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
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KLAMATH FIRST REPORTS ADJUSTED FISCAL THIRD QUARTER RESULTS;
NON-CASH CHARGE REDUCES YEAR-TO-DATE PROFITS TO $1.5 MILLION
KLAMATH FALLS, OREGON - August 13, 2003 - Klamath First Bancorp, Inc. (Nasdaq:
KFBI) today announced it has adjusted results for the third quarter ended June
30, 2003, as a result of a non-cash charge to earnings of approximately $2.5
million after tax in connection with "other-than-temporary" impairment (OTTI) on
two Federal Home Loan Mortgage Corporation (FHLMC) and one Federal National
Mortgage Association (FNMA) issues of variable rate non-cumulative preferred
stock held in the Company's available for sale investment portfolio. After the
non-cash charge, Klamath First recorded a net loss of $1.4 million, or $(0.20)
per diluted share, for the third fiscal quarter. After the charge, earnings for
the nine months ended June 30, 2003, totaled $1.5 million, or $0.22 per diluted
share.
"This impairment is not permanent," said Kermit Houser, President and Chief
Executive Office. "This decrease in value was the result of the unprecedented
decline in interest rates of the last two years. We do not anticipate the value
will fully recover in the near term, however, when interest rates rise, there
will be a relative increase in the value of the securities. In fact, from the
end of the third fiscal quarter, when we calculated the charge, until the end of
July, there was a $650,000 improvement in the market value of these securities.
Any increases in value will subsequently only be realized through an increase in
the Company's equity in the normal mark-to-market process, but will increase
income only when and if the securities are sold."
The $2.5 million after tax charge is for the reduction to fair market value, as
of June 30, 2003, of three issues of floating rate preferred stock of Federal
Home Loan Mortgage Corporation (FHLMC), and Federal National Mortgage
Association (FNMA) that, as of the same date, had a combined cost of $18.7
million and a combined market value of approximately $15.2 million. The three
issues of the preferred stock pay dividends and qualify for the 70% dividend
received deduction, resulting in a greater after tax effective yield. As a
result of the leveraged nature of the tax benefit, when rates increase the yield
and mark-to-market improve, as rates decline the yield and mark-to-market
decrease.
"FHLMC and FNMA have issued more than $7.5 billion of preferred stock issues
over the past several years and while we believe most of our peers have yet to
reflect this OTTI through their profit and loss statements, after consultation
with our auditors Deloitte & Touche LLP, we have concluded that now is the time
to take the impairment charge in accordance with GAAP," said Houser.
These securities are accounted for in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities. In accordance with SFAS 115, the determination of
"other-than-temporary" impairment considers both the length of time and the
extent to which the value of a security has declined. These write-downs are
non-cash charges, which are recorded as realized losses in Klamath First's
income statement, with a corresponding reduction in unrealized losses in
shareholders' equity, even though there were no sales of the securities.
Previously the market value losses on these securities were reflected in the
equity statement through other comprehensive income rather than in the income
statement. As a result, reported equity and book value of the Company are not
affected by this charge.
As previously announced, Klamath First is party to a pending merger agreement
pursuant to which Klamath will merge with and into Sterling Financial
Corporation (Nasdaq: STSA). The adjustment of results for the third quarter will
not affect the pending merger because it is understood that Sterling took the
matter into account as part of its normal due diligence analysis of Klamath
First as a potential merger candidate.
About Klamath First Bancorp, Inc.
Klamath First Bancorp, Inc. is the holding company for Klamath First Federal
Savings and Loan Association, 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. Customers have access to brokerage and
investment services through the company's subsidiary Klamath First Financial
Services. Additionally, customers may visit new in-store branches seven days a
week with extended banking hours.
ADDITIONAL INFORMATION
The proposed transaction will be submitted to both Sterling and Klamath First's
shareholders for their consideration. Sterling and Klamath First will file a
registration statement, a joint Proxy Statement/ Prospectus and other relevant
documents concerning the proposed transaction with the SEC. Shareholders of
Klamath First 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) thee merger
between Sterling Financial Corporation and Klamath First Bancorp, Inc.; (ii)
Klamath First'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 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.
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) governmental approvals of the merger may not be
obtained, or adverse regulatory conditions may be imposed in connection with
governmental approvals of the merger; (2) the shareholders of Klamath First or
Sterling may fail to approve the merger; (3) changes in interest rates; (4)
changes in tax laws; (5) changes in general economic conditions or (6) changes
in the securities markets. 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 First'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). Klamath First Bancorp, Inc. disclaims any obligation
to publicly announce future events or developments that may affect the
forward-looking statements herein.
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Note: Transmitted on BusinessWire at 4:30 am PDT, August 13, 2003.
Klamath First 3Q03 Adjustment
August 13, 2003
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