KFBI:
klamathfirstfederal.com Release
Date: January 26, 2001 FOR IMMEDIATE RELEASE
Klamath First Bancorp, Inc. Announces First Quarter Earnings
KLAMATH FALLS, ORE -- January 26, 2001 -- Klamath First Bancorp, Inc. (Nasdaq: KFBI) (the "Company") today announced net earnings of $1.7 million, or $0.25 basic earnings per share for the first quarter ended December 31, 2000, compared to net earnings of $2.0 million, or $0.29 basic earnings per share for the quarter ended December 31, 1999. The economic environment of this quarter was very similar to last year’s with generally higher interest rates, an inverted yield curve, and lower loan volumes. With the Company’s current asset and liability mix, this environment will continue to have adverse effects on the Company’s quarterly earnings. The Company is the holding company for Klamath First Federal Savings and Loan Association (the "Association"), an Oregon-based federal savings and loan association, with 36 offices throughout the state of Oregon.
This past year and this past quarter have once again provided us, and much of the financial sector, many challenges. Historically, the Association has been a traditional thrift , relying primarily on spread income, income generated from the interest we receive on earning assets, primarily loans, less the interest we pay out on liabilities, primarily deposits. The flat to inverted yield curve in which short term rates, used to price deposits, are equal to or higher than long term rates, where our mortgage loans are priced, has created very thin spread and thus lower net income. Recently, rates have lowered, but the yield curve has remained inverted. The prospect of lower rates is positive for increasing mortgage loan volume; however, if the yield curve remains flat or inverted, it will continue to be difficult to improve spread income through traditional mortgage lending. The continued shape of the yield curve has caused the Company to re-evaluate our lines of business and how best to profitably manage the Company. Additionally, many of our markets have shown signs of economic weakness, as evidenced by a dramatic slow down in real estate sales in new housing developments and subdivisions. The economics of the past eighteen months have dictated that it was not profitable to grow the balance sheet in our traditional business model and, in many cases, it was prudent for profit preservation to shrink the balance sheet. With an eye towards potential credit weakness and a slowing economy in many of our previously rapid growing geographic areas, the Company reduced its exposure to speculative and construction lending. This has resulted not only in reduced lending in these sectors but also reduced exposure to potential credit risk. One of the Company’s strengths is the quality of its loan portfolio which will be of increasing value if the economy shows further weakness.
The Company’s focus this year is to capitalize on many of the Company’s strengths and many of the initiatives started last year. The Company’s new President and Chief Executive Officer ("CEO"), Kermit K. Houser, along with the management team, is evaluating new initiatives and ideas to profitably compete in the rapidly changing financial marketplace. As a result, this year may be looked at as a foundation building year to properly structure the Company to be stronger and more profitable for the long term. As Marshall J. Alexander, Senior Vice President and Chief Financial Officer, recently stated at the Company’s annual meeting, "Everything we do will be focused on improving long term revenues by emphasizing increased and better training throughout the organization, promoting a much more active and noticeable service and sales culture and new product development. The Company believes that if it doesn’t invest in its employees and in new technology today, it will be hard pressed to see profitability grow in the future." These initiatives will have some short term costs and may affect short term profitability; however, we are also looking at some balance sheet restructuring ideas that may result in non-recurring income that will offset potential non-recurring expenses.
Commenting on the Company’s vision and future, President and CEO, Houser stated, "During my short time with the Company, I have become even more impressed with the strengths of the Company than when I initially studied the Company prior to my employment. Of note is the high quality and dedication of the staff, the great branch locations, the variety of products the Company has to offer and the high credit quality of the loan portfolio. It is apparent that the Company has a great wealth of previously untapped potential within its current customer base and potential for new customers within its markets. The board of directors, the management team and I are having many discussions on how to better capitalize on these strengths, and to develop new initiatives to make the Company a high performing financial institution within the next eighteen months. My time table within the next ninety days is to have outlined the Company’s vision, goals and new initiatives. I am looking forward to presenting these to the public at that time."
First Quarter Earnings Summary
Total interest income for the three months ended December 31, 2000 was $17.8 million compared to $18.1 million for the three months ended December 31, 1999. This trend is similar to that reported over the last few quarters compared to a year ago. However, comparing the quarter ended December 31, 2000 with interest income of $17.8 million and interest expense of $10.3 million to the previous quarter ended September 30, 2000, with interest income of $17.7 million and interest expense of $10.3 million results in a slight increase in spread income. Although the increase is minimal, it reveals that with the recent downward shift in the yield curve and short term rates, the slippage in interest rate spread and margin has turned around. Interest rate spread and interest rate margin for the quarter ended September 30, 2000 were 2.37% and 3.06%, respectively, compared to the improved ratios for the quarter ended December 31, 2000 of 2.38% and 3.11%, respectively.
The Company’s current loan portfolio has very limited loan quality problems, as reflected in non-performing assets totaling only $1.6 million and a very low ratio of 0.16% of total non-performing assets to total assets. However, with the gradual shift in the loan portfolio from mortgage lending to consumer and commercial lending, the provision for loan loss will continue at the rate of about $228,000 per quarter as was the case for this past quarter ended December 31, 2000. As a result of this quarter’s provision, the ratio of loan loss allowance to gross loans increased from 0.54% at September 30, 2000 to 0.58% at December 31, 2000.
Non-interest income continues to improve. Non-interest income for the three months ended December 31, 2000 was $1.1 million compared to $1.0 million for the same quarter last year, a result of increased service fee income on various products including checking accounts, merchant fee income, debit cards and investment services. Non-interest expense of $5.8 million for the quarter ended December 31, 2000 was a decrease from both the previous quarter and for the same quarter last year of $6.7 million and $5.9 million, respectively. Net earnings for the quarter were $1.7 million compared to $2.0 million for the same quarter last year.
Earnings per share were $0.25 for the quarter ended December 31, 2000 compared to $0.29 for the same quarter last year. On a cash basis, earnings per share for the quarter were $0.35 for 2000, compared to $0.38 for the same quarter last year. Cash earnings are earnings of true operating results which include reported earnings excluding the non-cash charges for core deposit intangible amortization and amortization expense related to certain employee stock plans, net of tax effects. Operating cash performance ratios are determined as if core deposit intangible assets and their associated expenses and charges and amortization relating to certain employee stock plans, net of tax effects, have not been recognized in the financial statements.
Balance Sheet Summary
Total assets of $987.5 million at December 31, 2000, reflect the decrease in loans receivable and total deposits compared to the fiscal year-end September 30, 2000 total of $995.6 million. Net loans decreased to $725.6 million at December 31, 2000 from $729.0 million at September 30, 2000. Deposits decreased from $695.4 million at September 30, 2000 to $692.9 million at December 31, 2000. Borrowings, primarily Federal Home Loan Bank of Seattle advances, increased from $176.0 million at September 30, 2000, to $178.4 million at December 31, 2000.
The Company’s loan loss allowance to non-performing assets was 251.51% at September 30, 2000 compared to 275.32% at December 31, 2000. The Company’s non-performing assets to total assets at September 30, 2000 continues to be low at 0.16%.
Based upon the quarter-end shareholders’ equity of $109.4 million and shares outstanding of 6,530,917, book value per share was $16.75 at December 31, 2000. The Board of Directors declared a quarterly cash dividend of $0.13 per common share at their December 27, 2000 board meeting, payable January 16, 2001 to shareholders of record as of the close of business on January 5, 2001. This is the twenty first consecutive quarterly cash dividend declared by the Company and equates to a very high dividend payout ratio of 52.0%.
The Company announced a five percent stock repurchase plan on May 15, 2000, indicating it would repurchase approximately 375,648 shares over the next twelve months, subject to market conditions. Through January 26, 2001, the Company has repurchased 75.63% of the shares to be repurchased, or 284,100 shares, at a weighted average price per share of $11.45.
At December 31, 2000, the Association's tangible, core and risk-based capital ratios were 10.69%, 10.69% and 20.78%, respectively. The Association’s capital ratios remain well in excess of regulatory requirements of 1.50%, 4.00% and 8.00%, respectively.
Safe Harbor Clause: Except for the historical information in this news release, the matters described herein are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include those related to the economic environment, particularly in the region where Klamath First Bancorp, Inc. operates, competitive products and pricing, fiscal and monetary policies of the U.S. government, acquisitions and the integration of acquired businesses, credit risk management, change in government regulations affecting financial institutions, and other risks and uncertainties discussed from time to time in Klamath First Bancorp, Inc.’s SEC filings including its 2000 Form 10-K. Klamath First Bancorp, Inc. disclaims any obligation to publicly announce future events or developments which affect the forward-looking statements herein.
Financial Summaries follow.
KLAMATH FIRST BANCORP, INC.-
First Quarter Earnings (unaudited)
January 26, 2001
CONSOLIDATED FINANCIAL HIGHLIGHTS
For the Three Months Ended December 31, 2000
For the Three Months Ended December 31, 1999
($ in thousands, except per share information)
Total Interest Income
$17,816
$18,050
Total Interest Expense
10,338
9,813
Provision for Loan Losses
228
108
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--------------
Net Interest Income After Provision for Loan Losses
7,250
8,129
Non-Interest Income
1,114
1,032
Non-Interest Expense
5,783
5,866
Provision for Income Taxes
896
1,266
--------------
--------------
Net Earnings
$1,685
$2,029
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=====
Basic Earnings Per Share
$0.25
$0.29
Earnings Per Share - assuming dilution
$0.25
$0.29
Average Shares Outstanding
6,652,096
7,021,894
Average Shares Outstanding - assuming dilution
6,653,266
7,021,894
Ending Period Shares Outstanding
6,530,917
6,781,815
Book Value per Share
$16.75
$16.03
Dividends Declared
$0.130
$0.125
Dividend Payout Ratio
52.00%
43.10%
Return on Average Assets
0.68%
0.77%
Return on Average Equity
6.06%
7.29%
Efficiency Ratio
67.31%
63.29%
Operating Expense / Average Assets
2.32%
2.24%
Interest Rate Spread
2.38%
2.68%
Net Interest Margin
3.11%
3.28%
Cash Earnings
$2,308
$2,702
Cash Earnings Per Share
$0.35
$0.38
Cash Return on Average Assets
0.92%
1.03%
Cash Return on Average Equity
8.30%
9.70%
Cash Efficiency Ratio
57.40%
52.90%
Loans Originated and Purchased
$24,458
$30,643
At
At
December 31, 2000
September 30, 2000
-
-
Total Assets
$987,541
$995,575
Loans Receivable, Net
725,612
729,037
Mortgage-Backed Securities
71,111
77,491
Total Investment Securities
119,870
117,352
Deposits
692,851
695,381
Borrowings
178,400
176,000
Shareholders' Equity
109,386
108,725
Average Interest Earning Assets /
Average Interest Bearing Liabilities
117.02%
115.71%
Average Equity / Average Assets
11.14%
10.63%
Tangible Capital Ratio (Klamath First Federal only)
10.69%
10.35%
Core Capital Ratio (Klamath First Federal only)
10.69%
10.35%
Risk-Based Capital Ratio (Klamath First Federal only)
20.78%
20.30%
LOANS
Allowance for Loan Losses:
$4,295
$4,082
Loan Loss Allowance / Gross Loans
0.58%
0.54%
Loan Loss Allowance / Non-performing Loans
542.98%
503.33%
Loan Loss Allowance / Non-performing Assets
275.32%
251.51%
Total Non-performing Assets
$1,560
$1,623
Total Non-performing Assets/Total Assets
0.16%
0.16%
CONTACTS:
Kermit K. Houser, President and Chief Executive Officer
1-541-882-3444 x133
email khouser@kffsl.com
Marshall J. Alexander, Senior Vice President & CFO,
1-541-882-3444 x120,
email malexander@kffsl.com |
