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 EARNS $1.1 MILLION,
OR $0.16 PER SHARE IN THIRD FISCAL QUARTER
Klamath Falls, OR - July 24, 2003 - Klamath First Bancorp, Inc. (Nasdaq:
KFBI) reported net earnings for the third fiscal quarter ended June 30, 2003
were $1.1 million, or $0.16 per diluted share, a 15% increase over $962,000, or
$0.15 per diluted share in the second fiscal quarter. For the third quarter of
last fiscal year, net earnings were $1.9 million, or $0.30 per diluted share.
For the nine-month period net earnings were $4.0 million, or $0.60 per diluted
share, compared to $4.4 million, or $0.68 per diluted share, in the first nine
months of fiscal 2002.
On July 15, 2003, Klamath and Sterling Financial Corporation (Nasdaq: STSA)
jointly announced a definitive agreement for the merger of Klamath First into
Sterling Financial. Under the terms of the agreement, each share of Klamath
common stock will be converted into 0.77 shares of Sterling common stock subject
to certain conditions. Based upon Sterling's closing price on July 14, this is
equivalent to approximately $20.44 per share of Klamath stock. The transaction,
valued at approximately $147 million, is expected to close in the first calendar
quarter of 2004, pending shareholder and regulatory approval.
"We are continuing to execute our strategy to build a strong franchise in
Oregon, and due to the composition of our balance sheet, have been struggling
against the current exceptionally low interest rate environment. We now look
forward to accelerating our strategic plan through the merger with Sterling
Financial. The resulting larger organization will continue to provide local
decision-making, a greater range of banking products and customer convenience,"
said Kermit Houser, president and chief executive officer.
"We have been successfully increasing our levels of higher yield commercial
loans," continued Houser. "Commercial real estate loans have grown 37%, and now
equal 29% of the portfolio, compared to 19% a year ago, and commercial business
loans have increased 6% and now account for 10% of the portfolio, compared to 9%
a year ago. Home improvement and equity loans have also increased substantially
and now account for 17% of the portfolio, compared to 9% at June 30, 2002. At
the same time, the low interest rates continue to contribute to the record 1-4
family purchase and refinancing activity. 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 future higher interest rate environment." Net
loans totaled $555 million at June 30, 2003, compared to $626 million a year
earlier.
Loan quality remains exceptional as non-performing assets represented only
0.12% of total assets, compared to 0.14% of assets at March 31, 2003 and 0.07%
at June 30, 2002. The allowance for loan losses was $7.1 million, or 1.23% of
total loans outstanding and 592% of non-performing loans. A year earlier, the
allowance was $7.9 million, or 1.22% of loans and 718% of non-performing loans.
Assets were $1.45 billion at June 30, 2003 compared to $1.47 billion a year
earlier. Deposits were $1.08 billion, compared to $1.15 billion at June 30,
2002, which include a 13% increase in non-interest bearing deposits and an $107
million, or 22%, drop in high-cost certificates of deposit. Stockholders' equity
increased 5% to $122 million, and book value per share was up to $18.35,
compared to $18.28 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.
"Our exceptionally large investment portfolio provides excellent liquidity
but continues to hinder our ability to produce income in the current
low-interest rate environment," said Marshall J. Alexander, executive vice
president and chief financial officer.
Revenue for the quarter (net interest income before provision for loan
losses plus non-interest income) was $14.9 million compared to $15.4 million in
the like quarter last fiscal year. Revenue for the nine month period was $44.0
million compared to $43.9 million for the first nine months of fiscal 2002. For
the quarter, the net interest margin was 3.14%, a ten basis point improvement
over the 3.04% net interest margin in the second fiscal quarter. The net
interest margin year-to-date was 3.09% compared to 3.47% for the same period of
fiscal 2002.
(more)
Net interest income before provision for loan losses was $10.5 million for
the quarter, compared to $12.3 million in the third quarter of fiscal 2002. For
the first nine months of fiscal 2003, net interest income before provision was
$31.9 million compared to $35.6 million for the like period of fiscal 2002.
For the third quarter, non-interest income increased 43% to $4.4 million,
compared to $3.1 million in the like quarter a year earlier. For the first nine
months of the fiscal year, non-interest income grew 46% to $12.1 million,
compared to $8.3 million in the like period a year earlier.
Total non-interest expense was $13.4 million for the quarter, compared to
$12.4 million in the like quarter a year earlier. Total non-interest expense was
$38.4 million for the first nine months of fiscal 2003, compared to $36.9
million in the like period last fiscal year.
The company adopted SFAS No. 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 No.
147, its pre-tax amortization expense related to goodwill would have been
approximately $1.2 million year-to-date. Under SFAS No. 147, this expense will
not be recorded in 2003 or future fiscal years, but the intangible asset will be
subjected to impairment testing at least annually.
About Klamath First Bancorp, Inc.
Klamath First Bancorp, Inc. is the holding company for Klamath First
Federal Savings and Loan, which operates 59 offices, 57 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 timely completion of
the acquisition by Sterling Financial Corporation including timely regulatory
and shareholder approval, 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, 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 Quarter Ended Nine Months Ended
------------------------------------------ ---------------------------
(In thousands except shares and per share data) June 30, 2003 Mar 31, 2003 June 30, 2002 June 30, 2003 June 30, 2002
------------ ------------ ------------ ------------ ------------
INTEREST INCOME :
Loans receivable ........................... $ 10,438 $ 11,002 $ 12,618 $ 33,152 $ 39,908
Mortgage-backed securities ................. 5,212 5,099 6,742 16,254 19,684
Securities and deposits .................... 1,697 1,670 2,170 4,939 6,855
------------ ------------ ------------ ------------ ------------
17,347 17,771 21,530 54,345 66,447
INTEREST EXPENSE :
Deposits ................................... 4,145 4,698 6,795 14,393 23,552
Federal Home Loan Bank advances ............ 2,656 2,627 2,382 7,933 7,176
Other borrowings ........................... 19 23 31 71 96
------------ ------------ ------------ ------------ ------------
6,820 7,348 9,208 22,397 30,824
------------ ------------ ------------ ------------ ------------
Net Interest Income Before Provision
For Loan Losses ........................ 10,527 10,423 12,322 31,948 35,623
PROVISION FOR LOAN LOSSES ..................... -- -- -- -- 156
------------ ------------ ------------ ------------ ------------
Net Interest Income After Provision
For Loan Losses ........................ 10,527 10,423 12,322 31,948 35,467
NON-INTEREST INCOME :
Fees and service charges on deposit accounts 1,623 1,521 1,262 2,692 2,140
Other fees and service charges ............. 1,053 828 679 4,725 3,590
Gain on sale of securities ................. 76 100 433 555 552
Brokerage and annuity commissions .......... 603 401 276 1,512 819
Gain on sale of mortgage loans ............. 614 612 305 1,630 768
Other ...................................... 387 310 97 954 386
------------ ------------ ------------ ------------ ------------
4,356 3,772 3,052 12,068 8,255
NON-INTEREST EXPENSE :
Salary and employee benefits ............... 6,405 6,206 5,725 18,488 16,624
Occupancy and equipment .................... 1,345 1,352 1,215 3,921 3,577
Information / computer data services ....... 397 347 383 1,090 1,162
Deposit insurance .......................... 44 47 50 139 133
Amortization of intangibles ................ 912 912 1,382 2,736 4,139
Dividends on mandatorily redeemable
preferred securities ..................... 395 403 418 1,229 965
Other ...................................... 3,884 3,578 3,229 10,791 10,328
------------ ------------ ------------ ------------ ------------
13,382 12,845 12,402 38,394 36,928
------------ ------------ ------------ ------------ ------------
Income Before Provision For Income Taxes . 1,501 1,350 2,972 5,622 6,794
PROVISION FOR INCOME TAXES .................... 392 388 1,044 1,665 2,374
------------ ------------ ------------ ------------ ------------
NET EARNINGS .................................. $ 1,109 $ 962 $ 1,928 $ 3,957 $ 4,420
============ ============ ============ ============ ============
Earnings Per Share
Basic $ 0.17 $ 0.15 $ 0.30 $ 0.61 $ 0.69
Diluted $ 0.16 $ 0.15 $ 0.30 $ 0.60 $ 0.68
Cumulative Dividend Per Share $ 0.13 $ 0.13 $ 0.13 $ 0.39 $ 0.39
Weighted Average Shares Outstanding
Basic 6,645,230 6,482,777 6,398,027 6,508,796 6,418,168
Diluted 6,795,457 6,632,322 6,500,451 6,641,995 6,467,611
Shares repurchased during the period -- -- 30,000 -- 292,000
<FN>
(more)
</FN>
FINANCIAL CONDITION
(In thousands except shares and per share data) June 30, 2003 Sep 30, 2002 June 30, 2002
----------- ----------- -----------
ASSETS
Cash and due from banks ............................... $ 58,989 $ 45,791 $ 67,814
Mortgage-backed securities ............................ 591,058 650,796 539,104
Investment securities ................................. 141,804 119,999 141,724
Federal Home Loan Bank stock .......................... 14,152 13,510 13,309
Loans receivable:
Held for portfolio ............................... 562,346 614,841 634,355
Allowance for loan losses ........................ (7,059) (7,376) (7,865)
----------- ----------- -----------
555,287 607,465 626,490
Accrued interest receivable ........................... 6,821 8,177 8,144
Real estate held for sale, net ........................ 538 759 --
Property and equipment, net ........................... 23,496 23,411 23,659
Bank-owned life insurance ............................. 15,344 -- --
Intangible assets ..................................... 37,563 40,299 41,681
Deferred income tax receivable, net ................... 1,115 -- --
Other assets .......................................... 4,003 3,288 3,957
----------- ----------- -----------
$ 1,450,170 $ 1,513,495 $ 1,465,882
=========== =========== ===========
LIABILITIES
Deposits:
Non-interest bearing checking .................... $ 148,689 $ 142,773 $ 131,867
Interest-bearing checking ........................ 135,770 125,867 127,302
Statement savings ................................ 92,281 86,001 83,662
Money market ..................................... 332,405 330,646 326,897
Certificates of deposit .......................... 371,865 456,719 478,861
----------- ----------- -----------
1,081,010 1,142,006 1,148,589
Borrowings:
Advances from Federal Home Loan Bank ............. 208,000 205,250 158,000
Other borrowings ................................. -- 1,700 1,700
----------- ----------- -----------
208,000 206,950 159,700
Accrued expenses and other liabilities ................ 11,295 15,087 12,177
Pension liabilities ................................... 801 842 1,040
Deferred income tax liability, net .................... -- 1,467 1,712
----------- ----------- -----------
1,301,106 1,366,352 1,323,218
Mandatorily redeemable preferred securities ........... 27,305 27,206 27,172
STOCKHOLDERS' EQUITY
Common stock and additional paid in capital ........... 33,590 30,038 30,650
Retained earnings ..................................... 88,965 87,576 85,736
Accumulated other comprehensive income ................ 2,234 6,257 3,358
Unearned shares of common stock issued to ESOP ........ (2,201) (2,935) (3,180)
Unearned shares issued to MRDP ........................ (829) (999) (1,072)
----------- ----------- -----------
121,759 119,937 115,492
----------- ----------- -----------
$ 1,450,170 $ 1,513,495 $ 1,465,882
=========== =========== ===========
Shares Issued : (1)
Shares issued at end of period ................... 6,980,635 6,744,040 6,792,840
Less unearned ESOP and MRDP shares at
end of period ................................. 346,980 377,494 475,359
----------- ----------- -----------
Shares outstanding at end of period
excluding the unearned shares ................. 6,633,655 6,366,546 6,317,481
=========== =========== ===========
Book Value Per Share (1) $ 18.35 $ 18.84 $ 18.28
Tangible Book Value Per Share (1) $ 12.69 $ 12.51 $ 11.68
<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).
(more)
</FN>
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands)
LOANS (including loans held for sale): Jun 30, 2003 Mar 31, 2003 Jun 30, 2002
--------------- --------------- ---------------
Secured by real estate
1-4 family ........................................... $ 218,198 $ 255,517 $ 367,920
Construction ......................................... 15,276 13,524 15,479
Commercial, multi-family, and other .................. 169,482 154,365 123,596
Non-real estate loans
Home improvement and home equity ..................... 96,134 86,697 60,386
Other consumer ....................................... 17,875 18,501 19,918
Commercial business .................................. 59,153 61,437 55,719
--------------- --------------- ---------------
Total Gross Loans Outstanding ........................ $ 576,118 $ 590,041 $ 643,018
=============== =============== ===============
NON - PERFORMING ASSETS : ................................. Jun 30, 2003 Mar 31, 2003 Jun 30, 2002
--------------- --------------- ---------------
Loans on Non - Accrual Status ............................. $ 1,192 $ 1,512 $ 1,096
Delinquent Loans on Accrual Status ....................... -- -- --
--------------- --------------- ---------------
Total Non - Performing Loans .............................. 1,192 1,512 1,096
Real Estate Owned (REO) / Repossessed assets .............. 539 656 --
--------------- --------------- ---------------
Total Non - Performing Assets ........................ $ 1,731 $ 2,168 $ 1,096
=============== =============== ===============
Total Non - Performing Assets / Total Assets .............. 0.12% 0.14% 0.07%
Quarter Ended
-----------------------------------------------------
CHANGE IN THE Jun 30, 2003 Mar 31, 2003 Jun 30, 2002
--------------- --------------- ---------------
ALLOWANCE FOR LOAN LOSSES :
Balance at beginning of period ....................... $ 7,234 $ 7,328 $ 7,993
Provision for loan losses ............................ -- -- --
Recoveries ........................................... 5 14 4
Charge offs .......................................... (180) (108) (132)
--------------- --------------- ---------------
Net charge offs ................................. (175) (94) (128)
--------------- --------------- ---------------
Balance at end of period ............................. $ 7,059 $ 7,234 $ 7,865
=============== =============== ===============
Net Charge-offs / Average Loans Outstanding 0.03% 0.02% 0.02%
Allowance for Loan Losses / Total Loans Outstanding 1.23% 1.23% 1.22%
Allowance for Loan Losses / Non - Performing Loans 592% 478% 718%
<FN>
(more)
</FN>
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands)
(Rates / Ratios Annualized)
Quarters Ended Year to Date
------------------------------------------ ---------------------------
OPERATING PERFORMANCE : 6/30/2003 3/31/2003 6/30/2002 6/30/2003 6/30/2002
------------ ------------ ------------ ------------ ------------
Average loans ....................................... $ 574,299 $ 595,191 $ 646,144 $ 591,982 $ 669,891
Average securities and deposits ..................... 787,932 775,269 717,361 785,619 698,642
Average non - interest - earning assets ............ 129,831 139,496 114,770 129,550 111,596
------------ ------------ ------------ ------------ ------------
Total Average Assets ............................... $ 1,492,062 $ 1,509,956 $ 1,478,275 $ 1,507,151 $ 1,480,129
============ ============ ============ ============ ============
Average deposits .................................... $ 946,652 $ 963,418 $ 1,017,376 $ 967,467 $ 1,025,073
Average borrowings .................................. 210,109 210,291 168,139 208,608 169,279
Average non - interest earning - liabilities ........ 214,032 217,002 179,150 210,971 172,197
------------ ------------ ------------ ------------ ------------
Total Average Liabilities ........................... 1,370,793 1,390,711 1,364,665 1,387,046 1,366,549
Total average equity ................................ 121,269 119,245 113,610 120,105 113,580
------------ ------------ ------------ ------------ ------------
Total Average Liabilities And Equity ................ $ 1,492,062 $ 1,509,956 $ 1,478,275 $ 1,507,151 $ 1,480,129
============ ============ ============ ============ ============
Interest rate yield on loans ........................ 7.27% 7.39% 7.81% 7.47% 7.94%
Interest rate yield on securities and deposits ...... 3.51% 3.49% 4.97% 3.60% 5.06%
Interest Rate Yield On Interest Earning Assets ...... 5.15% 5.19% 6.32% 5.26% 6.47%
------------ ------------ ------------ ------------ ----------
Interest rate expense on deposits ................... 1.75% 1.95% 2.68% 1.99% 3.07%
Interest rate expense on borrowings ................. 5.09% 5.03% 5.71% 5.10% 5.69%
Interest Rate Expense On Interest
Bearing Liabilities ............................ 2.36% 2.50% 3.11% 2.54% 3.44%
------------ ------------ ------------ ------------ ------------
Interest rate spread ................................ 2.79% 2.69% 3.21% 2.72% 3.03%
============ ============ ============ ============ ============
Net interest margin ................................. 3.14% 3.04% 3.61% 3.09% 3.47%
============ ============ ============ ============ ============
Other operating income / Average assets
Includes gains (losses) from sales
of securities .................................. 1.17% 1.00% 0.83% 1.07% 0.74%
Excludes gains (losses) from sales of
securities ..................................... 1.15% 0.97% 0.71% 1.02% 0.69%
Other operating expense / Average assets
Includes non-cash items (GAAP) ................. 3.59% 3.40% 3.36% 3.40% 3.33%
Excludes non-cash items (1) .................... 3.22% 3.03% 2.86% 3.03% 2.84%
Efficiency ratio (other operating expense/revenue)
Includes non-cash items (GAAP) ................. 89.91% 90.49% 80.67% 87.23% 84.16%
Excludes non-cash items (1) .................... 80.81% 80.63% 68.70% 77.87% 71.86%
Return on average assets
Includes non-cash items (GAAP) ................. 0.30% 0.25% 0.52% 0.35% 0.40%
Excludes non-cash items (1) .................... 0.56% 0.54% 0.91% 0.70% 77.00%
Return on average equity
Includes non-cash items (GAAP) ................. 3.66% 3.23% 6.79% 4.39% 5.19%
Excludes non-cash items (1) .................... 6.85% 6.85% 11.95% 7.67% 10.04%
Average equity / Average assets ................... 8.13% 7.90% 7.69% 7.97% 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 benefit.
</FN>
Reconciliation to GAAP financial measures
Net earnings - GAAP ............................ $ 1,109 $ 962 $ 1,928 $ 3,957 $ 4,420
Add back: non-cash items, net of tax 968 1,080 1,422 2,948 4,133
------------ ------------ ------------ ------------ ------------
Net earnings - excluding non-cash items $ 2,077 $ 2,042 $ 3,350 $ 6,905 $ 8,553
============ ============= ============= ============ ============
###
NOTE: Transmitted on Business Wire at 5:00 PDT on July 24, 2002.