,732			25,579
Cash and cash equivalents, at end of period	$	25,147		$	44,323
The accompanying notes are an integral part of these unaudited consolidated financial statements

4

K-FED BANCORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – Nature of Business and Significant Accounting Policies

Nature of Business:  K-Fed Bancorp (or the “Company”) is a majority-owned subsidiary of K-Fed Mutual Holding Company (or the “Parent”). The Company and its Parent are holding companies that are federally chartered. The Company’s sole subsidiary, Kaiser Federal Bank (or the “Bank”), is a federally chartered savings association, which provides retail and commercial banking services to individuals and business customers from its nine branch locations throughout California. While the Bank originates all types of retail and commercial real estate loans, the majority of its residential real estate loans have been purchased from other financial institutions.

The Company’s business activities generally are limited to passive investment activities and oversight of our investment in the Bank. Unless the context otherwise requires, all references to the Company include the Bank and the Company on a consolidated basis.

Basis of Presentation:  The financial statements of K-Fed Bancorp have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and predominant practices followed by the financial services industry, and are unaudited. In the opinion of the Company’s management, all adjustments consisting of normal recurring accruals necessary for a fair presentation of the financial condition and results of operations for the interim periods included herein have been made.

The results of operations for the three months ended September 30, 2007 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the fiscal year ending June 30, 2008. Certain information and note disclosures normally included in the Company’s annual financial statements have been condensed or omitted. Therefore, these consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes included in the 2007 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Principles of Consolidation:  The consolidated financial statements presented in this quarterly report include the accounts of K-Fed Bancorp and its wholly-owned subsidiary, Kaiser Federal Bank. All material intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates:  The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Changes in these estimates and assumptions are considered reasonably possible and may have a material impact on the consolidated financial statements and thus actual results could differ from the amounts reported and disclosed herein. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of financial instruments, and mortgage-loan prepayment assumptions used to determine the effective interest amortization of loan purchase premiums and discounts.

Newly Issued Accounting Standards:

The  Company  adopted FASB Interpretation 48, Accounting for Uncertainty in Income  Taxes  (“FIN  48”),  as  of  January  1,  2007.   A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax  benefit  that  is  greater  than  50%  likely  of  being  realized  on examination.   For tax positions not meeting the "more likely than not" test, no tax benefit is recorded.   The adoption had no affect on the Company’s financial statements.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of the state of California. The Company is no longer subject to examination by taxing authorities for years before 2002. The Company does not expect the total amount of unrecognized tax benefits to significantly increase in the next twelve months.

5

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.   The Company did not have any amounts accrued for interest and penalties at January 1, 2007.

In  September  2006, the SEC issued Staff Accounting Bulletin No. 108 “Considering  the  Effects  of  Prior  Year  Misstatements when Quantifying Misstatements  in  Current  Year Financial Statements” (“SAB 108”). SAB 108 requires the evaluation of prior-year misstatements using both the balance sheet approach and the income statement approach. In the initial year of adoption should either approach result in quantifying an error that is material in light of quantitative and qualitative factors, SAB 108 guidance allows for a one-time cumulative-effect adjustment to beginning retained earnings.  In years subsequent to adoption, previously undetected misstatements deemed material shall result in the restatement of previously issued financial statements in accordance with FAS 154.  SAB 108 is effective for fiscal years ending on or after November 15, 2006.  The adoption of this standard on July 1, 2007 did not have a significant impact on the Company’s financial condition or results of operations.

Under  Emerging  Issues  Task  Force  (“EITF”)  06-4:  Accounting for deferred  compensation  and  postretirement  benefit aspects of endorsement split dollar life insurance arrangements, the EITF reached a consensus that requires  the  recognition  of  a  liability  related to the postretirement benefits covered by an endorsement split-dollar life insurance arrangement.  The consensus highlights that the employer who is the policy holder has a liability for the benefit it is providing to the employee. If the employer has agreed to maintain the insurance policy in force for the employee's benefit during retirement, then the liability recognized during the employee's active service period should be based on the future cost of insurance to be incurred during the employee's retirement. Also, if the employer has agreed to provide the employee with a death benefit, then the liability for the future death benefit should be recognized under SFAS 106. The adoption of this standard on July 1, 2007 did not have a significant impact on the Company’s financial condition or results of operations.

Under EITF 06-5: Accounting for Purchases of Life Insurance - Determining the Amount That Could be Realized in Accordance with FASB Technical Bulletin No. 85-4, "Accounting for Purchases of Life Insurance", the Task Force reached a consensus that a policyholder should consider any additional amounts included in the contractual terms of the policy in determining the amount that could be realized under the insurance contract.  The task forces agreed that contractual limitations should be considered when determining the realizable amounts. Those amounts that are recoverable by the policyholder at the discretion of the insurance company should be excluded from the amount that could be realized. The task force also agreed that fixed amounts that are recoverable by the policyholder in future periods in excess of one year from the surrender of the policy should be recognized at their present value. The task force also reached a consensus that a policyholder should determine the amount that could be realized under the life insurance contract assuming the surrender of an individual life by individual life policy. The Task force also noted that any amount that is ultimately realized by the policyholder upon the assumed surrender of the final policy shall be included in the amount that could be realized under the insurance contract.  The adoption of this standard on July 1, 2007 did not have a significant impact on the Company’s financial condition or results of operations.

Note 2 – Earnings Per Share

Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. ESOP shares are considered outstanding for this calculation unless unearned. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options and stock awards.

6

	Three months ended September 30,
	2007		2006
		(Dollars in thousands)
Net income as reported	$	993	$	1,315
Weighted average common shares outstanding		13,558,404		13,719,818
Basic earnings per share	$	0.07	$	0.10
Earnings per share assuming dilution
Net income available to common shareholders	$	993	$	1,315
Weighted average common shares outstanding		13,558,404		13,719,818
Dilutive effect of stock options		—		19,787
Dilutive effect of stock awards		—		8,522
Average common shares and dilutive potential common shares		13,558,404		13,748,127
Diluted earnings per share	$	0.07	$	0.10

For the three months ended September 30, 2007, outstanding stock options to purchase 348,400 shares and outstanding stock awards of 103,340 shares were not considered in computing diluted earnings per common share because they were anti-dilutive.

Note 3 – Stock Conversion

On June 26, 2007, the Board of Directors of K-Fed Mutual Holding Company approved a plan to convert the Mutual Holding Company from the mutual to stock form of organization. The Mutual Holding Company is a federally chartered mutual holding company and currently owns approximately 63.5% of the outstanding shares of common stock of K-Fed Bancorp, which owns 100% of the issued and outstanding shares of the capital stock of Kaiser Federal Bank (the “Bank”). Pursuant to the terms of K-Fed Mutual Holding Company’s plan of conversion and reorganization, K-Fed Mutual Holding Company will convert from the mutual holding company to the stock holding company corporate structure. As part of the conversion, we are offering for sale in a subscription offering, and possibly in a community and/or a syndicated community offering, the majority ownership interest of K-Fed Bancorp that is currently owned by K-Fed Mutual Holding Company. Upon the completion of the conversion and offering, K-Fed Mutual Holding Company will cease to exist, and we will complete the transition from partial to full public stock ownership. Upon completion of the conversion, existing public stockholders of K-Fed Bancorp will receive shares of common stock of Kaiser Federal Financial Group in exchange for their shares of K-Fed Bancorp common stock in order to maintain the public stockholders’ existing percentage ownership in our organization (excluding any new shares purchased by them in the offering).

In connection with the conversion, shares of common stock of a new successor holding company, representing the ownership interest of the Mutual Holding Company, will be offered for sale to depositors of the Bank. The following persons and employee benefit plan have subscription rights to purchase shares of common stock of the new holding company in the following order of priority: (1) depositors of record as of March 31, 2006; (2) the Bank’s tax qualified employee benefit plans; (3) depositors of record as of the end of the calendar quarter preceding the commencement of the offering; and (4) depositors entitled to vote on the conversion proposal. If necessary, shares will be offered to the general public. In addition, upon completion of the conversion of the Mutual Holding Company, shares of the Company’s common stock held by public stockholders will be exchanged for shares of a new corporation, which will become the Bank’s new parent holding company. As a result of the conversion and offering, the Mutual Holding Company and Company will cease to exist. The conversion is subject to approval of the Office of Thrift Supervision as well as the approval of the Mutual Holding Company’s members (depositors of the Bank) and the Company’s stockholders.

Offering costs have been deferred and will be deducted from the proceeds of the shares sold in the offering. If the offering is not completed, all costs will be charged to expense. At June 30, 2007, $26,000 of offering costs had been incurred and deferred.

7

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Information

This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to the Company and the Bank that are based on the beliefs of management as well as assumptions made by and information currently available to management. In addition, in portions of this document the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “should” and similar expressions or the negative thereof, as they relate to the Company or the Bank or their management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company and/or the Bank with respect to forward-looking events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements.

Comparison of Financial Condition at September 30, 2007 and June 30, 2007.

Assets: Cash and cash equivalents decreased $1.6 million, or 5.9% to $25.1 million at September 30, 2007 from $26.7 million at June 30, 2007. The decrease related to cash and due from banks which decreased $4.6 million to $6.4 million at September 30, 2007 from $11.0 million at June 30, 2007 offset by federal funds sold, which increased $2.9 million to $18.7 million at September 30, 2007 from $15.8 million at June 30, 2007.  The decrease in cash and cash equivalents was primarily attributable to fund loan origination activity.

Our investment portfolio decreased $1.1 million, or 3.2% to $33.6 million at September 30, 2007 from $34.7 million at June 30, 2007. The decrease was attributable to normal repayments of principal on our mortgage-backed securities and collateralized mortgage obligations.

Our gross loan portfolio increased $8.7 million, or 1.2% to $710.7 million at September 30, 2007 from $702.0 million at June 30, 2007. One-to-four family real estate loans decreased $11.1 million, or 2.4% to $458.4 million at September 30, 2007 from $469.5 million at June 30, 2007.  Commercial real estate loans increased $7.9 million, or 10.1% to $85.7 million at September 30, 2007 from $77.8 million at June 30, 2007.  Multifamily loans increased $10.2 million, or 11.5% to $98.3 million at September 30, 2007 from $88.1 million at June 30, 2007.  Other loans which are comprised primarily of auto loans increased $1.8 million, or 2.7% to $68.4 million at September 30, 2007 from $66.6 million at June 30, 2007. The overall loan mix remained relatively consistent, with real estate loans comprising 90.4% of the total loan portfolio at September 30, 2007, compared with 90.5% at June 30, 2007.

Deposits: Total deposits increased $14.6 million, or 2.9% to $508.7 million at September 30, 2007 from $494.1 million at June 30, 2007. The increase was primarily due to increases of $20.7 million in certificates of deposit and $2.0 million in checking accounts.  These increases were offset by reductions of $4.9 million in savings accounts and $3.2 million in money market accounts.  Certificates of deposit balances grew primarily as a result of obtaining a $15.0 million deposit from the State of California through the State’s Time Deposit program in exchange for pledging certain investment securities.

Borrowings: Advances from the Federal Home Loan Bank of San Francisco decreased $10.0 million, or 4.8% to $200.0 million at September 30, 2007 from $210.0 million at June 30, 2007.  We interchange the use of deposits and borrowings to fund assets depending on various factors including liquidity and asset/liability management strategies.

Stockholders’ Equity: Stockholders’ equity increased $940,000 to $93.3 million at September 30, 2007 from $92.3 million at June 30, 2007 primarily as a result of $993,000 in net income earned for the three months ended September 30, 2007, an unrealized gain on securities of $83,000 net of tax and the allocation of ESOP shares, stock awards, and stock options earned totaling $335,000. This gain was offset by cash payments of $471,000 in dividends to stockholders of record, excluding shares held by K-Fed Mutual Holding Company, of $0.10 per share for the quarter.

8

Average Balances, Net Interest Income, Yields Earned and Rates Paid

	For the three months ended September 30,
				2007 (4)							2006 (4)
						Average							Average
	Average					Yield/		Average					Yield/
	Balance			Interest		Cost		Balance			Interest		Cost
	(Dollars in thousands)
INTEREST-EARNING ASSETS
Loans receivable(1)	$	702,819		$	10,273	5.85	%	$	631,919		$	8,904	5.64	%
Securities(2)		34,099			373	4.38	%		35,366			347	3.92	%
Fed Funds		11,826			148	5.01	%		19,076			245	5.14	%
Federal Home Loan Bank stock		10,003			119	4.76	%		8,848			113	5.11	%
Interest-bearing deposits in other financial institutions		2,970			25	3.37	%		9,010			82	3.64	%
Other interest-earning assets		3,663			49	5.35	%		2,188			34	6.22	%
Total interest-earning assets		765,380			10,987	5.74	%		706,407			9,725	5.51	%
Noninterest earning assets		37,408							33,768
Total assets	$	802,788						$	740,175
INTEREST-BEARING  LIABILITIES
Money Market	$	74,728		$	529	2.83	%	$	111,367		$	799	2.87	%
Savings deposits		132,759			601	1.81	%		89,329			90	0.40	%
Certificates of deposit		255,695			3,003	4.70	%		218,013			2,282	4.19	%
FHLB advances		205,019			2,327	4.54	%		182,463			1,982	4.34	%
Total interest-bearing liabilities		668,201			6,460	3.87	%		601,172			5,153	3.43	%
Noninterest bearing liabilities		41,811							46,118
Total liabilities		710,012							647,290
Equity		92,776							92,885
Total liabilities and equity	$	802,788						$	740,175
Net interest/spread				$	4,527	1.87	%				$	4,572	2.08	%
Margin(3)						2.37	%						2.59	%
Ratio of interest-earning assets to interest bearing liabilities		114.54	%						117.50	%
(1) Calculated net of deferred fees and loss reserves
(2) Calculated based on amortized cost
(3) Net interest income divided by interest-earning assets
(4) Yields earned and rates paid have been annualized

9

Comparison of Results of Operations for the Three Months Ended September 30, 2007 and September 30, 2006.

General. Net income for the three months ended September 30, 2007 was $993,000, a decrease of $322,000, or 24.5%, compared to net income of $1.3 million for the three months ended September 30, 2006. Earnings per basic and diluted common share were $0.07 for the three months ended September 30, 2007 compared to $0.10 for the three months ended September 30, 2006. The decrease in net income primarily resulted from an increase in non-interest expense as described below.

Interest Income. Interest income increased by $1.3 million or 13.0%, to $11.0 million for the three months ended September 30, 2007 from $9.7 million for the three months ended September 30, 2006. The primary factor for the increase in interest income was an increase in the average loans receivable balance of $70.9 million or 11.2%, from $631.9 million for the three months ended September 30, 2006 to $702.8 million for the three months ended September 30, 2007. The increase was primarily attributable to increases in multifamily and non-residential real estate loans. Interest income was also positively impacted by a 21 basis point increase in the average yield on loans receivable from 5.64% for the three months ended September 30, 2006 to 5.85% for the three months ended September 30, 2007.  The increase in the average yield on loans receivable was primarily attributable to the addition of higher-yielding multifamily and non-residential real estate loans to our portfolio.

Interest income on securities increased by $26,000 or 7.5%, to $373,000 for the three months ended September 30, 2007 from $347,000 for the three months ended September 30, 2006. The increase resulted from a 46 basis point increase in the average yield on the securities investment portfolio from 3.92% for the three months ended September 30, 2006 to 4.38% for the three months ended September 30, 2007.

Other interest income decreased by $139,000 or 38.5% to $222,000 for the three months ended September 30, 2007 from $361,000 for the three months ended September 30, 2006.  The decrease was primarily attributable to a decrease in the average balance of fed funds sold of $7.3 million or 38.0%, from $19.1 million for the three months ended September 30, 2006 to $11.8 million for the three months ended September 30, 2007.  The decrease in fed funds was attributable to increased loan growth during the comparable periods. Interest income was also negatively impacted by a 13 basis point decrease in the average yield earned on fed funds sold from 5.14% for the three months ended September 30, 2006 to 5.01% for the three months ended September 30, 2007.  The decrease in the average yield earned on fed funds sold was primarily attributable to declines in general market rates.

Interest Expense. Interest expense increased $1.3 million, or 25.4%, for the three months ended September 30, 2007 to $6.5 million as compared to $5.2 million for the three months ended September 30, 2006. The increase was primarily attributable to an increase in the average balance of deposits and FHLB advances, combined with higher interest rates. The average balance of interest-bearing liabilities increased $67.0 million or 11.1% to $668.2 million for the three months ended September 30, 2007 from $601.2 million for the three months ended September 30, 2006.  The average interest rates on interest-bearing liabilities increased 44 basis points to 3.87% for the three months ended September 30, 2007 from 3.43% for the three months ended September 30, 2006.

Net Interest Income.  Net income before provision for loan losses decreased $45,000 or 1.0%, to $4.5 million for the three months ended September 30, 2007 from $4.6 million for the three months ended September 30, 2006.  The decline was attributable to continued compression in our net interest margin as a result of the current yield curve.  As a result, the net interest margin decreased 22 basis points from 2.59% for the three months ended September 30, 2006 to 2.37% for the three months ended September 30, 2007.

Provision for Loan Losses.We maintain an allowance for loan losses to absorb probable incurred losses inherent in the loan portfolio. The allowance is based on ongoing, quarterly assessments of the probable losses inherent in the loan portfolio. Our methodology for assessing the appropriateness of the allowance consists of several key elements, which include loss ratio analysis by type of loan and specific allowances for identified problem loans, including the results of measuring impaired loans as provided in Statement of Financial Accounting Standards (“SFAS”) No. 114, “Accounting by Creditors for Impairment of a Loan” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan – Income Recognition and Disclosures.”  These accounting standards prescribe the measurement methods, income recognition and disclosures related to impaired loans.

10

The loss ratio analysis component of the allowance is calculated by applying loss factors to outstanding loans based on the internal risk evaluation of the loans or pools of loans. Changes in risk evaluations of both performing and nonperforming loans affect the amount of the formula allowance. Loss factors are based both on our historical loss experience as well as on significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date.

The appropriateness of the allowance is reviewed and established by management based upon its evaluation of then-existing economic and business conditions affecting our key lending areas and other conditions, such as credit quality trends (including trends in nonperforming loans expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments and recent loss experience in particular segments of the portfolio that existed as of the balance sheet date and the impact that such conditions were believed to have had on the collectibility of the loan. Senior management reviews these conditions quarterly in discussions with our senior credit officers. To the extent that any of these conditions is evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s estimate of the effect of such condition may be reflected as a specific allowance applicable to such credit or portfolio segment. Where any of these conditions is not evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s evaluation of the loss related to this condition is reflected in the general allowance. The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific problem credits or portfolio segments.

Management also evaluates the adequacy of the allowance for loan losses based on a review of individual loans, historical loan loss experience, the value and adequacy of collateral and economic conditions in our market area. This evaluation is inherently subjective as it requires material estimates, including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. For all specifically reviewed loans for which it is probable that we will be unable to collect all amounts due according to the terms of the loan agreement, we determine impairment by computing a fair value either based on discounted cash flows using the loan’s initial interest rate or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogenous loans that are collectively evaluated for impairment and are excluded from specific impairment evaluation, and their allowance for loan losses is calculated in accordance with the allowance for loan losses policy described above.

Because the allowance for loan losses is based on estimates of losses inherent in the loan portfolio, actual losses can vary significantly from the estimated amounts. Our methodology as described above permits adjustments to any loss factor used in the computation of the formula allowance in the event that, in management’s judgment, significant factors which affect the collectibility of the portfolio as of the evaluation date are not reflected in the loss factors. By assessing the estimated losses inherent in the loan portfolio on a quarterly basis, we are able to adjust specific and inherent loss estimates based upon any more recent information that has become available. In addition, management’s determination as to the amount of our allowance for loan losses is subject to review by the Office of Thrift Supervision and the FDIC, which may require the establishment of additional general or specific allowances based upon their judgment of the information available to them at the time of their examination of Kaiser Federal Bank.

Our provision for loan losses was $168,000 for the three months ended September 30, 2007 compared to $122,000 for the three months ended September 30, 2006. The allowance for loan losses as a percent of total loans was 0.41% at September 30, 2007 as compared to 0.44% at September 30, 2006. The increase in provision for loan losses was primarily attributable to an increase in our multifamily and commercial real estate lending, which has a higher risk than our traditional one-to four-family real estate lending.  Our gross loan portfolio increased $75.0 million, or 11.8% to $710.7 million at September 30, 2007 from $635.7 million at September 30, 2006.  The assumptions are based both on current industry and economic trends in addition to our internal loan loss history.  We used the same methodology and generally similar assumptions in assessing the adequacy of the allowance for consumer and real estate loans for both periods.

Noninterest Income. Our noninterest income decreased $35,000, or 3.3%, to $1.0 million for the three months ended September 30, 2007 from $1.1 million for the three months ended September 30, 2006. The decrease was primarily the result of an increase in losses attributable to our investment in a California Affordable Housing Program offset by increased fee and transaction income related to customer service charges and fees.

11

Noninterest Expense. Our noninterest expense increased $426,000, or 12.4% to $3.9 million for the three months ended September 30, 2007 from $3.4 million for the three months ended September 30, 2006. The increase was primarily due to a $206,000 increase in salaries and benefits, a $106,000 increase in other operating expense and a $45,000 increase in professional services.

Salaries and benefits represented 52.1% of total noninterest expense for the three months ended September 30, 2007 compared to 52.6% for the three months ended September 30, 2006. Total salaries and benefits increased $206,000, or 11.4% to $2.0 million for the three months ended September 30, 2007 from $1.8 million for the three months ended September 30, 2006. The increase was primarily due to annual salary increases and higher restricted stock award expense.

Other operating expense increased $106,000, or 28.5% to $478,000 for the three months ended September 30, 2007 from $372,000 for the three months ended September 30, 2006. The increase was primarily attributable to the Federal Deposit Insurance Corporation imposing additional deposit insurance assessments effective January 1, 2007.

Professional services increased $45,000, or 22.4% to $246,000 for the three months ended September 30, 2007 from $201,000 for the three months ended September 30, 2006. The increase in professional services was primarily due to increased legal costs stemming from the bankruptcy of U.S. Mortgage as discussed in Part II Item 1 — Legal Proceedings.

Income Tax Expense. Income tax expense for the three months ended September 30, 2007 was $554,000 compared to $784,000 for the three months ended September 30, 2006. This decrease was primarily the result of lower pre-tax income of $1.5 million for the three months ended September 30, 2007 compared to $2.1 million for the three months ended September 30, 2006. The effective tax rate was 35.8% and 37.4% for the three months ended September 30, 2007 and 2006, respectively.  The decrease in effective tax rate is due to low income housing credits which have a greater impact on our rate when our taxable income is lower.

Liquidity and Commitments

Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Historically, we have maintained liquid assets at levels above the minimum requirements imposed by Office of Thrift Supervision regulations and above levels believed to be adequate to meet the requirements of normal operations, including potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained. See “Consolidated Statements of Cash Flows” contained in the Consolidated Financial Statements included in this document.

Our liquidity, represented by cash and cash equivalents and mortgage-backed and related securities, is a product of operating, investing and financing activities. Our primary sources of funds are deposits; amortization, prepayments and maturities of outstanding loans and mortgage-backed and related securities, and other short-term investments; and funds provided from operations. While scheduled payments from the amortization of loans and mortgage-backed related securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements. We also generate cash through borrowings. We utilize Federal Home Loan Bank advances to leverage our capital base and provide funds for our lending and investment activities and enhance our interest rate risk management.

Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments such as overnight deposits. On a longer-term basis, we maintain a strategy of investing in various lending products. We use our sources of funds primarily to meet ongoing commitments, to pay maturing time deposits and savings withdrawals, to fund loan commitments and to maintain our portfolio of mortgage-backed and related securities. At September 30, 2007, the total approved loan commitments unfunded amounted to $9.3 million, which includes the unadvanced portion of loans of $6.3 million.

12

During the quarter ended September 30, 2007, the Bank pledged certain investment securities and obtained $15.0 million in deposits with the State of California through the State’s Time Deposit program.  Time deposits and advances from the Federal Home Loan Bank of San Francisco scheduled to mature in one year or less at September 30, 2007, totaled $106.3 million and $20.0 million, respectively. Based on historical experience, management believes that a significant portion of maturing deposits will remain with Kaiser Federal Bank. We anticipate that we will continue to have sufficient funds, through deposits and borrowings, to meet our current commitments.

At September 30, 2007, we had available additional advances from the Federal Home Loan Bank of San Francisco in the amount of $113.6 million.  Kaiser Federal Bank’s credit limit with the Federal Home Loan Bank is limited to 40% of the Bank’s total assets.

Capital

The table below sets forth Kaiser Federal Bank’s capital position relative to its Office of Thrift Supervision capital requirements at September 30, 2007. The definitions of the terms used in the table are those provided in the capital regulations issued by the Office of Thrift Supervision.

	Actual			Minimum Capital Requirements			Minimum required to be Well Capitalized Under Prompt Corrective Actions Provisions
	Amount	Ratio		Amount	Ratio		Amount	Ratio
	(Dollars in thousands)
Total risk-based capital (to risk-weighted assets)	$68,959	13.33	%	$41,391	8.00	%	$51,739	10.00	%
Tier 1 risk-based capital (to risk-weighted assets)	66,135	12.78		20,696	4.00		31,043	6.00
Tier 1 (core) capital (to adjusted tangible assets)	66,135	8.40		31,508	4.00		39,385	5.00

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a “well capitalized” institution in accordance with regulatory standards.  At September 30, 2007, Kaiser Federal Bank was a “well-capitalized” institution under regulatory standards.

Impact of Inflation

The consolidated financial statements presented herein have been prepared in accordance with GAAP. These principles require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

Our primary assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates, however, do not necessarily move in the same direction or with the same magnitude as the price of goods and services, since such prices are affected by inflation. In a period of rapidly rising interest rates, the liquidity and maturity structure of our assets and liabilities are critical to the maintenance of acceptable performance levels.

The principal effect of inflation, as distinct from levels of interest rates, on earnings is in the area of noninterest expense. Such expense items as employee compensation, employee benefits and occupancy and equipment costs may be subject to increases as a result of inflation. An additional effect of inflation is the possible increase in the dollar value of the collateral securing loans that we have made. We are unable to determine the extent, if any, to which properties securing our loans have appreciated in dollar value due to inflation.

13

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Our loans generally have longer maturities than our deposits. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we monitor our interest rate risk. In monitoring interest rate risk we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities, and their sensitivity to actual or potential changes in market interest rates.

In order to minimize the potential for adverse effects of material and prolonged increases in interest rates on our results of operations, we have adopted investment/asset and liability management policies to better match the maturities and repricing terms of our interest-earning assets and interest-bearing liabilities. The board of directors sets and recommends the asset and liability policies of Kaiser Federal Bank, which are implemented by the asset/liability management committee.

The purpose of the asset/liability management committee is to communicate, coordinate and control asset/liability management consistent with our business plan and board approved policies. The committee establishes and monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk and profitability goals.

The asset/liability management committee generally meets on a weekly basis to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to net present value of portfolio equity analysis and income simulations. The asset/liability management committee regularly reviews interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity, which is defined as the net present value of an institution’s existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity that are authorized by the board of directors of Kaiser Federal Bank. The asset/liability management committee recommends appropriate strategy changes based on this review. The chairman or his designee is responsible for reviewing and reporting on the effects of the policy implementations and strategies to the board of directors at least quarterly.

In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, we have focused our strategies on: (1) originating and purchasing adjustable rate loans; (2) originating a reasonable volume of short- and intermediate-term consumer loans; (3) managing our deposits to establish stable deposit relationships; and (4) using Federal Home Loan Bank advances, and pricing on fixed-term non-core deposits to align maturities and repricing terms.

At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the asset/liability management committee may determine to increase our interest rate risk position somewhat in order to maintain our net interest margin. In the future, we intend to continue our existing strategy of originating and purchasing relatively short-term and/or adjustable rate loans. The Bank does not maintain any securities for trading purposes. The Bank does not currently engage in trading activities or use instruments such as interest rate swaps, hedges, or other similar derivatives to control interest rate risk.

14

The Office of Thrift Supervision provides Kaiser Federal Bank with the information presented in the following table, which is based on information provided to the Office of Thrift Supervision by Kaiser Federal Bank. It presents the change in Kaiser Federal Bank’s net portfolio value at June 30, 2007 which is the latest information available that would occur upon an immediate change in interest rates based on Office of Thrift Supervision assumptions but without giving effect to any steps that management might take to counteract that change.

	June 30, 2007
Change in interest rates in basis points (“bp”) (Rate shock in rates)
	Net portfolio value (NPV)							NPV as % of PV of assets
	$ amount		$ change			% change		NPV ratio		Change(bp)
		(Dollars in thousands)
+300 bp	$	39,973	$	(38,212	)	(49	)%	5.49	%	(445	)bp
+200 bp		54,079		(24,106	)	(31	)	7.22		(272	)
+100 bp		67,237		(10,948	)	(14	)	8.75		(119	)
0 bp		78,185		—		—		9.94		—
-100 bp		85,981		7,796		10		10.72		78
-200 bp		88,745		10,560		14		10.92		98

The Office of Thrift Supervision uses certain assumptions in assessing the interest rate risk of savings associations. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates, and the market values of certain assets under differing interest rate scenarios.

As with any method of measuring interest rate risk, shortcomings are inherent in the method of analysis presented in the foregoing tables. For example, although assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in the market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features, that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates of deposit could deviate significantly from those assumed in calculating the table.

ITEM 4. Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Act”)) as of the end of the period covered by this report. The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this report are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the quarter ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

15

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In March 2007, U.S. Mortgage converted its Chapter 11 bankruptcy proceeding to a Chapter 7 in the District Court of Nevada. U.S. Mortgage was responsible for servicing various commercial real estate participation loans totaling approximately $1.0 million that Kaiser Federal Bank purchased from the company. Through this transition period, all servicing functions of U.S. Mortgage are being handled by the Bankruptcy Trustee.

During the course of these proceedings, U.S. Bank has asserted a claim against $1.0 million in loan principal being serviced by U.S. Mortgage on the basis that U.S. Bank has a priority right to the funds. Kaiser Federal Bank is vigorously contesting this claim and believes it has the priority ownership interest in these loans.

Item 1A. Risk Factors

There have been no material changes to the risk factors that were previously disclosed in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2007.

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

None.

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

31.1            Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

31.1            Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

32.1            Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act

32.2            Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

16

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.

                                      K-Fed Bancorp

   Registrant

Date: November 9, 2007                                                                                                                            /s/ Kay M. Hoveland

                                                                            Kay M. Hoveland

                                                                         President, Chief Executive Officer

                                                                     /s/ Dustin Luton

                                                                   Dustin Luton

                                                                   Chief Financial Officer

17

EXHIBIT 31.1

Certification of the Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

I, Kay M. Hoveland, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of K-Fed Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially effect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 9, 2007                                                                                     /s/ Kay M. Hoveland

                 Kay M. Hoveland

                 President and Chief Executive Officer

EXHIBIT 31.2

Certification of the Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

I, Dustin Luton, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of K-Fed Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially effect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 9, 2007                                                                                     /s/ Dustin Luton

              Dustin Luton

              Chief Financial Officer

EXHIBIT 32.1

Certification of the Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350,

as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of K-Fed Bancorp (the “Company”) on Form 10-Q for the period ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kay M. Hoveland, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this quarterly report on Form 10-Q that:

1. The Report fully complies with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the report fairly presents, in all material respects, the company’s financial condition and results of operations.

Date: November 9, 2007                                                                                /s/ Kay M. Hoveland

Kay M. Hoveland

Chief Executive Officer

EXHIBIT 32.2

Certification of the Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of K-Fed Bancorp (the “Company”) on Form 10-Q for the period ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dustin Luton, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this quarterly report on Form 10-Q that:

1. The Report fully complies with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the report fairly presents, in all material respects, the company’s financial condition and results of operations.

Date: November 9, 2007                                                                                /s/ Dustin Luton

Dustin Luton

Chief Financial Officer