SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-26556
KLAMATH FIRST BANCORP, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-1180440
____________________________________________ __________
State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
540 Main Street, Klamath Falls, Oregon 97601
Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (541) 882-3444
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act: Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .
As of April 21, 1999, there were issued 7,932,676 shares of the
Registrant's Common Stock. The Registrant's voting common stock is traded
over-the-counter and is listed on the Nasdaq National Market under the symbol
"KFBI."
<PAGE>
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
TABLE OF CONTENTS
Part I. Financial Information
- ------- ----------------------
Item 1. Financial Statements Page
-------
Consolidated Balance Sheets
(As of March 31, 1999 and September 30, 1998) 3
Consolidated Statements of Earnings (For the three months
and six months ended March 31, 1999 and 1998) 4
Consolidated Statement of Shareholders' Equity
(For the years ended September 30, 1998 and 1997 and for
the six months ended March 31, 1999) 5
Consolidated Statements of Cash Flows (For the six
months ended March 31, 1999 and 1998) 6 - 7
Notes to Consolidated Financial Statements 8 - 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 17
Part II. Other Information
- -------- -------------------
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
2
<PAGE>
<TABLE>
<CAPTION>
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1999 AND SEPTEMBER 30, 1998
(Unaudited)
March 31, 1999 September 30, 1998
ASSETS ------------------- ------------------
<S> <C> <C>
Cash and due from banks $23,231,327 $25,644,460
Interest bearing deposits with banks 11,515,185 11,496,026
Federal funds sold and securities purchased under agreements to resell 18,866,681 29,844,783
------------------ ------------------
Total cash and cash equivalents 53,613,193 66,985,269
Investment securities available for sale, at fair value
(amortized cost: $168,797,552 and $199,251,123) 169,953,050 203,224,184
Investment securities held to maturity, at amortized cost (fair
value: $915,786 and $2,928,324) 887,238 2,888,759
Mortgage backed and related securities available for sale, at fair
value (amortized cost: $22,853,866 and $42,741,863) 23,104,453 43,335,857
Mortgage backed and related securities held to maturity, at amortized
cost (fair value: $2,972,581 and $3,696,444) 2,956,964 3,661,683
Loans receivable, net 720,907,810 668,146,380
Real estate owned and repossessed assets 4,287 --
Premises and equipment, net 12,052,038 12,347,467
Stock in Federal Home Loan Bank of Seattle, at cost 10,569,700 10,172,900
Accrued interest receivable 6,634,048 7,471,717
Core deposit intangible 10,604,679 11,431,018
Other assets 1,953,709 1,637,164
------------------ ------------------
Total assets $1,013,241,169 $1,031,302,398
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposit liabilities $724,177,185 $689,541,345
Accrued interest on deposit liabilities 1,200,589 1,291,784
Advances from borrowers for taxes and insurance 3,958,335 9,420,791
Advances from Federal Home Loan Bank of Seattle 167,000,000 167,000,000
Short term borrowings -- 12,112,500
Accrued interest on borrowings 120,362 213,957
Pension liabilities 844,690 779,392
Deferred income taxes 1,801,774 3,655,944
Other liabilities 5,451,003 2,205,730
------------------ ------------------
Total liabilities 904,553,938 886,221,443
------------------ ------------------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares authorized; none issued -- --
Common stock, $.01 par value, 35,000,000 shares authorized,
March 31, 1999 - 7,932,676 issued, 6,916,105 outstanding
September 30, 1998 - 9,916,766 issued, 8,898,972 outstanding 79,327 99,168
Additional paid-in capital 43,884,644 82,486,183
Retained earnings-substantially restricted 74,242,472 71,051,445
Unearned shares issued to ESOP (6,361,225) (6,850,550)
Unearned shares issued to MRDP (4,029,761) (4,536,865)
Net unrealized gain on securities available for sale, net of tax 871,774 2,831,574
------------------ ------------------
Total shareholders' equity 108,687,231 145,080,955
------------------ ------------------
Total liabilities and shareholders' equity $1,013,241,169 $1,031,302,398
================== ==================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Three Six Six
Months Ended Months Ended Months Ended Months Ended
March 31, March 31, March 31, March 31,
1999 1998 1999 1998
-------------- -------------- -------------- --------------
INTEREST INCOME
<S> <C> <C> <C> <C>
Loans receivable $14,064,649 $12,062,942 $27,904,038 $23,479,371
Mortgage backed and related securities 391,092 1,080,062 952,302 2,187,810
Investment securities 2,863,380 3,704,876 6,292,645 7,896,311
Federal funds sold 214,756 191,311 422,316 339,960
Interest bearing deposits 152,623 140,695 392,772 221,722
-------------- -------------- -------------- --------------
Total interest income 17,686,500 17,179,886 35,964,073 34,125,174
-------------- -------------- -------------- --------------
INTEREST EXPENSE
Deposit liabilities 7,263,000 7,149,174 14,681,561 14,356,659
FHLB advances 2,135,328 1,748,242 4,346,724 3,437,666
Other 62,775 225,546 220,434 514,975
-------------- -------------- -------------- --------------
Total interest expense 9,461,103 9,122,962 19,248,719 18,309,300
-------------- -------------- -------------- --------------
Net interest income 8,225,397 8,056,924 16,715,354 15,815,874
Provision for loan losses 303,000 91,000 426,000 166,000
-------------- -------------- -------------- --------------
Net interest income after provision for
loan losses 7,922,397 7,965,924 16,289,354 15,649,874
-------------- -------------- -------------- --------------
NON-INTEREST INCOME
Fees and service charges 686,215 550,136 1,377,892 1,155,500
Gain on sale of investments 179,135 -- 307,328 --
Gain on sale of real estate owned 26,179 -- 26,179 --
Other income 54,000 26,359 133,550 117,662
-------------- -------------- -------------- --------------
Total non-interest income 945,529 576,495 1,844,949 1,273,162
-------------- -------------- -------------- --------------
NON-INTEREST EXPENSE
Compensation, employee benefits and related expense 2,549,616 2,417,806 4,963,502 4,897,339
Occupancy expense 561,453 515,859 1,120,557 1,036,370
Data processing expense 242,978 241,186 482,783 473,698
Insurance premium expense 77,662 105,859 147,638 173,199
Loss on sale of investments -- -- 112,256 --
Loss on sale of real estate owned 5,398 -- 5,398 --
Amortization of core deposit intangible 413,169 413,169 826,339 826,338
Other expense 1,213,458 1,194,041 2,480,338 2,309,452
-------------- -------------- -------------- --------------
Total non-interest expense 5,063,734 4,887,920 10,138,811 9,716,396
-------------- -------------- -------------- --------------
Earnings before income taxes 3,804,192 3,654,499 7,995,492 7,206,640
Provision for income tax 1,508,741 1,446,726 3,246,226 2,852,793
-------------- -------------- -------------- --------------
Net earnings $2,295,451 $2,207,773 $4,749,266 $4,353,847
============== ============== ============== ==============
Earnings per common share - basic $0.32 $0.24 $0.59 $0.47
Earnings per common share - fully diluted $0.31 $0.23 $0.57 $0.45
Weighted average common shares outstanding - basic 7,261,474 9,272,315 8,095,744 9,259,981
Weighted average common shares outstanding - with dilution 7,478,127 9,754,449 8,337,116 9,735,105
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1998 AND THE SIX MONTHS ENDED MARCH 31, 1999
(Unaudited)
Unearned Unearned Unrealized
Common Common Additional shares shares gain Total
Stock Shares paid-in Retained issued issued (loss) on shareholders'
Shares Amount capital earnings to ESOP to MRDP securities equity
--------------------------------------- -------------- ------------ ------------ ------------ -------------
Balance at
<S> <C> <C> <C> <C> <C> <C> <C> <C>
October 1, 1996 .. 10,242,360 $ 116,124 $110,762,678 $ 59,082,479 $(8,807,850) $(6,694,470) $(1,047,987) $153,410,974
Cash dividends ... -- -- -- (2,895,234) -- -- -- (2,895,234)
Net unrealized
gain (loss) on
securities
available for sale . -- -- -- -- -- -- 1,512,041 1,512,041
Stock repurchased
and retire ......... (1,182,936) (11,829) (18,866,299) -- -- -- -- (18,878,128)
ESOP contribution .. 97,865 -- 705,260 -- 978,650 -- -- 1,683,910
MRDP contribution .. 78,293 -- -- -- -- 1,071,130 -- 1,071,130
Net earnings ..... -- -- -- 8,557,750 -- -- -- 8,557,750
------------ ---------- ------------ ------------ ----------- ----------- ------------ -----------
Balance at
September 30, 1997 . 9,235,582 104,295 92,601,639 64,744,995 (7,829,200) (5,623,340) 464,054 144,462,443
Cash dividends ..... -- -- -- (3,244,587) -- -- -- (3,244,587)
Net unrealized
gain (loss) on
securities
available for sale . -- -- -- -- -- -- 2,367,520 2,367,520
Stock repurchased
and retire ....... (544,085) (5,440) (11,556,044) -- -- -- -- (11,561,484)
ESOP contribution .. 97,865 -- 1,029,866 -- 978,650 -- -- 2,008,516
MRDP contribution .. 78,293 -- -- -- -- 1,086,475 -- 1,086,475
Exercise of stock
options .......... 31,317 313 410,722 -- -- -- -- 411,035
Net earnings ..... -- -- -- 9,551,037 -- -- -- 9,551,037
---------- --------- ------------ ------------ ----------- ----------- ------------ -----------
Balance at
September 30, 1998 . 8,898,972 99,168 82,486,183 71,051,445 (6,850,550) (4,536,865) 2,831,574 145,080,955
Cash dividends ... -- -- -- (1,558,239) -- -- -- (1,558,239)
Net unrealized
gain (loss) on
securities
available for sale . -- -- -- -- -- -- (1,959,800) (1,959,800)
Stock repurchased
and retire ....... (1,984,090) (19,841) (38,960,892) -- -- -- -- (38,980,733)
ESOP contribution .. -- -- 359,353 -- 489,325 -- -- 848,678
MRDP contribution .. 1,223 -- -- -- -- 507,104 -- 507,104
Net earnings ..... -- -- -- 4,749,266 -- -- -- 4,749,266
------------ ---------- ------------ ------------ ----------- ----------- ------------ ------------
Balance at
March 31, 1999 ... 6,916,105 $ 79,327 $ 43,884,644 $ 74,242,472 $(6,361,225) $(4,029,761) $ 871,774 $108,687,231
============ ========= ============ ============ =========== =========== ============ ============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
Six Six
Months Ended Months Ended
March 31, March 31,
1999 1998
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net earnings .......................................... $ 4,749,266 $ 4,353,847
ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization ......................... 1,447,131 1,398,475
Provision for loan losses ............................. 426,000 166,000
Compensation expense related to ESOP benefit .......... 848,678 1,077,534
Compensation expense related to MRDP Trust ............ 507,104 542,537
Net amortization of premiums (discounts) paid on
investment and mortgage backed and related securities (65,700) (200,526)
Increase in deferred loan fees, net of amortization ... 434,825 568,818
Accretion of discounts on purchased loans ............. 2,602 10,790
Net (gain) loss on sale of real estate owned and
premises and equipment .............................. (20,781) --
Net (gain) loss on sale of investment and mortgage
backed and related securities ....................... (195,072) --
FHLB stock dividend ................................... (396,800) (283,400)
CHANGES IN ASSETS AND LIABILITIES
Accrued interest receivable ........................... 837,669 307,549
Other assets .......................................... (396,545) 292,392
Accrued interest on deposit liabilities ............... (91,195) (122,828)
Accrued interest on borrowings ........................ (93,595) (236,959)
Pension liabilities ................................... 65,298 63,298
Deferred income taxes ................................ (653,002) (65,865)
Other liabilities ..................................... 926,974 560,871
------------- -------------
Net cash provided by operating activities ................. 8,332,857 8,432,533
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of investment securities
held to maturity .................................... 82,130,000 20,000,000
Proceeds from maturity of investment securities
available for sale .................................. 29,072,000 53,680,000
Principal repayments received on mortgage
backed and related securities held to maturity ..... 693,758 802,454
Principal repayments received on mortgage
backed and related securities available for sale ... 10,104,457 8,691,824
Principal repayments received on loans ................ 86,664,019 50,064,627
Loan originations ..................................... (135,767,224) (101,113,902)
Loans purchased ....................................... (4,764,023) (3,894,787)
Purchase of investment securities held
to maturity ......................................... (79,711,523) --
Purchase of investment securities available
for sale ............................................ (6,331,027) (21,570,845)
Purchase of mortgage backed and related
securities available for sale ....................... -- (10,040,575)
Proceeds from sale of investment securities
available for sale .................................. 10,302,314 --
Proceeds from sale of mortgage backed and related
securities available for sale ....................... 9,454,776 --
Proceeds from sale of real estate owned and
premises and equipment .............................. 258,865 --
Purchases of premises and equipment ................... (245,363) (562,109)
------------- -------------
Net cash provided by (used in) investing activities ....... 1,861,029 (3,943,313)
------------- -------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
(Continued)
Six Six
Months Ended Months Ended
March 31, March 31,
1999 1998
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposit liabilities,
<S> <C> <C>
net of withdrawals .................................. $ 34,635,840 $ 6,657,202
Proceeds from FHLB advances ........................... 5,000,000 79,000,000
Repayments of FHLB advances ........................... (5,000,000) (68,500,000)
Proceeds from short term borrowings ................... 8,595,000 54,104,000
Repayments of short term borrowings ................... (20,707,500) (57,097,500)
Stock repurchase and retirement ....................... (38,980,733) --
Advances from borrowers for tax and insurance ......... (5,462,456) (5,205,965)
Dividends paid ........................................ (1,646,113) (1,668,725)
------------- -------------
Net cash provided by (used in) financing activities ....... (23,565,962) 7,289,012
------------- -------------
Net (decrease) increase in cash and cash
equivalents ............................................. (13,372,076) 11,778,232
Cash and cash equivalents at beginning
of period ............................................... 66,985,269 32,043,196
------------- -------------
Cash and cash equivalents at end of period ................ $ 53,613,193 $ 43,821,428
============= =============
SUPPLEMENTAL SCHEDULE OF INTEREST AND
INCOME
TAXES PAID
Interest paid ......................................... $ 19,433,509 $ 18,669,088
Income taxes paid ..................................... 3,001,000 2,724,000
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES
Net unrealized gain (loss) on securities
available for sale .................................. ($ 1,959,800) $ 404,917
Dividends declared and accrued in other
liabilities ......................................... 951,920 886,510
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
7
<PAGE>
KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary for a fair presentation of Klamath
First Bancorp, Inc.'s (the "Company") financial condition as of March 31, 1999
and September 30, 1998, the results of operations for the three and six months
ended March 31, 1999 and 1998 and the cash flows for the six months ended March
31, 1999 and 1998. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K. The results
of operations for the three and six months ended March 31, 1999 are not
necessarily indicative of the results which may be expected for the entire
fiscal year.
2. COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130
requires all items that are required to be recognized under accounting standards
as components of comprehensive income to be reported in a financial statement
that is displayed in equal prominence with the other financial statements and to
disclose as a part of shareholders' equity accumulated comprehensive income.
Comprehensive income is defined as the change in equity during a period from
transactions and other events from nonowner sources. The Company has chosen, for
purposes of its interim financial reporting, to present comprehensive income in
the notes to the financial statements.
Comprehensive income is the total of net income and other comprehensive income,
which for the Company is comprised entirely of unrealized gains and losses on
securities available for sale and realized gains and losses on the sale of
securities available for sale.
For the three months ended March 31, 1999, the Company's total comprehensive
income was $1.8 million compared to $2.2 million for the three months ended
March 31, 1998. Total comprehensive income for the three months ended March 31,
1999 was comprised of net income of $2.3 million and other comprehensive loss of
$526,025, net of tax. Total comprehensive income for the three months ended
March 31, 1998 was comprised of net income of $2.2 million and other
comprehensive income of $41,631, net of tax.
For the six months ended March 31, 1999, the Company's total comprehensive
income was $2.8 million compared to $4.8 million for the six months ended March
31, 1998. Total comprehensive income for the six months ended March 31, 1999 was
comprised of net income of $4.7 million and other comprehensive loss of $1.9
million, net of tax. Total comprehensive income for the six months ended March
31, 1998 was comprised of net income of $4.4 million and other comprehensive
income of $404,917, net of tax.
8
<PAGE>
3. ALLOWANCE FOR LOAN LOSSES
Activity in allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, September 30,
1999 1998
-------------- --------------
<S> <C> <C>
Balance, beginning of period $1,949,677 $1,296,451
Charge-offs (3,000) (20,774)
Additions 426,000 674,000
-------------- --------------
Balance, end of period $2,372,677 $1,949,677
======== ========
</TABLE>
4. ADVANCES FROM FEDERAL HOME LOAN BANK
Borrowings at March 31, 1999 consisted of four short term advances totaling
$45.0 million and eight long term advances totaling $122.0 million from the
Federal Home Loan Bank of Seattle ("FHLB"). The advances are collateralized in
aggregate by certain mortgages or deeds of trust and securities of the U.S.
Government and agencies thereof.
Scheduled maturities of advances from the FHLB were as follows:
<TABLE>
<CAPTION>
March 31, 1999 September 30, 1998
---------------------------------------- -------------------------------------------
Range of Weighted Range of Weighted
interest average interest average
Amount rates interest rate Amount rates interest rate
------------ ------------ ------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Due within one year . $ 45,000,000 4.85%-5.12% 4.93% $30,000,000 5.54%-5.56% 5.55%
After one but within
five years .......... 40,000,000 5.05%-5.70% 5.35% 55,000,000 5.39%-5.74% 5.56%
After five but within
ten years ........... 82,000,000 4.77%-5.24% 4.96% 82,000,000 4.77%-5.24% 4.96%
------------ --------------
$167,000,000 $ 167,000,000
============ ==============
</TABLE>
5. SHORT TERM BORROWINGS
Securities sold under agreements to repurchase matured and were not renewed
during the quarter ended March 31, 1999.
6. SHAREHOLDERS' EQUITY
In September 1998, the Board of Directors authorized the repurchase of
approximately 20 percent of the Company's outstanding common stock. The
repurchase was completed through a "Modified Dutch Auction Tender." Under this
procedure, the Company's shareholders were given the opportunity to sell part or
all of their shares to the Company at a price of not less than $18.00 per share
and not more than $20.00 per share. Results of the offer were finalized on
January 15, 1999 when the Company announced purchase of 1,984,090 shares at
$19.50 per share. This represents approximately 85.9 percent of the shares
tendered at $19.50 per share or below, and 64.7 percent of all shares tendered.
The cost of the shares purchased was approximately $39.0 million. The effect of
the transaction is reflected in a reduction in cash and investments and a
reduction in equity and with corresponding impact on the performance ratios for
the quarter ended March 31, 1999.
9
<PAGE>
7. EARNINGS PER SHARE
Earnings per share ("EPS") is computed in accordance with SFAS No. 128,
"Earnings per Share," which was adopted by the Company as of December 31, 1997.
EPS for all prior periods have been restated to reflect the adoption. Shares
held by the Company's Employee Stock Ownership Plan ("ESOP") that are committed
for release are considered common stock equivalents and are included in weighted
average shares outstanding (denominator) for the calculation of basic and
diluted EPS. Diluted EPS is computed using the treasury stock method, giving
effect to potential additional common shares that were outstanding during the
period. Potential dilutive common shares include shares awarded but not released
under the Company's Management Recognition and Development Plan ("MRDP"), and
stock options granted under the Stock Option Plan. Following is a summary of the
effect of dilutive securities on weighted average number of shares (denominator)
for the basic and diluted EPS calculations. There are no resulting adjustments
to net earnings.
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------------
March 31, March 31,
1999 1998
------------------ --------------
Weighted average common
<S> <C> <C>
shares outstanding - basic 7,261,474 9,272,315
------------------ --------------
Effect of Dilutive Securities on Number of Shares:
MRDP shares 30,181 84,806
Stock options 186,472 397,328
------------------ --------------
Total Dilutive Securities 216,653 482,134
------------------ --------------
Weighted average common shares
outstanding - with dilution 7,478,127 9,754,449
================== ==============
For the Six Months Ended
-------------------------------------
March 31, March 31,
1999 1998
------------------ ---------------
Weighted average common
shares outstanding - basic 8,095,744 9,259,981
------------------ --------------
Effect of Dilutive Securities on Number of Shares:
MRDP shares 29,386 80,652
Stock options 211,986 394,472
------------------ --------------
Total Dilutive Securities 241,372 475,124
------------------ --------------
Weighted average common shares
outstanding - with dilution 8,337,116 9,735,105
================== ==============
</TABLE>
8. REGULATORY CAPITAL
The following table illustrates the compliance by Klamath First Federal Savings
and Loan Association (the "Association") with currently applicable regulatory
capital requirements at March 31, 1999:
<TABLE>
<CAPTION>
Categorized as "Well
Capitalized" Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
-------------------------- --------------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
As of March 31, 1999: ------------ ---------- --------------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Total Capital: ...... $ 89,601,101 16.9% $ 42,354,416 8.0% $ 52,943,020 10.0%
(To Risk Weighted Assets)
Tier I Capital: ..... 87,228,424 16.5% N/A N/A 31,765,812 6.0%
(To Risk Weighted Assets)
Tier I Capital: ..... 87,228,424 8.8% 29,759,431 3.0% 49,599,051 5.0%
(To Total Assets)
Tangible Capital: ... 87,228,424 8.8% 14,879,715 1.5% N/A N/A
(To Tangible Assets)
</TABLE>
10
<PAGE>
9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1998, SFAS No. 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits," was issued. SFAS No. 132 revises employers'
disclosures about pensions and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. It standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer as useful. This
Statement becomes effective for fiscal years beginning after December 15, 1997.
Restatement of disclosures for earlier periods provided for comparative purposes
is required unless the information is not readily available.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. SFAS No.133 established accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment, (b)
a hedge of the exposure to variable cash flows of a forecasted transaction, or
(c) a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. This Statement becomes
effective for fiscal years beginning after June 15, 1999, and should not be
applied retroactively to financial statements of prior periods.
An analysis of the Company's current operations and practices indicates that the
Company is not involved in derivative instruments or hedging activities.
Accordingly, the adoption of these statements is not expected to have a material
impact on the financial statements of the Company.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 Management's Discussion and Analysis, describe
future plans or strategies and include the Company's expectations 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, loan delinquency rates, and changes in federal and
state regulation. These factors should be considered in evaluating the
forward-looking statements, and undue reliance should not be placed on such
statements.
General
The Company, an Oregon corporation, became the unitary savings and loan holding
company for the Association upon the Association's conversion from a federally
chartered mutual to a federally chartered stock savings and loan association
("Conversion") on October 4, 1995. At March 31, 1999, the Company had total
consolidated assets of $1.0 billion and consolidated shareholders' equity of
$108.7 million. The Company is currently not engaged in any business activity
other than holding the stock of the Association. Accordingly, the information
set forth in this report, including financial statements and related data,
relates primarily to the Association.
As a traditional, community-oriented, savings and loan, the Association focuses
on personalized customer service within its principal market area. The
Association's primary market activity is attracting deposits from the general
public and using those and other available sources of funds to originate
permanent residential one- to four-family real estate loans within its market
area and, to a lesser extent, loans on commercial property and multi-family
dwellings. To supplement internal growth generated through its branch network,
the Association also purchases commercial real estate and multi-family
residential loans from other Oregon financial institutions, as well as using
mortgage brokers to locate mortgage loans that meet our existing conservative
underwriting standards outside of the current branch market areas.
Net interest income, which is the difference between interest and dividend
income on interest-earning assets, primarily loans and investment securities,
and interest expense on interest-bearing deposits and borrowings, is the major
source of profit for the Company. Because the Company depends primarily on net
interest income for its earnings, the focus of the Company's management is to
create and implement strategies that will provide stable, positive spreads
between the yield on interest-earning assets and the cost of interest-bearing
liabilities. Such strategies include the Association's expansion of its consumer
and commercial loan products. Consumer and commercial loans increased 40.18%
from $9.7 million at March 31, 1998 to $13.7 million at March 31, 1999. To a
lesser degree, the net earnings of the Company rely on the level of its
non-interest income. The Company is aggressively pursuing strategies to improve
its service charge and fee income, and control its non-interest expense, which
includes employee compensation and benefits, occupancy and equipment expense,
deposit insurance premiums, and miscellaneous other expenses. The acquisition of
25 branches from Wells Fargo in 1997 contributed to improvement of the Company's
non-interest income by providing a larger customer base to generate service
charge and fee income.
12
<PAGE>
The Association is regulated by the Office of Thrift Supervision ("OTS") and its
deposits are insured up to applicable limits under the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").
The Association is a member of the Federal Home Loan Bank of Seattle, conducting
its business through thirty-five office facilities, with the main office located
in Klamath Falls, Oregon. The primary market areas of the Association are the
state of Oregon and adjoining areas of California and Washington.
Year 2000 Readiness
As with other organizations, some of the data processing programs used by the
Company were originally designed to recognize calendar years by their last two
digits. Calculations performed using these truncated fields may not work
properly with dates beyond 1999. Correct processing of date oriented information
is critical to the operation of all financial institutions because computer
systems track deposit account and loan balances, record transaction activity in
accounts, and calculate interest amounts, among other activities. Failure of
these processes could severely hinder the ability to continue operations and
provide customer service. Because of the critical nature of the issue, the
Company established a committee early in 1997 to address "Year 2000" issues. The
committee, consisting of executive management, technical staff, and a full time
project manager, has chosen to use the Office of Thrift Supervision Year 2000
Checklist as a guide for Year 2000 preparation. The committee is also using a
Year 2000 Testing Guide and Contingency Guide provided by Alex Information
Systems, Inc. to complement the OTS checklist.
The Federal Financial Institutions Examination Council ("FFIEC") has also issued
guidelines for Year 2000 project management by financial institutions, which are
being followed by the Company. These guidelines identify the following five
steps for Year 2000 conversion programs:
Awareness Phase - Define the Year 2000 problem and establish a Year 2000
program team and overall strategy. This step was completed by the Company
as of September 30, 1997.
Assessment Phase - Assess the size and complexity of the problem and detail
the magnitude of effort necessary to address Year 2000 issues, including
hardware, software, networks, automated teller machines, etc. This step was
approximately 99% complete by March 31, 1999 and assessment will be ongoing
until the Year 2000.
Renovation Phase - This phase includes hardware and software upgrades and
system replacements. This step was 100% complete for in-house systems at
December 31, 1998. This phase also encompasses ongoing discussions with and
monitoring of outside servicers and third- party software providers.
Validation/Testing Phase - This process includes testing of hardware and
software components. Testing is completed by performing extensive tests
with the computer dates changed to January 1,2, and 3, 2000. Such testing
will continue through June 30, 1999, with the most critical functions
tested first. This allows time to correct any discovered deficiencies
before the end of 1999. In-house systems and third party service bureaus
are 100% tested as of March 31, 1999. The Company is either testing or
reviewing test documents of additional third party vendors that are deemed
critical to the operations of the Company. Overall, the validation phase is
approximately 94% complete as of March 31, 1999.
Implementation Phase - Systems successfully tested will be certified as
Year 2000 compliant. For any system failing validation testing, the
business impact must be assessed and a contingency plan implemented. This
phase is scheduled for completion by June 30, 1999.
13
<PAGE>
All personal computers ("PCs") and related software throughout the Company have
been inventoried and tested for Year 2000 capability. The Company used two
testing methods, BIOS and off line, for PC certification of Year 2000
compatibility. PCs were required to pass both tests to be considered ready for
Year 2000. As of September 30, 1998, all of the Company's PCs were Year 2000
compatible. The Company's Wide Area Network and various Local Area Networks have
also been upgraded, tested, and determined to be Year 2000 prepared.
Data processing for the Company is provided by Fiserv, the nation's largest
third party service bureau serving financial institutions. Fiserv has stated
that all their processing was Year 2000 ready of as June 30, 1998. The Company
successfully performed test procedures for critical service bureau processes in
December 1998.
Software purchased from a Fiserv affiliate is used for applications such as
accounts payable, fixed assets, and investment portfolio accounting. The
investment portfolio accounting software was Year 2000 compatible as of
September 30, 1998. During the quarter ended March 31, 1999, the Company
converted the accounts payable and fixed asset applications to the Year 2000
ready software provided by the Fiserv affiliate.
Other third party vendors identified by the Company are being monitored for Year
2000 readiness. Validation with critical vendors was approximately 50% complete
as of March 31, 1999. Subsequent to the March quarter end, additional results of
vendor testing were received, bringing the completion of this phase to a 95%
level.
Critical data processing applications, in addition to those provided by the
service bureau, have been identified. These include applications such as
electronic processing through the Federal Reserve Bank and ATM processing.
Testing with Federal Reserve has been successfully completed. All ATM machines
have been upgraded and are now ready for Year 2000.
Contingency plans are also being developed by the committee. The contingency
plans address actions to be taken to continue operations in the event of system
failure due to areas that cannot be tested in advance, such as power and
telephone service, which are vital to business continuation. Contingency
planning is scheduled for completion by June 30, 1999.
For many financial institutions, the Year 2000 readiness of borrowers to whom
the institution has commercial operating loans is of concern. Lack of Year 2000
preparedness could cause disruptions of borrowers' businesses significant enough
to compromise their ability to repay indebtedness. The Company's loans of this
type represent less than one half of one percent of the total loan portfolio,
and are not considered to represent a significant risk of loss.
To assist customers in understanding Year 2000 issues and to inform them of the
Company's preparation activities, brochures regarding Year 2000 preparedness
have been distributed to all customers. Another mailing is anticipated during
the fiscal year ending September 30, 1999. In addition, the Company has
published advertisements in local newspapers and has placed "Year 2000" bulletin
boards in all the branches, which contain current information on Year 2000
readiness for the Company and the financial services industry.
The Company believes that the Year 2000 issue will not pose significant
operational problems and is not anticipated to be material to its financial
position or results of operations in any given year. As of March 31, 1999, the
Company estimated that total Year 2000 implementation costs will be
approximately $200,000 and are expected to be expensed over a period of 18
months, affecting fiscal years 1998, 1999, and 2000. This estimate is based on
information available at March 31, 1999, and may be revised as additional
information and actual costs become available. During the six months ended March
31, 1999 and the year ended September 30, 1998, $58,000 and $89,000 of Year 2000
expenses were incurred and expensed, respectively.
14
<PAGE>
Changes in Financial Condition
At March 31, 1999, the consolidated assets of the Company totaled $1,013.2
million, a decrease of $18.1 million, or 1.75%, from $1,031.3 million at
September 30, 1998. The decrease in total assets was primarily a result of the
Company's repurchase of 20% of the outstanding common stock in January 1999,
reducing cash and investments by $39.0 million.
Net loans receivable increased by $52.8 million, or 7.90%, to $720.9 million at
March 31, 1999, compared to $668.1 million at September 30, 1998. The increase
was primarily the result of continued new loan demand exceeding loan repayments,
augmented by the Company's purchase of $4.8 million in higher yielding loans on
multi-family residential and commercial properties in Oregon during the six
months ended March 31, 1999.
Investment securities decreased $35.3 million, or 17.11%, from $206.1 million at
September 30, 1998 to $170.8 million at March 31, 1999. This decrease was the
result of scheduled maturities, primarily maturities of short term commercial
paper. The proceeds from these maturities were used to fund the stock
repurchase.
During the six months ended March 31, 1999, $10.8 million of principal payments
were received on mortgage backed and related securities ("MBS") and $9.5 million
of MBS were sold, reducing the balance of MBS from $47.0 million at September
30, 1998 to $26.0 million at March 31, 1999.
Deposit liabilities increased $34.7 million, or 5.02%, from $689.5 million at
September 30, 1998 to $724.2 million at March 31, 1999. Management attributes
the increase to the maintaining of competitive rates in our market areas as well
as the use of an automated on-line personal computer-based system to market
deposits nationally. Interest credited on accounts also contributed to the
increase. The increase in deposits has been experienced throughout the network
of 34 branches.
Advances from borrowers for taxes and insurance decreased $5.5 million from
September 30, 1998 to March 31, 1999. The decrease is the result of using the
reserves to pay the required real estate taxes due on the Association's loan
receivable portfolio in November partially offset by collection of taxes from
borrowers.
Advances from the FHLB of Seattle remained consistent at $167.0 million for
September 30, 1998 and March 31, 1999. Short term borrowings at September 30,
1998 consisted of $12.1 million in reverse repurchase agreements. These
agreements matured during the quarter ended March 31, 1999, and they were not
renewed.
Total shareholders' equity decreased $36.4 million, or 25.09%, from $145.1
million at September 30, 1998 to $108.7 million at March 31, 1999. The decrease
is primarily attributable to $39.0 million paid out for the 20% stock repurchase
completed in January 1999. Equity was also decreased by a $2.0 million decrease
in unrealized gains on securities available for sale during the six month period
from September 30, 1998 to March 31, 1999. These decreases were partially offset
by $4.7 million in earnings for the year to date.
Results of Operations
Comparison of Six Months Ended March 31, 1999 and 1998
General. Net income increased by $395,419, or 9.08%, from $4.4 million for the
six months ended March 31, 1998 to $4.7 million for the six months ended March
31, 1999. Increases in net interest income and non-interest income were
partially offset by increases in non-interest expense.
15
<PAGE>
Interest Income. Additional interest income generated by the $53.0 million
increase in average interest earning assets contributed to an increase of $1.8
million in interest income for the six months ended March 31, 1999 compared to
1998. Interest income on loans receivable increased $4.4 million, or 18.84%,
from $23.5 million for the six months ended March 31, 1998 to $27.9 million for
the same period of 1999. This increase was a result of the $123.2 million
increase in average loans receivable. The increase in interest on loans was
offset by a $2.8 million decrease in interest on investment and mortgage backed
securities. Short term investments matured and interest bearing deposits were
liquidated in January 1999 to fund the $39.0 million stock repurchase, reducing
average investment balances, thus generating less income. The average yield on
interest earning assets decreased 3 basis points to 7.32% for the six months
ended March 31, 1999 compared to 7.35% for the same period ended March 31, 1998.
In spite of the lower yields experienced for the period, interest rate spread
(the difference between the rates earned on interest earning assets and the
rates paid on interest bearing liabilities) improved from 2.58% to 2.72% and
interest rate margin (net interest income divided by average interest earning
assets) remained stable at 3.40% comparing the six month periods.
Interest Expense. Total interest expense increased $939,419, or 5.13%, for the
six months ended March 31, 1999 compared to the same period in 1998. Of that
increase, $324,902 related to an increase in interest expense on deposit
liabilities. This increase was the combined result of a $32.5 million increase
in the average deposit balance offset by a 10 basis point reduction in the
average rate paid on deposits. The average balance of FHLB advances increased
$46.3 million from $120.8 million for the six months ended March 31, 1998 to
$167.1 million for the same period ended March 31, 1999 resulting in an increase
in interest on FHLB advances of $909,058 for the six months ended March 31, 1999
compared with the same period ended March 31, 1998.
Provision for Loan Losses. The provision for loan losses was $426,000 and there
were $3,000 of charge offs during the six months ended March 31, 1999 compared
to a $166,000 provision and no charge offs during the six months ended March 31,
1998. As the Company has grown over the last twelve months, the composition of
the loan portfolio has changed with increases in construction loans and
commercial and consumer loans, which are considered to have more associated risk
than the Company's traditional portfolio of one- to four-family residential
mortgages. Because of the Company's history of relatively low loan loss
experience, it has historically maintained an allowance for loan losses at a
lower percentage of total loans as compared with other institutions with higher
risk loan portfolios and higher loss experience. The increased provision for
loan losses reflects such changes in the composition of the loan portfolio,
although the Company's recent experience has not indicated a deterioration in
loan quality. Also, the balance of non-performing loans has increased during
the current fiscal year, primarily as a result of the addition of a $1.6 million
secured commercial real estate loan as well as six construction loans from two
contractors that have passed their maturity dates. The Company is not
anticipating any material loss on these loans at this time and sees these as
isolated problem assets, not a market or underwriting trend. Subsequent to
quarter end, the six construction loans were paid off or brought current and
extended.
Non-Interest Income. Non-interest income increased $571,787, or 44.91%, to $1.8
million for the six months ended March 31, 1999 from $1.3 million for the six
months ended March 31, 1998. The increase was primarily attributable to
increases in fee income related to the increase in deposit accounts subject to
service charges and $307,328 gain on sale of investment securities.
Non-Interest Expense. Non-interest expense increased $422,415, or 4.35%, to
$10.1 million for the six months ended March 31, 1999, from $9.7 million for the
comparable period in 1998. Occupancy expense increased from $1.0 million for the
six months ended March 31, 1998 to $1.1 million for the same period in 1999 due
to the addition of two branches and expenditures on equipment related to
preparing for the Year 2000. Sale of mortgage backed and related securities
resulted in a loss of $112,256 which partially offset the gain on sale noted
above. The ratio of non-interest expense to average total assets was 1.97% and
1.99% for the six months ended March 31, 1999 and 1998, respectively.
16
<PAGE>
Income Taxes. The provision for income taxes increased $393,433 for the six
months ended March 31, 1999 compared with the prior year, primarily as result of
a higher state income tax rate for this year.
Comparison of Three Months Ended March 31, 1999 and 1998
General. Net income increased $87,678, or 3.97%, from $2.2 million for the three
months ended March 31, 1998 to $2.3 million for the three months ended March 31,
1999. Increases in net interest income and non-interest income were partially
offset by increases in non-interest expense.
Interest Income. Additional interest income generated by the $37.5 million
increase in average interest earning assets contributed to an increase of
$506,614 in interest income for the three months ended March 31, 1999 compared
to 1998. Of this increase, $2.0 million is attributable to increased interest
income on loans which was partially offset by a $1.5 million decrease in
interest on investment and mortgage backed and related securities. The average
yield on interest earning assets decreased 8 basis points to 7.31% for the three
months ended March 31, 1999 compared to 7.39% for the same period ended March
31, 1998. Average yield decreased because overall yields are lower due to the
downward shift in the yield curve. In spite of the lower yields experienced for
the period, interest rate spread (the difference between the rates earned on
interest earning assets and the rates paid on interest bearing liabilities)
improved from 2.67% to 2.81%, however, interest rate margin (net interest income
divided by average interest earning assets) declined from 3.47% to 3.40%
comparing the three month periods.
Interest Expense. Total interest expense increased $338,141 for the three months
ended March 31, 1999 compared to the same period in 1998. Of that increase,
$113,826 related to an increase in interest expense on deposit liabilities.
Although average deposits increased by $37.9 million comparing March 31, 1998 to
1999, the average interest paid on interest-bearing deposits decreased 18 basis
points from 4.53% for the three months ended March 31, 1998 to 4.35% for the
same period ended March 31, 1999. The average balance of FHLB advances increased
from $123.9 million for the three months ended March 31, 1998 to $167.0 million
for the same period ended March 31, 1999 resulting in an increase in interest on
FHLB advances of $387,086 for the three months ended March 31, 1999 compared
with the same period ended March 31, 1998.
Provision for Loan Losses. The provision for loan losses was $303,000 and there
were no charge offs during the three months ended March 31, 1999 compared to a
$91,000 provision and no charge offs during the three months ended March 31,
1998. As noted above, the provision for loan losses was increased in response to
changes in the composition of the loan portfolio, although the Company's
recent experience has not indicated a deterioration in loan quality.
Non-Interest Income. Non-interest income increased $369,034, or 64.01%, to
$945,529 for the three months ended March 31, 1999 from $576,495 for the three
months ended March 31, 1998. The increase was primarily attributable to a
$136,079 increase in fee income related to the increase in deposit accounts
subject to service charges and $179,135 gain on sale of investment securities.
Non-Interest Expense. Non-interest expense increased $175,814, or 3.60%, to $5.1
million for the three months ended March 31, 1999, from $4.9 million for the
comparable period in 1998. Of this increase, $131,810 was attributable to an
increase in compensation and benefit expense in 1999, reflecting addition of
staff related to the addition of two branches during the past year. Occupancy
expense increased slightly from $515,859 for the three months ended March 31,
1998 to $561,453 for the three months ended March 31, 1999 due to the addition
of the two branches. The ratio of non-interest expense to average total assets
was 1.99% and 2.00% for the three months ended March 31, 1999 and 1998,
respectively.
Income Taxes. The provision for income taxes increased $62,015 for the three
months ended March 31, 1999 compared with the prior year. The increase is a
result of a higher state income tax rate for the current year.
17
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various claims and legal actions arising in
the normal course of business. Management believes that these
proceedings will not result in a material loss to the Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held an annual meeting on January 27, 1999. The election
of three directors was brought before the security holders for vote.
The following three directors were nominated and elected for
three-year terms:
Vote For Vote Withheld
Gerald V. Brown 8,686,072 25,814
J. Gillis Hannigan 8,683,852 28,034
Dianne E. Spires 8,684,766 27,120
The following directors continue in office for their respective
remaining terms: Rodney N. Murray (two-year term), Bernard Z. Agrons
(two-year term), Timothy A. Bailey (one-year term), James D. Bocchi
(one-year term), and William C. Dalton (one-year term).
No additional items were on the agenda of the annual meeting and no
items were brought to a vote during the meeting.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Not applicable.
b) No Current Reports on Form 8-K were filed during the quarter ended
March 31, 1999.
18
<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, thereunto duly authorized.
KLAMATH FIRST BANCORP, INC.
Date: May 14, 1999 By: /s/ Gerald V. Brown
---------------------------
Gerald V. Brown, President and
Chief Executive Officer
Date: May 14, 1999 By: /s/ Marshall Jay Alexander
---------------------------
Marshall Jay Alexander,
Senior Vice President
and Chief Financial Officer
19
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 23,231,327
<INT-BEARING-DEPOSITS> 11,515,185
<FED-FUNDS-SOLD> 18,866,681
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 193,057,503
<INVESTMENTS-CARRYING> 3,844,202
<INVESTMENTS-MARKET> 3,888,367
<LOANS> 723,280,487
<ALLOWANCE> 2,372,677
<TOTAL-ASSETS> 1,013,241,169
<DEPOSITS> 724,177,185
<SHORT-TERM> 45,000,000
<LIABILITIES-OTHER> 13,376,753
<LONG-TERM> 122,000,000
0
0
<COMMON> 79,327
<OTHER-SE> 108,607,904
<TOTAL-LIABILITIES-AND-EQUITY> 1,013,241,169
<INTEREST-LOAN> 27,904,038
<INTEREST-INVEST> 7,244,947
<INTEREST-OTHER> 815,088
<INTEREST-TOTAL> 35,964,073
<INTEREST-DEPOSIT> 14,681,561
<INTEREST-EXPENSE> 19,248,719
<INTEREST-INCOME-NET> 16,715,354
<LOAN-LOSSES> 426,000
<SECURITIES-GAINS> 195,072
<EXPENSE-OTHER> 10,026,555
<INCOME-PRETAX> 7,995,492
<INCOME-PRE-EXTRAORDINARY> 7,995,492
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,749,266
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.57
<YIELD-ACTUAL> 3.40
<LOANS-NON> 3,905,521
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,949,677
<CHARGE-OFFS> 3,000
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