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Klamath First issues $13 million in securities

KLAMATH FALLS - Klamath First Bancorp Inc. announced the issuance of $13 million of trust-preferred securities in a private placement managed by Sandler O'Neill & Partners and Salomon Smith Barney.

"The proceeds from this offering will provide $10 million in capital to Klamath First, our primary subsidiary, and the remainder will be used to fund stock repurchases and for general corporate purposes," said Kermit Houser, president and chief executive officer. "Using trust preferred securities allows us to raise capital to fund our growth and improve shareholder value without diluting earnings per share."

Trust-preferred securities came into use around 1996 for institutions wanting to raise Tier — capital (equity capital and disclosed reserves), said Marshall J. Alexander, Klamath First's vice president and chief financial officer.

By going into a pool with other financial institutions, the bank raised money more quickly and at less expense than if it had issued a stock offering.

The former thrift institution converted into a stock company in 1995. Klamath First participated in a similar pool last July when it acquired 12 former Western Bank branches and one Washington Mutual branch.

"Our capital levels leveraged pretty low as a result of our acquisitions and this is a way to improve equity-to-capital at the holding company level," Alexander said.

Federal regulations require an equity-to-capital percentage of 4 percent. Klamath First Bancorp's is around 5 percent, and Alexander said the securities sale will help push the percentage closer to 8 percent.

The trust-preferred securities will have a maturity of 30 years and are redeemable after five years.