EXHIBIT 99.1
Contacts: Kermit K. Houser Marshall J. Alexander
President and CEO Executive VP And CFO
(541) 882-3444 X 7133 (541) 882-3444 X 7120
News Release
================================================================================
KLAMATH FIRST BANCORP REPORTS FIRST HALF FY03 EARNINGS UP 14% TO $2.8 MILLION
Klamath Falls, OR - April 24, 2003 - Klamath First Bancorp, Inc. (Nasdaq:
KFBI) reported net earnings for the second fiscal quarter ended March 31, 2003
was $962,000, or $0.15 per diluted share, compared to $1.7 million, or $0.26 per
diluted share in the like quarter a year earlier. For the six-month period net
earnings grew 14% to $2.8 million, or $0.43 per share compared to $2.5 million,
or $0.37 per share, in the first six months of last fiscal year.
"Two years ago, we embarked on a strategy to reduce our reliance on fixed
rate 1-4 family loans and certificates of deposit by growing the commercial and
consumer loan segments and emphasizing core deposits. We are continuing with
this strategy because it is a sound one for the future of Klamath First.
However, with the current interest rate environment, particularly the last 50
basis point reduction in interest rates last fall, our quarterly results have
been disappointing due to the accelerated payoffs of our existing residential
loan portfolio before it can be replaced with the targeted assets," said Kermit
Houser, president and chief executive officer. "As our loan portfolio shifts to
a greater percentage of higher yielding commercial, consumer and more rapidly
repricing adjustable rate loans we will be able to produce additional revenues.
In addition, future interest rate increases will accelerate our income
generating capabilities from our large investment portfolio.
"We remain committed to maintaining high credit quality while shifting our
loan portfolio to commercial and consumer loans and are unwilling to take on
undue risk in producing these assets," Houser added. "We are building core
deposits and have allowed other high cost deposits to run off. From an
operations standpoint, we remain strong and are continuing to build our
franchise."
Revenue for the quarter (net interest income before provision for loan
losses plus non-interest income) was $14.2 million compared to $14.9 million in
the like quarter last fiscal year. Revenue for the six month period was $29.1
million compared to $28.5 million for the first six months of fiscal 2002. For
the quarter, the net interest margin was 3.04%, compared to 3.14% for the
quarter ended December 31, 2002 and 3.55% for the quarter ended March 31, 2002.
The net interest margin year-to-date was 3.09% compared to 3.41% for the first
half of fiscal 2002.
Net interest income before provision for loan losses was $10.4 million for
the quarter, compared to $12.0 million in the second quarter of fiscal 2002. For
the first six months of fiscal 2003, net interest income before provision was
$21.4 million compared to $23.3 million for the like period of fiscal 2002.
For the second quarter, non-interest income increased 29% to $3.8 million,
compared to $2.9 million in the like quarter a year earlier. For the first half
of the fiscal year, non-interest income grew 48% to $7.7 million, compared to
$5.2 million in the like period a year earlier.
"Increased productivity and cost saving strategies implemented over the
last couple of years have curbed increases in operating expense, with the most
recent quarter increasing less than 4% compared to a year ago. Individual line
item expenses are comparable to our peers. Unfortunately, with our ability to
generate income severely limited by the current interest rate environment and
our low loan to deposit ratio, our performance ratios are not where they need to
be," said Houser. Total non-interest expense was $12.8 million for the quarter,
compared to $12.4 million in the like quarter a year earlier. Total non-interest
expense was $25.0 million for the first six months of fiscal 2003, compared to
$24.5 million in the like period last fiscal year.
The company adopted SFAS 147, "Acquisitions of Certain Financial
Institutions," as of October 1, 2002. This statement makes the accounting for
branch acquisitions by financial institutions consistent with the accounting
principles applied to other acquisitions. By adopting this pronouncement,
Klamath has ceased amortizing other intangibles related to branch acquisitions.
These other intangibles totaled $22.9 million at September 30, 2002. During the
year ended September 30, 2002, the company expensed $1.1 million related to
amortization of other intangibles. If Klamath First had not adopted SFAS 147,
its pre-tax amortization expense related to other intangibles would have been
approximately $816,000 year-to-date. Under SFAS No. 147, this expense will not
be recorded in future fiscal years, but the intangible asset will be subjected
to impairment testing at least annually.
(more)
Assets grew 2% to $1.48 billion at March 31, 2003 compared to $1.45 billion
a year earlier. Deposits were $1.10 billion, compared to $1.14 billion at March
31, 2002, which include a 17% increase in non-interest bearing deposits and an
$83 million, or 18%, drop in high-cost certificates of deposit. Stockholders'
equity increased 9% to $119 million, and book value per share was up 13% to
$19.36, compared to $17.18 a year earlier. In April 2002, the company issued $13
million of floating rate capital securities, and in July 2001, the company
issued $15 million of floating rate capital securities.
"We are more dependent than many of our peers on our investment portfolio
as it totals over three quarters of a billion dollars. Two years ago, with the
sale of securities related to the securitization of $190 million in fixed rate
long-term mortgage loans and our purchase of 13 branches from Washington Mutual,
we began the process of restructuring our balance sheet to provide more
liquidity and to better deploy our resources in a changing interest rate
environment. We believed at that time that it was most prudent to make
short-term investments with a three to five year cash flow horizon in
anticipation of rising interest rates. Therefore, those short-term investments
are now maturing or returning cash, which will continue. Unfortunately, these
funds must now be reinvested at the lowest interest rate levels seen in over 50
years. We remain well-positioned to benefit from accelerated income generation
when interest rates increase," said Marshall J. Alexander, executive vice
president and chief financial officer.
"Non-real estate secured loans such as commercial business, which were up
5%, and consumer loans, up 41%, continue to be a larger portion of our
portfolio. They now account for 28% of the total portfolio compared to 20% a
year ago," said Houser. "Commercial real estate loans have grown 23%, and now
equal 26% of the portfolio, compared to 19% a year ago. At the same time, record
1-4 family refinancing activity and the selling of new loan production into the
secondary market has caused contraction in the overall loan portfolio. We will
continue to sell these lower rate loans into the secondary market to mitigate
the risk of holding low, fixed-rate, long-term loans in a higher interest rate
environment." Net loans totaled $573 million at March 31, 2003, compared to $645
million a year earlier.
Loan quality remains outstanding as non-performing assets represented only
0.15% of total assets, compared to 0.09% of assets at December 31, 2002 and
0.04% at March 31, 2002. The allowance for loan losses was $7.2 million, or
1.23% of total loans outstanding and 478% of non-performing loans. A year
earlier, the allowance was $8.0 million, or 1.21% of loans and 1334% of
non-performing loans. "While we have had an increase in non-performing assets,
we are still below our peers. According to the most recent data from third-party
source SNL Financial, the average ratio of non-performing assets to assets for
companies similar to ours it 0.40%, 25 basis points higher than our ratio. In
addition, we have not added to our loan loss provision in recent quarters
because the overall portfolio has been shrinking due to sales of 1-4 family
loans to the secondary market and because the quality of our loan portfolio
remains well above average," said Houser.
About Klamath First Bancorp, Inc.
Klamath First Bancorp, Inc. is the holding company for Klamath First, which
operates 57 offices, 55 in 26 counties throughout Oregon and two in-store
branches in South Central Washington. Klamath First serves the state of Oregon
through these offices by offering a full range of products and services for both
the consumer and business customer, including commercial, consumer and real
estate loans, various checking and savings products, 24 hour telephone banking,
and online banking with bill pay through its web site www.KlamathFirst.com.
Additionally, customers may visit new in-store branches seven days a week with
extended banking hours.
Safe Harbor Clause: Except for the historical information in this news release,
the matters described herein are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 and are subject to risks
and uncertainties that could cause actual results to differ materially. Such
risks and uncertainties include those related to the economic environment,
particularly in the region where Klamath First Bancorp, Inc. operates, fiscal
and monetary policies of the U.S. government, competitive products and pricing,
acquisitions, credit risk management, change in government regulations affecting
financial institutions and other risks and uncertainties discussed from time to
time in Klamath First Bancorp, Inc.'s SEC filings including its 2002 Form 10-K.
Klamath First Bancorp, Inc. disclaims any obligation to publicly announce future
events or developments that may affect the forward-looking statements herein.
(tables follow)
RESULTS OF OPERATIONS Quarters Ended Six Months Ended
--------------------------------------- ---------------------------
(In thousands except shares and per share data) Mar 31, 2003 Dec 31, 2002 Mar 31, 2002 Mar 31, 2003 Mar 31, 2002
------------ ----------- ------------ ------------ ------------
INTEREST INCOME :
Loans receivable $ 11,002 $ 11,712 $ 13,330 $ 22,714 $ 27,290
Mortgage-backed securities 5,099 5,944 6,358 11,043 12,942
Securities and deposits 1,670 1,571 2,234 3,241 4,684
------------ ----------- ------------ ------------ ------------
17,771 19,227 21,922 36,998 44,916
INTEREST EXPENSE :
Deposits 4,698 5,550 7,510 10,248 16,757
Federal Home Loan Bank advances 2,627 2,651 2,363 5,277 4,793
Other borrowings 23 29 24 53 65
------------ ----------- ------------ ------------ ------------
7,348 8,230 9,897 15,578 21,615
------------ ----------- ------------ ------------ ------------
Net Interest Income Before Provision For Loan Losses 10,423 10,997 12,025 21,420 23,301
PROVISION FOR LOAN LOSSES - - - - 3 - - 156
------------ ----------- ------------ ------------ ------------
Net Interest Income After Provision For Loan Losses 10,423 10,997 12,022 21,420 23,145
NON-INTEREST INCOME :
Fees and service charges on deposit accounts 1,521 1,581 1,236 3,102 2,328
Other fees and service charges 828 811 751 1,639 1,462
Gain (loss) on sale of securities 100 380 119 480 119
Brokerage and annuity commissions 401 507 301 908 543
Gain on sale of mortgage loans 612 405 329 1,017 463
Other 310 257 185 567 288
------------ ----------- ------------ ------------ ------------
3,772 3,941 2,921 7,713 5,203
NON-INTEREST EXPENSE :
Salary and employee benefits 6,206 5,877 5,524 12,083 10,899
Occupancy and equipment 1,352 1,224 1,156 2,576 2,362
Information / computer data services 347 346 407 693 780
Deposit insurance 47 48 51 95 84
Amortization of intangibles 912 912 1,378 1,824 2,756
Dividends on mandatorily redeemable preferred securities 403 431 244 834 546
Other 3,578 3,329 3,636 6,908 7,099
------------ ----------- ------------ ------------ ------------
12,845 12,167 12,396 25,013 24,526
------------ ----------- ------------ ------------ ------------
Income Before Provision For Income Taxes 1,350 2,771 2,547 4,120 3,822
PROVISION FOR INCOME TAXES 388 885 876 1,273 1,330
------------ ----------- ------------ ------------ ------------
NET EARNINGS $ 962 $ 1,886 $ 1,671 $ 2,847 $ 2,492
============ =========== ============ ============ ============
Earnings Per Share
Basic $ 0.15 $ 0.29 $ 0.26 $ 0.44 $ 0.37
Diluted $ 0.15 $ 0.29 $ 0.26 $ 0.43 $ 0.37
Cumulative Dividend Per Share $ 0.13 $ 0.13 $ 0.13 $ 0.26 $ 0.26
Weighted Average Shares Outstanding
Basic 6,482,777 6,399,299 6,381,819 6,440,579 6,822,025
Diluted 6,632,322 6,541,255 6,402,420 6,579,390 6,822,025
Shares repurchased during the period - - - - 30,000 - - 21,732
FINANCIAL CONDITION
(In thousands except shares and per share data) Mar 31, 2003 Sep 30, 2002 Mar 31, 2002
------------ ------------ ------------
ASSETS
Cash and due from banks $ 53,044 $ 45,791 $ 62,509
Mortgage-backed securities 592,316 650,796 497,166
Investment securities 154,191 119,999 150,032
Federal Home Loan Bank stock 13,969 13,510 13,113
Loans receivable:
Held for portfolio 580,630 614,841 652,991
Allowance for loan losses (7,234) (7,376) (7,993)
------------ ------------ ------------
573,396 607,465 644,998
Accrued interest receivable 7,469 8,177 8,299
Real estate held for sale, net 656 759 49
Property and equipment, net 23,323 23,411 23,385
Bank-owned life insurance 15,137 - - - -
Intangible assets 38,475 40,299 42,827
Deferred income tax receivable, net 1,366 - - - -
Other assets 4,298 3,288 5,186
------------ ------------ ------------
$ 1,477,640 $ 1,513,495 $ 1,447,564
============ ============ ============
LIABILITIES
Deposits:
Non-interest bearing checking $ 143,372 $ 142,773 $ 122,781
Interest-bearing checking 134,386 125,867 120,705
Statement savings 89,333 86,001 84,250
Money market 329,350 330,646 323,468
Certificates of deposit 403,287 456,719 490,360
------------ ------------ ------------
1,099,728 1,142,006 1,141,564
Borrowings:
Advances from Federal Home Loan Bank 208,000 205,250 168,000
Other borrowings 1,700 1,700 1,700
------------ ------------ ------------
209,700 206,950 169,700
Accrued expenses and other liabilities 21,149 15,087 11,916
Pension liabilities 811 842 1,007
Deferred income tax liability, net - - 1,467 - -
------------ ------------ ------------
1,331,388 1,366,352 1,324,187
Mandatorily redeemable preferred securities 27,272 27,206 14,577
STOCKHOLDERS' EQUITY
Common stock and additional paid in capital 31,841 30,038 30,929
Retained earnings 88,726 87,576 84,642
Accumulated other comprehensive income (loss) 1,712 6,257 (2,201)
Unearned shares of common stock issued to ESOP (2,446) (2,935) (3,424)
Unearned shares issued to MRDP (853) (999) (1,146)
------------ ------------ ------------
118,980 119,937 108,800
------------ ------------ ------------
$ 1,477,640 $ 1,513,495 $ 1,447,564
============ ============ ============
Shares Issued : (1)
Shares issued at end of period 6,502,780 6,744,040 6,817,367
Less unearned ESOP and MRDP shares at end of period 356,625 377,494 485,004
------------ ------------ ------------
Shares outstanding at end of period excluding the
unearned shares 6,146,155 6,366,546 6,332,363
============ ============ ============
Book Value Per Share (1) $ 19.36 $ 18.84 $ 17.18
Tangible Book Value Per Share (1) $ 13.10 $ 12.51 $ 10.42
<FN>
(1)Calculation is based on number of shares outstanding at the end of the period rather than weighted
average shares outstanding and excludes unallocated shares in the employee stock ownership plan
(ESOP) and Management Recognition and Development Plan (MRDP).
</FN>
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands)
LOANS (including loans held for sale): Mar 31, 2003 Dec 31, 2002 Mar 31, 2002
--------------- --------------- ---------------
Secured by real estate
1-4 family $ 255,517 $ 298,906 $ 388,519
Construction 13,524 13,072 15,072
Commercial, multi-family, and other 154,365 138,468 125,375
Non-real estate loans
Home improvement and home equity 86,697 74,930 54,140
Other consumer 18,501 18,541 20,674
Commercial business 61,437 62,385 58,310
--------------- --------------- ---------------
Total Gross Loans Outstanding $ 590,041 $ 606,302 $ 662,090
=============== =============== ===============
NON - PERFORMING ASSETS : Mar 31, 2003 Dec 31, 2002 Mar 31, 2002
--------------- --------------- ---------------
Loans on Non - Accrual Status $ 1,512 $ 583 $ 599
Delinquent Loans on Accrual Status - - - - - -
--------------- --------------- ---------------
Total Non - Performing Loans 1,512 583 599
Real Estate Owned (REO) / Repossessed assets 656 754 49
--------------- --------------- ---------------
Total Non - Performing Assets $ 2,168 $ 1,337 $ 648
=============== =============== ===============
Total Non - Performing Assets / Total Assets 0.15% 0.09% 0.04%
Quarter Ended
--------------------------------------------------
CHANGE IN THE Mar 31, 2003 Dec 31, 2002 Mar 31, 2002
--------------- --------------- ---------------
ALLOWANCE FOR LOAN LOSSES :
Balance at beginning of period $ 7,328 $ 7,376 $ 8,059
Provision for loan losses - - - - 3
Recoveries 14 30 4
Charge offs (108) (78) (73)
--------------- --------------- ---------------
Net (charge off's) recoveries (94) (48) (69)
--------------- --------------- ---------------
--------------- --------------- ---------------
Balance at end of period $ 7,234 $ 7,328 $ 7,993
=============== =============== ===============
Net Charge-offs / Average Loans Outstanding 0.02% 0.01% 0.01%
Allowance for Loan Losses / Total Loans Outstanding 1.23% 1.21% 1.21%
Allowance for Loan Losses / Non - Performing Loans 478% 1257% 1334%
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands)
(Rates / Ratios Annualized)
Quarter Ended Year to Date
---------------------------------------- --------------------------
OPERATING PERFORMANCE : 3/31/2003 12/31/2002 3/31/2002 3/31/2003 3/31/2002
------------ ------------ ------------ ------------ ------------
Average loans $ 595,191 $ 606,377 $ 671,637 $ 600,828 $ 681,243
Average securities and deposits 775,269 793,295 684,668 784,531 689,339
Average non - interest - earning assets 139,496 120,865 110,065 129,542 110,528
------------ ------------ ------------ ------------ ------------
Total Average Assets $ 1,509,956 $ 1,520,537 $ 1,466,370 $ 1,514,901 $ 1,481,110
============ ============ ============ ============ ============
Average deposits $ 963,418 $ 991,969 $ 1,022,752 $ 977,870 $ 1,028,942
Average borrowings 210,291 205,458 169,700 207,850 169,832
Average non - interest earning - liabilities 217,002 203,310 161,737 209,660 168,776
------------ ------------ ------------ ------------ ------------
Total Average Liabilities 1,390,711 1,400,737 1,354,189 1,395,380 1,367,550
Total average equity 119,245 119,800 112,181 119,521 113,560
------------ ------------ ------------ ------------ ------------
Total Average Liabilities And Equity $ 1,509,956 $ 1,520,537 $ 1,466,370 $ 1,514,901 $ 1,481,110
============ ============ ============ ============ ============
Interest rate yield on loans 7.39% 7.73% 7.94% 7.56% 8.01%
Interest rate yield on securities and deposits 3.49% 3.79% 5.02% 3.64% 5.11%
Interest Rate Yield On Interest Earning Assets 5.19% 5.49% 6.47% 5.34% 6.55%
------------ ------------ ------------ ------------ ------------
Interest rate expense on deposits 1.95% 2.24% 2.94% 2.10% 3.26%
Interest rate expense on borrowings 5.03% 5.20% 5.61% 5.11% 5.64%
Interest Rate Expense On Interest Bearing
Liabilities 2.50% 2.75% 3.32% 2.63% 3.60%
------------ ------------ ------------ ------------ ------------
Interest rate spread 2.69% 2.74% 3.15% 2.71% 2.95%
============ ============ ============ ============ ============
Net interest margin 3.04% 3.14% 3.55% 3.09% 3.41%
============ ============ ============ ============ ============
Other operating income / Average assets
Includes gains (losses) from sales of securities 1.00% 1.04% 0.80% 1.02% 0.70%
Excludes gains (losses) from sales of securities 0.97% 0.94% 0.76% 0.95% 0.69%
Other operating expense / Average assets
Includes non-cash items (GAAP) 3.40% 3.20% 3.38% 3.30% 3.31%
Excludes non-cash items (1) 3.03% 2.84% 2.90% 2.94% 2.83%
Efficiency ratio (other operating expense / revenue)
Includes non-cash items (GAAP) 90.49% 81.45% 82.94% 85.86% 86.04%
Excludes non-cash items (1) 80.63% 72.31% 71.01% 76.37% 73.56%
Return on average assets
Includes non-cash items (GAAP) 0.25% 0.50% 0.46% 0.38% 0.34%
Excludes non-cash items (1) 0.54% 0.73% 0.83% 0.64% 0.70%
Return on average equity
Includes non-cash items (GAAP) 3.23% 6.30% 5.96% 4.76% 4.39%
Excludes non-cash items (1) 6.85% 9.30% 10.80% 8.08% 9.16%
Average equity / Average assets 7.90% 7.88% 7.65% 7.89% 7.67%
<FN>
(1)This press release includes information relating to non-interest expense that is calculated on a non-GAAP basis. Management
uses this non-GAAP information internally, and has disclosed it to investors, based on its belief that the information provides
a more accurate picture of its operating results for purposes of comparisons to prior periods and other entities. Items
considered non-cash items are amortization of core deposit and other intangibles and expense related to the company's
Management Recognition and Development Plan and Employee Stock Ownership Plan. These expenses have been reflected net of the
related tax expense.
</FN>
Reconciliation to GAAP financial measures
Net earnings - GAAP $ 962 $ 1,886 $ 1,671 $ 2,847 $ 2,492
Add back: non-cash items, net of tax 1,080 900 1,358 1,980 2,711
------------ ------------ ------------ ------------ ------------
Net earnings - excluding non-cash items $ 2,042 $ 2,786 $ 3,029 $ 4,827 $ 5,203
============ ============ ============ ============ ============
NOTE: Transmitted on Business Wire at 5:00 PDT on April 24, 2002.