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): July 18, 1997
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)
<PAGE>
Item 2. Acquisition or Disposition of Assets
Effective July 18, 1997, 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 twenty-five (25) branch offices located in the State of Oregon (the
"Branches") from Wells Fargo Bank, National Association ("Wells Fargo"). The
transaction includes purchase of the branch facilities and assumption of certain
deposit and other liabilities associated therewith. The Branches are located in
rural Oregon communities and were formerly branches of First Interstate Bank of
Oregon. The acquisition was previously announced in a Form 8-K filed by the
Company on August 1, 1997, 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 from
Wells Fargo Bank, N.A. as of the acquisition date of July 18, 1997 is filed
with this report:
Page
-----
(i) Independent Auditors' Report 4
(ii) Schedule of Branch Assets Acquired and
Liabilities Assumed from Wells Fargo
Bank, N.A. as of July 18, 1997 5
(iii) Notes to Schedule of Branch Assets Acquired
And Liabilities Assumed from Wells Fargo
Bank, N.A. 6
(b) Pro Forma Financial Information
(i) Unaudited Pro Forma Combined Balance Sheet
as of June 30, 1997 9
(ii) Narrative Disclosures Regarding the
Acquisition 10
<PAGE>
The Unaudited Pro Forma Combined Balance Sheet as of June 30, 1997 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 statement
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 statement 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, 1996 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
3
<PAGE>
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 Wells Fargo Bank, N.A. (the "Schedule") by Klamath
First Bancorp, Inc. through its subsidiary Klamath First Federal Savings and
Loan Association as of July 18, 1997. 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 generally accepted auditing standards.
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 Wells Fargo
Bank, N.A. as of July 18, 1997 in conformity with generally accepted accounting
principles.
/s/Deloitte & Touche LLP
Portland, Oregon
September 26, 1997
4
<PAGE>
SCHEDULE OF BRANCH ASSETS ACQUIRED AND LIABILITIES ASSUMED
FROM WELLS FARGO BANK, N.A.
JULY 18, 1997
(In thousands)
ASSETS
Cash on hand $ 2,282
Federal funds sold 230,312
--------
Total cash and cash equivalents 232,594
Premises and equipment 5,030
Core deposit intangible 13,387
Other assets 109
--------
$251,120
========
LIABILITIES
Deposit liabilities $241,272
Payable to Wells Fargo Bank, N.A. 9,404
Accrued interest on deposit liabilities 444
--------
$251,120
========
5
<PAGE>
NOTES TO SCHEDULE OF BRANCH ASSETS ACQUIRED AND LIABILITIES ASSUMED
(1) Summary of Significant Accounting Policies
Basis of Presentation
Effective July 18, 1997, Klamath First Bancorp, Inc. acquired through its
wholly-owned subsidiary, Klamath First Federal Savings and Loan Association (the
"Association"), twenty-five branches of Wells Fargo Bank, N. A. under the terms
of a Purchase and Assumption Agreement dated March 5, 1997 (the "Agreement").
The acquisition of the twenty-five branches has been accounted for as a purchase
transaction whereby all assets acquired and liabilities assumed are recorded at
their fair values as of July 18, 1997 (the "Acquisition Date") in the
accompanying Schedule of Branch Assets Acquired and Liabilities Assumed from
Wells Fargo Bank, N. A. 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 22 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 generally accepted accounting
principles 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.
(2) Premises and equipment
Premises and equipment consist of the following (in thousands):
Land $ 926
Buildings and improvements 3,819
Furniture and equipment 285
------
$5,030
======
6
<PAGE>
(3) Core Deposit Intangible
Under the terms of the Agreement, the Company paid a premium of 6.51% of the
average deposit balance at the branches for the thirty days prior to July 18,
1997. The average deposit balance for the thirty-day period was $251,565,000
resulting in a calculated premium of $16,377,000. According to generally
accepted accounting principles, this calculated premium was allocated to
premises and equipment in the amount of $2,990,000 and to core deposit
intangible in the amount of $13,387,000. The recorded core deposit intangible
will be amortized over the estimated life of the deposit base of 8.1 years.
(4) Deposit Liabilities
Following is detail of deposit liabilities assumed as of July 18, 1997 (in
thousands):
Weighted
Average
Interest
Balance Rate
-------- -------
Noninterest bearing demand deposits $ 40,527 --
Interest bearing demand deposits 100,827 2.80%
Savings deposits 31,490 2.24%
Time deposits 68,428 5.23%
-------- -------
$241,272 2.95%
======== =======
The fair value of the deposit liabilities approximates the recorded deposit
liabilities assumed as of July 18, 1997.
7
<PAGE>
The following table details the amounts of certificate accounts with balances of
$100,000 or greater by time remaining until maturity as of July 18, 1997.
Certificate
Maturity Period Accounts
--------------- --------------
(In thousands)
Three months or less $2,038
Over three through six months 1,161
Over six through twelve months 852
Over twelve months 103
--------------
$4,154
==============
(5) Payable to Wells Fargo Bank, N.A.
Cash exchanged on the acquisition date of July 18, 1997 was based upon estimated
closing balances. The final settlement, which was based on actual balances on
July 18, 1997, required the Company to pay Wells Fargo $9,404,000 which was
recorded as a liability. The account was settled on July 25, 1997.
8
<PAGE>
<TABLE>
ACQUISITION OF BRANCHES BY KLAMATH FIRST BANCORP, INC.
Unaudited Pro Forma Combined Balance Sheet
KLAMATH FIRST BANCORP, INC. ACQUIRED BRANCHES PROFORMA
STATEMENTS
June 30, 1997 July 18, 1997 COMBINED
--------------- --------------- ---------------
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 13,720 $232,594 $246,314
Investment securities available for sale 66,343 0 66,343
Investment securities held to maturity 19,702 0 19,702
Mortgage backed & related securities AFS 69,322 0 69,322
Mortgage backed & related securities HTM 5,922 0 5,922
Loans receivable, net 531,461 0 531,461
Premises and equipment, net 5,330 5,030 10,360
FHLB stock, at cost 7,009 0 7,009
Accrued interest receivable 5,589 0 5,589
Core deposit intangible 0 13,387 13,387
Other Assets 3,505 109 3,614
--------------- --------------- ---------------
$727,903 $251,120 $979,023
=============== =============== ===============
LIABILITIES
Deposit liabilities $418,205 $241,272 $659,477
Accrued interest on deposit liabilities 699 444 1,143
Advances from borrowers for taxes and insurance 6,161 0 6,161
Advances from FHLB 137,000 0 137,000
Short term borrowings 18,883 0 18,883
Accrued interest on borrowings 695 0 695
Pension liability 769 0 769
Deferred federal and state taxes 1,633 0 1,633
Payable to Wells Fargo Bank, N.A. 0 9,404 9,404
Other liabilities 1,577 0 1,577
--------------- --------------- ---------------
TOTAL LIABILITIES 585,622 251,120 836,742
=============== =============== ===============
SHAREHOLDERS' EQUITY
Common stock 104 0 104
Additional paid-in capital 92,362 0 92,362
Retained earnings-substantially restricted 63,401 0 63,401
Unearned shares issued to ESOP (8,074) 0 (8,074)
Unearned shares issued to MRDP (5,623) 0 (5,623)
Net unrealized loss on securities available 111 0 111
--------------- --------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 142,281 0 142,281
--------------- --------------- ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $727,903 $251,120 $979,023
=============== =============== ===============
</TABLE>
9
<PAGE>
NARRATIVE DISCLOSURES REGARDING THE ACQUISITION
Conversion Costs
In connection with the acquisition of the Branches, the Company expects to incur
$789,000 in pre-tax merger related costs. All these costs are expected to be
incurred by fiscal year end September 30, 1997. 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
generally accepted accounting principles and amortized to expense over five
years.
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 reinvested in commercial paper (13.2%), U.S. Treasury and agency
securities (45.4%), corporate bonds (22.4%), and callable agency securities
(19.0%). Except for the commercial paper which matures over the next nine
months, investment maturities are distributed throughout the next five years.
Regulatory Capital
The following tables illustrate the compliance by the Association with currently
applicable regulatory capital requirements at June 30, 1997, before the
acquisition and at July 31, 1997 reflecting the effects of the acquisition. The
Association continues to be in compliance with applicable regulatory capital
requirements.
<TABLE>
Categorized as "Well
Capitalized" Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
---------------------- ---------------------- ----------------------
Amount Ratio Amount Ratio Amount Ratio
As of June 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Total Capital: $116,225,237 35.3% $26,325,744 8.0% $32,907,180 10.0%
(To Risk Weighted Assets)
Tier I Capital: 114,983,786 34.9% N/A 19,744,308 6.0%
(To Risk Weighted Assets)
Tier I Capital: 114,983,786 16.8% 20,527,142 3.0% 34,211,903 5.0%
(To Total Assets)
Tangible Capital: 114,983,786 16.8% 10,263,571 1.5% N/A
(To Total Assets)
</TABLE>
10
<PAGE>
<TABLE>
Categorized as "Well
Capitalized" Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
-------------- ------- -------------- ------- -------------- -------
Amount Ratio Amount Ratio Amount Ratio
As of July 31, 1997:
<S> <C> <C> <C> <C> <C> <C>
Total Capital: $98,633,481 23.0% $34,283,072 8.0% $42,853,840 10.0%
(To Risk Weighted Assets)
Tier I Capital: $97,377,029 22.7% N/A $25,712,304 6.0%
(To Risk Weighted Assets)
Tier I Capital: $97,377,029 10.5% $27,712,961 3.0% $46,188,268 5.0%
(To Total Assets)
Tangible Capital: $97,377,029 10.5% $13,856,481 1.5% N/A
(To Total Assets)
</TABLE>
11
<PAGE>
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. All amounts are
annualized. Pro forma income and expense information available at July 18, 1997
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.
12 Month Pro Forma
At July 18, 1997
------------------
(in thousands)
INTEREST INCOME
Interest income on investments based on
average return of 6.05% on investment
securities and federal funds $12,306
Interest income on loans based on anticipated
investment run off directed into new
loan production 1,523
-------
Interest income 13,829
INTEREST EXPENSE
Interest expense on deposits based on average
rate of 2.95% at July 18, 1997 7,118
-------
Net interest income 6,711
NON-INTEREST INCOME
Service fee income, net 2,300
NON-INTEREST EXPENSE
Compensation and employee benefits 2,951
Occupancy 907
Amortization of core deposit intangible 1,653
Amortization of conversion costs 158
Other expense 300
-------
Total non-interest expense 5,969
-------
Income before income taxes $3,042
=======
12
<PAGE>
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: September 26, 1997 By: _/s/Gerald V. Brown
-------------------------------------
Gerald V. Brown
President and Chief Executive Officer
13
<PAGE>
