Filed by Klamath First Bancorp, Inc.
Pursuant to Rule 425 under the Securities Act of 1933 and
deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934
Subject Company: Klamath First Bancorp, Inc.
Commission File No. 0-26556
On July 15, 2003, Sterling Financial Corporation and Klamath First Bancorp,
Inc. issued the following joint press release:
For Release July 15, 2003 4:30 a.m. PDT
Contact: Heidi Stanley
EVP Corporate Administration
509-358-6160
STERLING FINANCIAL CORPORATION
OF SPOKANE, WASHINGTON,
ANNOUNCES DEFINITIVE AGREEMENT TO ACQUIRE
KLAMATH FIRST BANCORP, INC.
Spokane, Washington and Klamath Falls, Oregon July 15, 2003 Sterling Financial
Corporation (NASDAQ: STSA) and Klamath First Bancorp, Inc. (NASDAQ: KFBI)
announced today that they have signed a definitive agreement for the merger of
Klamath First Bancorp, Inc. with and into Sterling Financial Corporation.
The transaction, which is valued at approximately $147 million, is expected to
close in the first quarter of 2004, pending shareholder and regulatory
approval, and to be accretive to Sterling's earnings per share in 2004.
Under the terms of the merger agreement, which has been unanimously approved
by the Boards of Directors of both companies, each share of Klamath common
stock will be converted into 0.77 shares of Sterling common stock subject to
certain conditions. Based upon the closing price for Sterling on July 14 of
$26.55 per share, the consideration is equivalent to $20.44 per share of
Klamath common stock. The parties have agreed to pay termination fees in the
event the merger agreement is terminated under certain conditions. The
exchange of shares is expected to be tax-free to the Klamath shareholders.
Based upon balance sheet data as of March 31, 2003, the combined company will
have approximately $5.3 billion in total assets, deposits of approximately
$3.4 billion, and shareholders' equity of approximately $388 million. Based on
yesterday's closing price, the combined company will have a market
capitalization of approximately $535 million.
Sterling's Chairman and Chief Executive Officer, Harold B. Gilkey, commented,
"We are very pleased to welcome the employees, customers and investors of
Klamath into the Sterling family. This merger is consistent with our
previously stated growth plans to become the leading community bank in the
region."
With the increase to approximately 143 branches serving Oregon, Washington,
Idaho, and Montana, Sterling strengthens its position as a leading regional
community bank and gives it the ability to extend its "Hometown Helpful"
philosophy throughout communities in the region.
"The merger with Klamath is a perfect fit for Sterling," said Mr. Gilkey. "In
addition to the financial aspects, Sterling and Klamath match up very well
culturally. As a leading regional community bank we'll be able to build a bank
for all of Oregon, a bank that offers the same products and services of a
large bank while retaining the feel of a hometown bank."
Mr. Gilkey expressed confidence that Klamath would be smoothly integrated into
Sterling. "Our two institutions have complementary financial, organizational
and philosophical aspects. Sterling has averaged one acquisition per year
since 1998 and has successfully integrated every merged institution into
Sterling. From our acquisition of 33 bank branches and related operations to
the recent addition of five Empire branches in Montana, our back office is
well-prepared for this merger," said Mr. Gilkey. "When two community banks
join forces, the transition tends to be smooth since both institutions are
used to operating with the focus on understanding the individual communities
in which they do business."
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According to Kermit K. Houser, President and CEO of Klamath, "This combination
of companies is positive in every way. It accelerates our mutual desire to
provide extensive coverage in the Northwest, as our existing geographic
footprints are a perfect fit. Klamath's strong deposit base supports
Sterling's strong loan growth and the combined banking products and offices
add additional business options and customer convenience. The larger
organization also provides numerous opportunities for Klamath First employees
and our shareholders are receiving a premium over our stock price today and
will have an opportunity for future growth with the larger company."
Rodney Murray, Chairman of Klamath First Bancorp, Inc. commented, "We are very
pleased to be joining Sterling Financial Corporation. Becoming a part of a
leading regional community bank will give Klamath the opportunity to
accelerate our business plan and better serve the customers and communities we
have served for nearly 70 years. I am very pleased that our customers will
continue to receive the personalized service from our customer service staff,
but at the same time will have access to a much wider array of products and
services. In addition, Sterling's community-banking culture, local
decision-making, strong commitment to employees and involvement in local
communities carries on the traditions that Klamath has taken such pride in for
so many years. "
According to Gilkey, "Sterling will continue local decision-making in Oregon.
This will allow us to continue to deliver on our promise to customers of
prompt, professional responses to their banking needs and our history of
community involvement in these Oregon communities. Sterling intends to form an
Oregon-area advisory board comprised of current Klamath board members to
facilitate Sterling's further expansion in Oregon. In addition, Sterling will
be adding one board position at the holding company and two seats on the
Sterling Savings Bank board. Klamath board members will be asked to fill these
positions."
Commenting further, Mr. Gilkey, stated, "This transaction is a win-win for the
shareholders of both companies. The access to capital and other resources
gives Sterling the opportunity to continue its regional growth. Additionally,
the transaction reflects Sterling's long-term strategy of concentrating on its
core businesses, including our ability to diversify loan portfolio
opportunities across the region. Sterling welcomes and looks forward to a
long-term opportunity for achievements and success with this acquisition."
Sterling and Klamath will host a conference call for investors, analysts and
other interested parties on July 15, 2003 at 4:30 p.m. ET.
Participants will include:
. Harold B. Gilkey, Chairman and CEO of Sterling
. Kermit K. Houser, President and CEO of Klamath
. Heidi B. Stanley, EVP Corporate Administration of Sterling
. Daniel G. Byrne, SVP and CFO of Sterling
Investors, analysts and other interested parties may access the teleconference
at 630-395-0041 and use the password "STERLING." A replay will be available
from approximately 7:00 p.m ET on July 15, 2003 until August 15, 2003 at 8:00
p.m. ET. The replay number is 402-998-0787. In addition, Sterling has prepared
an Investor Presentation to accompany the audio call. The presentation is
available via the Internet at www.sterlingsavingsbank.com. The Investor
Relations site contains the investor presentation, as well as the link to the
audio webcast for the Friday morning conference call.
Klamath is being advised in this transaction by D.A. Davidson & Co. Sterling
is being advised by Sandler O'Neill & Partners, L.P.
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ABOUT STERLING
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Sterling Financial Corporation of Spokane, Washington, is a unitary savings
and loan holding company, which owns Sterling Savings Bank. Sterling Savings
Bank is a Washington State-chartered, federally insured stock savings
association, which opened in April 1983. Sterling Savings Bank, based in
Spokane, Washington, has branches throughout Washington, Idaho, Oregon and
western Montana. Through Sterling's wholly owned subsidiaries Action Mortgage
Company and INTERVEST-Mortgage Investment Company, it operates loan production
offices inWashington, Oregon, Idaho and western Montana. Sterling's subsidiary
Harbor Financial Services provides non-bank investments, including mutual
funds, variable annuities, and tax-deferred annuities, through regional
representatives throughout Sterling Savings' branch network.
ABOUT KLAMATH
- -------------
Klamath First Bancorp Inc. is the holding company for Klamath First Federal
Savings and Loan Association (Klamath First Federal), organized in 1934.
Klamath First Federal is a progressive, community-oriented financial
institution that focuses on serving customers within its primary market area.
Accordingly, Klamath First Federal 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 within its market area, as well as commercial
real estate and multi-family residential loans, loans to consumers and loans
for commercial purposes. Upon the acquisition of 13 branches from Washington
Mutual in September 2001, Klamath First Federal had a presence in 26 of
Oregon's 36 counties and had two in-store branches in the State of Washington.
ADDITIONAL INFORMATION
- ----------------------
The proposed transaction will be submitted to both Sterling and Klamath's
shareholders for their consideration. Sterling and Klamath will file a
registration statement, a joint Proxy Statement/ Prospectus and other relevant
documents concerning the proposed transaction with the SEC. Shareholders of
both companies are urged to read the Proxy Statement/Prospectus when it
becomes available and any other relevant documents filed with the SEC as well
as any amendments or supplements to those documents, because they will contain
important information. Shareholders may obtain a free copy of the Proxy
Statement/Prospectus and other documents containing information about Sterling
and Klamath when they become available on the SEC's Internet site at
(http://www.sec.gov).
FORWARD-LOOKING STATEMENTS
- --------------------------
This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, statements about (i) the benefits
of the merger between Sterling Financial Corporation ("Sterling") and Klamath
First Bancorp, Inc. ("Klamath"), including future financial and operating
results, cost savings enhancements to revenue and accretion to reported
earnings that may be realized from the merger; (ii) Sterling's and Klamath's
plans, objectives, expectations and intentions and other statements contained
in this presentation that are not historical facts; and (iii) other statements
identified by words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates," or words of similar meaning generally
intended to identify forward-looking statements. These forward-looking
statements are based upon the current beliefs and expectations of the
management of Sterling and Klamath and are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of
which are beyond our control. In addition, these forward-looking statements
are subject to assumptions with respect to future business strategies and
decisions that are subject to change. Actual results may differ materially
from the anticipated results discussed in these forward-looking statements
because of numerous possible uncertainties.
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The following factors, among others, could cause actual results to differ
materially from the anticipated results or other expectations expressed in the
forward-looking statements: (1) the businesses of Sterling and Klamath may not
be combined successfully, or such combination may take longer, be more
difficult, time-consuming or costly to accomplish than expected; (2) the
expected growth opportunities or cost savings from the merger may not be fully
realized or may take longer to realize than expected; (3) operating costs,
customer losses and business disruption following the merger, including
adverse effects on relationships with employees, may be greater than expected;
(4) governmental approvals of the merger may not be obtained, or adverse
regulatory conditions may be imposed in connection with governmental approvals
of the merger; (5) the shareholders of Klamath or Sterling may fail to approve
the merger; (6) adverse governmental or regulatory policies may be enacted;
(7) the interest rate environment may further compress margins and adversely
affect net interest income; (8) results may be adversely affected by continued
diversification of assets and adverse changes to credit quality; (9)
competition from other financial services companies in Sterling's and
Klamath's markets could adversely affect operations; and (10) an economic
slowdown could adversely affect credit quality and loan originations.
Additional factors, that could cause actual results to differ materially from
those expressed in the forward-looking statements are discussed in Sterling's
and Klamath's reports (such as Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and
Exchange Commission and available on the SEC's Internet site
(http://www.sec.gov).
Media Contact:
Sterling Financial Corporation Klamath First Bancorp, Inc.
Heidi B. Stanley Kermit K. Houser
EVP, Corporate Administration President and CEO
509-358-6160 541-882-3444
Investor Contacts:
Sterling Financial Corporation Klamath First Bancorp, Inc.
Heidi B. Stanley Kermit K. Houser
or Daniel G. Byrne
SVP, Chief Financial Officer
509-458-3711
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