FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 7, 2001
Klamath First Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Oregon 0-26556 93-1180440
State or other jurisdiction Commission (I.R.S. Employer
of incorporation File Number Identification No.)
540 Main Street, Klamath Falls, Oregon 97601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (including area code):(541)882-3444
Not Applicable
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
Effective September 7, 2001, Klamath First Bancorp, Inc. (the "Company")
through its wholly-owned subsidiary, Klamath First Federal Savings and Loan
Association (the "Association") consummated the previously announced acquisition
of thirteen(13) branch offices located in the State of Oregon (the "Branches")
from Washington Mutual Bank ("WAMU"). The transaction includes purchase of loans
and furniture and equipment and assumption of certain deposit and other
liabilities associated therewith. The Branches are located primarily on the
central and northern Oregon coast and 12 of the branches were formerly branches
of Western Bank. The acquisition was previously announced in a Form 8-K filed by
the Company on September 15, 2001, and this report is being filed for the
purpose of filing the financial statements and pro forma financial information
included in Item 7 hereof.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements of Business Acquired
The assets acquired and liabilities assumed associated with
the Branches are not considered a business under SEC Rule 11-
01(d) of Regulation S-X for which historical financial
statements would be relevant. The following audited Schedule
of Branch Assets Acquired and Liabilities Assumed as of the
acquisition date of September 7, 2001 is filed with this
report:
Page
-----
(i) Independent Auditors' Report 4
(ii) Schedule of Branch Assets Acquired and
Liabilities Assumed from Washington
Mutual Bank as of September 7, 2001 5
(iii) Notes to Schedule of Branch Assets Acquired
And Liabilities Assumed from Washington
Mutual Bank 6
(b) Pro Forma Financial Information
(i) Unaudited Pro Forma Combined Balance Sheet
as of June 30, 2001 10
(ii) Unaudited Impact on Operating Results 11
The Unaudited Pro Forma Combined Balance Sheet as of June 30, 2001 and the
narrative disclosure regarding the transaction including the pro forma income
and expense information provided have been prepared by the Company based upon
assumptions and expectations it considers reasonable. The financial statements
and disclosures presented herein are shown for illustrative purposes only and
are not necessarily indicative of the future financial position or results of
operations of the Company.
The unaudited pro forma financial statements and disclosures should be read in
conjunction with the historical financial statements and related notes of the
Company that have been previously filed with the Company's Form 10-K for the
year ended September 30, 2000 and Forms 10-Q for subsequent interim periods.
Safe Harbor Clause. This report contains certain "forward-looking statements."
The Company 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 itself of the protection of such safe harbor
with respect to all of such forward-looking statements. These forward-looking
statements, which are included in the pro forma disclosures, describe future
plans or strategies and include the Company's expectation of future financial
results. The words "believe," "expect," "anticipate," "estimate," "project," and
similar expressions identify forward-looking statements. The Company'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, and changes in federal and state legislation. These factors
should be considered in evaluating the forward-looking statements, and undue
reliance should not be placed on such statements.
(c) Exhibits
None
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Klamath First Bancorp, Inc.
Klamath Falls, Oregon
We have audited the accompanying Schedule of Branch Assets Acquired and
Liabilities Assumed from Washington Mutual Bank (the "Schedule") by Klamath
First Bancorp, Inc. through its subsidiary, Klamath First Federal Savings and
Loan Association, as of September 7, 2001. This Schedule is the responsibility
of management. Our responsibility is to express an opinion on this Schedule
based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the Schedule is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Schedule. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall Schedule presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the accompanying Schedule presents fairly, in all material
respects, the branch assets acquired and liabilities assumed from Washington
Mutual Bank as of September 7, 2001 in conformity with accounting principles
generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Portland, Oregon
November 20, 2001
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SCHEDULE OF BRANCH ASSETS ACQUIRED AND LIABILITIES ASSUMED
FROM WASHINGTON MUTUAL BANK
SEPTEMBER 7, 2001
(In thousands)
ASSETS
Cash on hand .......................................... $ 3,582
Federal funds sold .................................... 198,445
________
Total cash and cash equivalents .............. 202,027
Loans receivable, net ................................. 179,298
Accrued interest on loans ............................. 1,013
Furniture, fixtures and equipment ..................... 436
Receivable from Washington Mutual Bank ................ 4,075
Core deposit intangible ............................... 14,990
Other intangible asset ................................ 24,100
Other assets .......................................... 33
________
$425,972
========
LIABILITIES
Deposit liabilities ................................... $423,457
Accrued interest on deposit liabilities ............... 995
Other liabilities ..................................... 1,520
________
$425,972
========
<FN>
See notes to Schedule of Branch Assets Acquired and Liabilities
Assumed from Washington Mutual Bank
</FN>
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NOTES TO SCHEDULE OF BRANCH ASSETS ACQUIRED AND LIABILITIES ASSUMED
FROM WASHINGTON MUTUAL BANK
(1) Summary of Significant Accounting Policies
Basis of Presentation
Effective September 7, 2001, Klamath First Bancorp, Inc. acquired through its
wholly-owned subsidiary, Klamath First Federal Savings and Loan Association (the
"Association"), thirteen branches of Washington Mutual Bank under the terms of a
Purchase and Assumption Agreement dated May 7, 2001 (the "Agreement"). The
acquisition of the thirteen branches has been accounted for as a purchase
transaction in accordance with Statement of Financial Accounting Standards
("SFAS") No. 72, "Accounting for Certain Acquisitions of Banking and Thrift
Institutions," whereby all assets acquired and liabilities assumed were recorded
at their fair values as of September 7, 2001 (the "Acquisition Date") in the
accompanying Schedule of Branch Assets Acquired and Liabilities Assumed from
Washington Mutual Bank. Fair values were determined by market studies conducted
by management and outside advisors, and management deems the results of such
studies to be indicators of fair values as of the Acquisition Date.
Nature of Operations
The Company and subsidiary provide banking and limited nonbanking services to
its customers who are located in 26 counties in the State of Oregon. These
services primarily include attracting deposits from the general public and using
such funds, together with other borrowings, to invest in various real estate
loans, consumer loans, commercial loans, investment securities, and
mortgage-backed and related securities.
Use of Estimates
The preparation of the Schedule in conformity with accounting principles
generally accepted in the United States of America requires management to make
assumptions that result in estimates that affect the reported amounts of certain
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the Schedule. Actual experience could differ from those estimates.
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(2) Loans receivable
Following is detail of loans purchased as of September 7, 2001
(in thousands):
Weighted
Average
Interest
Balance Rate
-------- --------
Mortgage loans $ 13,475 7.52%
Commercial loans 118,848 8.86%
Consumer loans 50,736 8.86%
Total $183,059 8.76%
In conjunction with the transaction, $3.7 million of the purchase price was
allocated to loan loss reserves. Because the acquisition involved branch assets
which had no related historical financial statements, the historical allowance
related to the purchased loans was indeterminable. Management's allocation to
the allowance was based on its estimate of required loan loss reserves
associated with similar loans in the Company's portfolio. Management believes
this amount approximates the historical allowance for these loans.
(3) Furniture, fixtures and equipment
Furniture, fixtures and equipment at the branches were purchased at book value
and recorded at fair value.
(4) Receivable from Washington Mutual Bank
Cash exchanged on the Acquisition Date was based on estimated closing balances.
The final settlement, which was based on actual balances on September 7, 2001,
required Washington Mutual Bank to pay the Company $4,075,000. The account was
settled on October 1, 2001.
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(5) Core Deposit Intangible
Under the terms of the Agreement, the Company paid a premium of 8.00% of the
average deposit balance at the branches for the fourteen days prior to September
7, 2001. The average deposit balance for the fourteen-day period was $425.0
million resulting in a calculated premium of $34.0 million. In accordance with
SFAS No. 72, this calculated premium was allocated to furniture, fixture and
equipment in the amount of $67,107, to core deposit intangible in the amount of
$15.0 million and to other intangible assets in the amount of $24.1 million. The
recorded core deposit intangible will be amortized over the estimated life of
the deposit base of 10 years using an accelerated amortization method. Other
intangible assets will be amortized straight-line over 15 years.
(6) Deposit Liabilities
Following is detail of deposit liabilities assumed as of September
7, 2001 (in thousands):
Weighted
Average
Interest
Balance Rate
________ _______
Noninterest bearing demand deposits $ 77,837 --
Interest bearing demand deposits 142,518 2.55%
Savings deposits 32,989 2.05%
Time deposits 170,113 4.46%
________ _______
$423,457 2.81%
======== =======
The fair value of the deposit liabilities approximates the recorded deposit
liabilities assumed as of September 7, 2001.
* * * * *
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NARRATIVE DISCLOSURES REGARDING THE ACQUISITION
Conversion Costs - In connection with the acquisition of the Branches, the
Company expects to incur $1.4 million in pre-tax merger related costs. Costs
primarily consist of legal, accounting and investment banking fees directly
related to the acquisition and one-time costs connected with converting
customers to new systems and accounts. These amounts will be recorded in
accordance with accounting principles generally accepted in the United States of
America and will be included in the acquisition cost to be allocated based on
the fair value of assets and liabilities acquired.
Impact on Liquidity - Cash received to offset the assumption of deposit
liabilities was initially invested in overnight federal funds. Over the
subsequent two-week period, the proceeds were re- invested in mortgage-backed
securities (16.1%), and collateralized mortgage obligations (83.9%). Contractual
investment maturities are distributed throughout the next thirty years with
calculated durations of the investments at less than five years.
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ACQUISITION OF BRANCHES BY KLAMATH FIRST BANCORP, INC.
Unaudited Pro Forma Combined Balance Sheet
(In thousands)
KLAMATH FIRST ACQUIRED
BANCORP, INC BRANCHES PROFORMA
June 30, 2001 Sept. 7, 2001 COMBINED
----------- ----------- -----------
ASSETS
Cash and cash equivalents ................................................. $ 125,041 $ 202,027 $ 327,068
Investment securities available for sale .................................. 137,386 0 137,386
Investment securities held to maturity .................................... 5 0 593
Mortgage backed & related securities AFS .................................. 177,285 0 177,285
Mortgage backed & related securities HTM .................................. 1,786 0 1,786
Loans receivable, net ..................................................... 518,743 179,298 698,041
Premises and equipment, net ............................................... 14,421 436 14,857
FHLB stock, at cost ....................................................... 12,478 0 12,478
Accrued interest receivable ............................................... 6,160 1,013 7,173
Receivable form Washington Mutual Bank .................................... 4,075 4,075
Core deposit intangible ................................................... 6,886 14,990 21,876
Other intangible assets ................................................... 0 24,100 24,100
Other assets .............................................................. 4,644 33 4,677
----------- ----------- -----------
TOTAL ASSETS .............................................................. $ 1,005,423 $ 425,972 $ 1,431,395
=========== =========== ===========
LIABILITIES
Deposit liabilities ....................................................... $ 710,598 $ 423,457 $ 1,134,055
Accrued interest on deposit liabilities ................................... 1,191 995 2,186
Advances from borrowers for taxes and insurance ........................... 4,855 0 4,855
Advances from FHLB ........................................................ 168,000 0 168,000
Short term borrowings ..................................................... 1,700 0 1,700
Accrued interest on borrowings ............................................ 8 0 806
Pension liability ......................................................... 9 0 986
Deferred federal and state taxes .......................................... 5 0 537
Other liabilities ......................................................... 2,845 1,520 4,365
----------- ----------- -----------
TOTAL LIABILITIES ......................................................... 891,518 425,972 1,317,490
SHAREHOLDERS' EQUITY
Common stock .............................................................. 7 0 72
Additional paid-in capital ................................................ 35,650 0 35,650
Retained earnings-substantially restricted ................................ 83,865 0 83,865
Unearned shares issued to ESOP ............................................ (4,207) 0 (4,207)
Unearned shares issued to MRDP ............................................ (1,356) 0 (1,356)
Net unrealized loss on securities available for sale ...................... (119 0 (119)
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY ................................................ 113,905 0 113,905
----------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY ................................................... $ 1,005,423 $ 424,572 $ 1,431,395
=========== =========== ===========
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IMPACT ON OPERATING RESULTS
Presented below is the Company's estimated pro forma income and expense before
taxes of the acquired branches on a stand alone basis. The pro forma income and
expense have been prepared based on the assets acquired and liabilities assumed
as of September 7, 2001 and projected for a one year period based on interest
rates existing at September 7, 2001. Pro forma income and expense information
available at September 7, 2001 may not be indicative of actual results over the
next twelve months. The estimates related to interest income and interest
expense are based upon assumptions regarding interest rates which may change
based upon market conditions. Service fee income consists primarily of
anticipated service charges on deposit accounts and safe deposit box fees, net
of related expenses. Assumptions regarding service fee income are critical to
results of operations and variance of actual experience from the assumptions
used could significantly impact those results. Non-interest expense does not
include integration costs and additional overhead costs related to operating the
branches, which are expected to be significant.
KLAMATH FIRST ACQUIRED
BANCORP, INC. BRANCHES
Year ended Year Ended PRO FORMA
Sept. 30, 2001 Sept. 30, 2001 COMBINED
-------------- -------------- ----------
(in thousands)
INTEREST INCOME
Interest income on investments $22,082 $10,603 $32,685
Interest income on loans 48,051 15,729 63,780
_______ _______ _______
Interest income 70,133 26,332 96,465
INTEREST EXPENSE
Interest expense on deposits 30,304 12,428 42,732
Interest expense on advances form FHLB 10,066 -- 10,066
Other 381 -- 381
______ _______ _______
Interest expense 40,751 12,428 53,179
______ _______ _______
Net interest income 29,382 13,904 43,286
Provision for loan losses 387 -- 387
______ _______ _______
Net interest income after provision
for loan losses 28,995 13,904 42,899
Non-interest income 11,014 1,486 12,500
Non-interest expense 28,720 11,949 40,669
______ _______ _______
Income before income taxes 11,289 3,441 14,730
Provision for income taxes 3,717 1,340 5,057
______ _______ _______
Net income $7,572 $2,101 $ 9,673
====== ======= =======
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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, hereunto duly authorized.
KLAMATH FIRST BANCORP, INC.
DATE: November 21, 2001 By: _/s/Kermit K. Houser_______
Kermit K. Houser
President and Chief Executive Officer
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