UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)


x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) of


THE
SECURITIES EXCHANGE ACT OF 1934





For
the quarterly period ended:  March 31,
2008





OR





o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) of


THE
SECURITIES EXCHANGE ACT OF 1934





For the
transition period from _____ to _____





Commission
File Number: 000-50592





K-FED
BANCORP


(Exact
name of registrant as specified in its charter)





Federal
            
            20-0411486(State
      or other jurisdiction of incorporation)
            
            (I.R.S.
      Employer Identification No.)1359 N. Grand Avenue, Covina,
      CA
            
            91724(Address
      of principal executive offices)
            
            (Zip
      Code)


(800)
524-2274


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Sections 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 o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange act. (Check one):





Large
accelerated filer o        Accelerated
filer x  Non-accelerated filer
o  Smaller
Reporting Company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes o
No x





APPLICABLE
ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of
the issuer’s classes of common stock, as of the latest practicable
date:





Common
Stock, $.01 par value – 13,679,247 shares outstanding as of May 2,
2008.











Form
10-Q





K-FED
BANCORP


Table
of Contents





PagePart
      I.
            Financial InformationItem
      1:
            Financial Statements
      (Unaudited)Consolidated Statements of Financial ConditionatMarch
      31, 2008and June 30, 2007
            1Consolidated Statements of Income and
      Comprehensive Income for the Threeand Nine MonthsEndedMarch
      31, 2008and 2007
            2Consolidated Statement of Stockholders’ Equity and
      Other Comprehensive Income for theNineMonths EndedMarch 31, 2008
            3Consolidated Statements of Cash Flows for theNineMonths EndedMarch 31, 2008and 2007
            4Notes to
      Consolidated Financial Statements
            5Item
      2:
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            7Item
      3:
            Quantitative and Qualitative Disclosures About
      Market Risk
            17Item
      4:
            Controls and Procedures
            18Part
      II.
            Other InformationItem
      1:
            Legal
      Proceedings
            20Item
      1A:
            Risk
      Factors
            20Item
      2:
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            20Item
      3:
            Defaults upon Senior
      Securities
            20Item
      4:
            Submission of Matters to a Vote of Security
      Holders
            20Item
      5:
            Other
      Information
            20Item
      6:
            Exhibits
            20SIGNATURES
            21











Part
I — FINANCIAL INFORMATION


Item
1. Financial Statements


K-FED
BANCORP AND SUBSIDIARY


Consolidated
Statements of Financial Condition


(Unaudited)


(Dollars
in thousands, except share data)


March
      31
              2008
            
            June
      30
              2007ASSETSCash
      and due from banks
            
            $
            7,087
            
            $
            10,982Federal
      funds sold
            
            
            69,265
            
            
            15,750Total
      cash and cash equivalents
            
            
            76,352
            
            
            26,732Interest
      earning deposits in other financial institutions
            
            
            —
            
            
            2,970Securities
      available-for-sale
            
            
            9,522
            
            
            13,579Securities
      held-to-maturity, fair value of $9,801 and
              $20,514
      at March 31, 2008 and June 30, 2007, respectively
            
            
            9,766
            
            
            21,096Federal
      Home Loan Bank stock, at cost
            
            
            12,366
            
            
            9,870Loans
      receivable
            
            
            732,790
            
            
            701,962Deferred
      net loan origination fees
            
            
            (11
            )
            
            (134
            )Net
      premium on purchased loans
            
            
            7
            
            
            120Allowance
      for loan losses
            
            
            (3,057
            )
            
            (2,805
            )Loans
      receivable, net
            
            
            729,729
            
            
            699,143Accrued
      interest receivable
            
            
            3,263
            
            
            3,259Premises
      and equipment, net
            
            
            3,059
            
            
            3,484Core
      deposit intangible
            
            
            249
            
            
            323Goodwill
            
            
            3,950
            
            
            3,950Bank-owned
      life insurance
            
            
            11,289
            
            
            10,954Other
      assets
            
            
            4,060
            
            
            4,265Total
      assets
            
            $
            863,605
            
            $
            799,625LIABILITIES
      AND STOCKHOLDERS’ EQUITYLiabilitiesDepositsNoninterest
      bearing
            
            $
            54,993
            
            $
            43,169Interest
      bearing
            
            
            441,409
            
            
            450,959Total
      deposits
            
            
            496,402
            
            
            494,128Federal
      Home Loan Bank advances, short-term
            
            
            38,000
            
            
            20,000Federal
      Home Loan Bank advances, long-term
            
            
            207,019
            
            
            190,016State
      of California time deposit
            
            
            25,000
            
            
            —Accrued
      expenses and other liabilities
            
            
            3,719
            
            
            3,164Total
      liabilities
            
            
            770,140
            
            
            707,308Commitments
      and contingent liabilities
            
            
            —
            
            
            —Stockholders’
      equityNonredeemable
      serial preferred stock, $.01 par value;
              2,000,000
      shares authorized; issued and outstanding — none
            
            
            —
            
            
            —Common
      stock, $0.01 par value; 18,000,000 authorized;
              March
      31, 2008 — 14,725,440 shares issued.
              June
      30, 2007 — 14,724,760 shares issued.
            
            
            147
            
            
            147Additional
      paid-in capital
            
            
            58,231
            
            
            57,626Retained
      earnings
            
            
            50,345
            
            
            49,084Accumulated
      other comprehensive loss, net of tax
            
            
            97
            
            
            (126
            )Unearned
      employee stock ownership plan shares
            
            
            (2,730
            )
            
            (3,071
            )Treasury
      stock, at cost (March 31, 2008 — 895,001 shares;
              June
      30, 2007 — 775,815 shares)
            
            
            (12,625
            )
            
            (11,343
            )Total
      stockholders’ equity
            
            
            93,465
            
            
            92,317Total
      liabilities and stockholders’ equity
            
            $
            863,605
            
            $
            799,625The
      accompanying notes are an integral part of these unaudited consolidated
      financial statements






1




K-FED BANCORP AND SUBSIDIARY


Consolidated
Statements of Income and Comprehensive Income


(Unaudited)


(Dollars
in thousands, except per share data)





Three
      Months Ended
              March
      31
            
            Nine
      Months Ended
              March
      312008
            
            2007
            
            2008
            
            2007Interest
      IncomeInterest
      and fees on loans
            
            $
            10,948
            
            $
            9,617
            
            $
            31,855
            
            $
            27,634Interest
      on securities, taxable
            
            
            224
            
            
            324
            
            
            882
            
            
            1,008Federal
      Home Loan Bank dividends
            
            
            146
            
            
            133
            
            
            398
            
            
            369Other
      interest
            
            
            268
            
            
            394
            
            
            690
            
            
            1,428Total
      interest income
            
            
            11,586
            
            
            10,468
            
            
            33,825
            
            
            30,439Interest
      ExpenseInterest
      on deposits
            
            
            3,575
            
            
            3,867
            
            
            11,493
            
            
            10,788Interest
      on borrowings
            
            
            2,924
            
            
            2,071
            
            
            7,955
            
            
            6,162Total
      interest expense
            
            
            6,499
            
            
            5,938
            
            
            19,448
            
            
            16,950Net
      interest income
            
            
            5,087
            
            
            4,530
            
            
            14,377
            
            
            13,489Provision
      for loan losses
            
            
            200
            
            
            116
            
            
            551
            
            
            419Net
      interest income after provision
              for
      loan losses
            
            
            4,887
            
            
            4,414
            
            
            13,826
            
            
            13,070Noninterest
      incomeService
      charges and fees
            
            
            558
            
            
            509
            
            
            1,739
            
            
            1,510ATM
      fees and charges
            
            
            410
            
            
            441
            
            
            1,144
            
            
            1,214Referral
      commissions
            
            
            98
            
            
            54
            
            
            232
            
            
            195Loss
      on equity investment
            
            
            (105
            )
            
            (30
            )
            
            (315
            )
            
            (85
            )Bank-owned
      life insurance
            
            
            113
            
            
            113
            
            
            335
            
            
            325Other
      noninterest income
            
            
            58
            
            
            6
            
            
            77
            
            
            20Total
      noninterest income
            
            
            1,132
            
            
            1,093
            
            
            3,212
            
            
            3,179Noninterest
      expenseSalaries
      and benefits
            
            
            2,064
            
            
            2,048
            
            
            6,056
            
            
            5,745Occupancy
      and equipment
            
            
            571
            
            
            516
            
            
            1,702
            
            
            1,545ATM
      expense
            
            
            326
            
            
            308
            
            
            952
            
            
            933Advertising
      and promotional
            
            
            99
            
            
            130
            
            
            225
            
            
            262Professional
      services
            
            
            242
            
            
            280
            
            
            709
            
            
            636Postage
            
            
            73
            
            
            82
            
            
            221
            
            
            230Telephone
            
            
            123
            
            
            122
            
            
            377
            
            
            340Stock
      offering costs
            
            
            10
            
            
            —
            
            
            1,279
            
            
            —Other
      operating expense
            
            
            420
            
            
            365
            
            
            1,339
            
            
            1,122Total
      noninterest expense
            
            
            3,928
            
            
            3,851
            
            
            12,860
            
            
            10,813Income
      before income tax expense
            
            
            2,091
            
            
            1,656
            
            
            4,178
            
            
            5,436Income
      tax expense
            
            
            766
            
            
            543
            
            
            1,453
            
            
            1,863Net
      income
            
            $
            1,325
            
            $
            1,113
            
            $
            2,725
            
            $
            3,573Comprehensive
      Income
            
            $
            1,426
            
            $
            1,149
            
            $
            2,948
            
            $
            3,733Earnings
      per common share:Basic
            
            $
            0.10
            
            $
            0.08
            
            $
            0.20
            
            $
            0.26Diluted
            
            $
            0.10
            
            $
            0.08
            
            $
            0.20
            
            $
            0.26The
      accompanying notes are an integral part of these unaudited consolidated
      financial statements





2








K-FED
BANCORP AND SUBSIDIARY


Consolidated Statements of Stockholders’
Equity


And
Other Comprehensive Income


(Unaudited)


(Dollars
in thousands, except share data)





Common
      Stock
            
            
            
            
            
            
            
            
            
            Treasury
      StockComprehensive
              Income
            
            Shares
            
            Amount
            
            Additional
              Paid-in
              Capital
            
            Retained
              Earnings
            
            Accumulated
              Other
              Comprehensive
              Loss,
      net
            
            Unearned
              ESOP
              Shares
            
            Shares
            
            Amount
            
            TotalBalance
      June 30, 2007
            
            
            
            
            14,724,760
            
            $
            147
            
            $
            57,626
            
            $
            49,084
            
            $
            (126
            )
            $
            (3,071
            )
            (775,815
            )
            $
            (11,343
            )
            $
            92,317Comprehensive
      incomeNet
      income for the nine months ended March 31, 2008
            
            $
            2,725
            
            —
            
            
            —
            
            
            —
            
            
            2,725
            
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            2,725Other
      comprehensive income – unrealized gain on securities, net of
      tax
            
            
            223
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            223
            
            
            —
            
            —
            
            
            —
            
            
            223Total
      comprehensive income
            
            $
            2,948Dividends
      paid ($0.31 per share) *
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,464
            )
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            (1,464
            )Purchase
      of treasury stock
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            (119,186
            )
            
            (1,282
            )
            
            (1,282
            )Stock
      options earned
            
            
            
            
            —
            
            
            —
            
            
            238
            
            
            —
            
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            238Allocation
      of stock awards
            
            
            
            
            —
            
            
            —
            
            
            325
            
            
            —
            
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            325Tax
      benefit of RRP shares
            
            
            
            
            —
            
            
            —
            
            
            (30
            )
            
            —
            
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            (30
            )Issuance
      of stock awards
            
            
            
            
            5,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            —Forfeiture
      of stock awards
            
            
            
            
            (4,320
            )
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            —Allocation
      of ESOP common stock
            
            
            
            
            —
            
            
            —
            
            
            72
            
            
            —
            
            
            —
            
            
            341
            
            —
            
            
            —
            
            
            413Balance
      March  31, 2008
            
            
            
            
            14,725,440
            
            $
            147
            
            $
            58,231
            
            $
            50,345
            
            $
            97
            
            $
            (2,730
            )
            (895,001
            )
            $
            (12,625
            )
            $
            93,465*
      K-Fed Mutual Holding Company waived its receipt of dividends on the
      8,861,750 shares it owns.The
      accompanying notes are an integral part of these unaudited consolidated
      financial statements










3





K-FED
BANCORP AND SUBSIDIARY


Consolidated Statements of Cash
Flows


(Unaudited)


(Dollars
in thousands)


Nine
      Months Ended
              March
      312008
            
            2007Operating
      ActivitiesNet
      income
            
            $
            2,725
            
            $
            3,573Adjustments
      to reconcile net income to cash provided by operating
      activities:Amortization
      of net premiums on securities
            
            
            17
            
            
            37Amortization
      of net premiums on loan purchases
            
            
            113
            
            
            239Accretion
      of net loan origination fees
            
            
            (41
            )
            
            (52
            )Provision
      for loan losses
            
            
            551
            
            
            419Federal
      Home Loan Bank stock dividend
            
            
            (398
            )
            
            (369
            )Depreciation
      and amortization
            
            
            636
            
            
            537Amortization
      of core deposit intangible
            
            
            74
            
            
            87Loss
      on equity investment
            
            
            315
            
            
            85Increase
      in cash surrender value of bank-owned life insurance
            
            
            (335
            )
            
            (325
            )Accretion
      of net premiums on purchased certificates of deposits
            
            
            (37
            )
            
            (37
            )Amortization
      of debt exchange costs
            
            
            4
            
            
            54Allocation
      of ESOP common stock
            
            
            413
            
            
            585Allocation
      of stock awards
            
            
            325
            
            
            249Stock
      options earned
            
            
            238
            
            
            181Net
      increase in accrued interest receivable
            
            
            (4
            )
            
            (414
            )Net
      (increase) decrease in other assets
            
            
            (269
            )
            
            235Net
      increase in accrued expenses and other liabilities
            
            
            555
            
            
            396Net
      cash provided by operating activities
            
            
            4,882
            
            
            5,480Investing
      ActivitiesProceeds
      from maturities and principal repayments of available-for-sale
      securities
            
            
            4,423
            
            
            869Proceeds
      from maturities and principal repayments of held-to-maturity
      securities
            
            
            11,330
            
            
            2,719Decrease
      in interest bearing deposits at other institutions
            
            
            2,970
            
            
            6,040Purchases
      of loans
            
            
            —
            
            
            (72,670
            )(Increase)
      decrease in loans, excluding loan purchases
            
            
            (31,209
            )
            
            35,817Purchases
      of FHLB stock
            
            
            (2,099
            )
            
            (71
            )Purchases
      of premises and equipment
            
            
            (212
            )
            
            (683
            )Net
      cash used in investing activities
            
            
            (14,797
            )
            
            (27,979
            )Financing
      ActivitiesProceeds
      from FHLB advances
            
            
            93,500
            
            
            20,000Repayment
      of FHLB advances
            
            
            (58,500
            )
            
            (10,000
            )Dividends
      paid on common stock
            
            
            (1,464
            )
            
            (1,378
            )Purchases
      of treasury stock
            
            
            (1,282
            )
            
            (4,556
            )Net
      increase in deposits
            
            
            2,311
            
            
            50,513Increase
      in State of California time deposit
            
            
            25,000
            
            
            —Exercise
      of stock options
            
            
            —
            
            
            170Tax
      benefit from RRP shares vesting
            
            
            (30
            )
            
            35Net
      cash provided by financing activities
            
            
            59,535
            
            
            54,784Net
      increase in cash and cash equivalents
            
            
            49,620
            
            
            32,285Beginning
      cash and cash equivalents
            
            
            26,732
            
            
            25,579Ending
      cash and cash equivalents
            
            $
            76,352
            
            $
            57,864The
      accompanying notes are an integral part of these unaudited consolidated
      financial statements








4





K-FED
BANCORP AND SUBSIDIARY


Notes to Consolidated Financial Statements


(Unaudited)





Note
1 – Nature of Business
and Significant Accounting Policies





Nature of
Business:  K-Fed Bancorp (or the “Company”) is a majority-owned
subsidiary of K-Fed Mutual Holding Company (or the “Parent”). The Company and
its Parent are holding companies that are federally chartered. The Company’s
sole subsidiary, Kaiser Federal Bank (or the “Bank”), is a federally chartered
savings association, which provides retail and commercial banking services to
individuals and business customers from its nine branch locations throughout
California. While the Bank originates all types of retail and commercial real
estate loans, the majority of its residential real estate loans have been
purchased from other financial institutions.





The
Company’s business activities generally are limited to passive investment
activities and oversight of our investment in the Bank. Unless the context
otherwise requires, all references to the Company include the Bank and the
Company on a consolidated basis.





Basis of
Presentation:  The financial statements of K-Fed Bancorp have
been prepared in conformity with accounting principles generally accepted in the
United States (“GAAP”) for interim financial information and predominant
practices followed by the financial services industry, and are unaudited. In the
opinion of the Company’s management, all adjustments consisting of normal
recurring accruals necessary for a fair presentation of the financial condition
and results of operations for the interim periods included herein have been
made.





The
results of operations for the nine months ended March 31, 2008 are not
necessarily indicative of the results of operations that may be expected for any
other interim period or for the fiscal year ending June 30, 2008. Certain
information and note disclosures normally included in the Company’s annual
financial statements have been condensed or omitted. Therefore, these
consolidated financial statements and notes thereto should be read in
conjunction with the consolidated financial statements and notes included in the
2007 Annual Report on Form 10-K filed with the Securities and Exchange
Commission.





Principles of
Consolidation:The consolidated financial statements presented
in this quarterly report include the accounts of K-Fed Bancorp and its
wholly-owned subsidiary, Kaiser Federal Bank. All material intercompany balances
and transactions have been eliminated in consolidation.





Use of
Estimates:The preparation of consolidated financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of income and expenses during the
reporting period. Changes in these estimates and assumptions are considered
reasonably possible and may have a material impact on the consolidated financial
statements and thus actual results could differ from the amounts reported and
disclosed herein. Material estimates that are particularly susceptible to
significant change in the near term relate to the determination of the allowance
for loan losses, the valuation of financial instruments, and mortgage-loan
prepayment assumptions used to determine the effective interest amortization of
loan purchase premiums and discounts.





Newly
Issued Accounting Standards:





In July
2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
No. 48 (“FIN 48”) “Accounting for Uncertainty in Income Taxes:  an
interpretation of Statement of Financial Accounting Standards (“SFAS”) Statement
No. 109.”  This interpretation clarifies the accounting for
uncertainty in income taxes recognized in an entity’s financial statements in
accordance with SFAS No. 109, “Accounting for Income Taxes.”  FIN 48
prescribes a recognition threshold and measurement attribute for a tax position
taken or expected to be taken in a tax return.  Under FIN 48, an
income tax position will be recognized if it is more likely than not that it
will be sustained upon IRS examination, based upon its technical merits. Once
that status is met, the amount recorded will be the largest amount of benefit
that is greater than 50 percent likely of being realized upon ultimate
settlement. FIN 48 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and
transition. FIN 48 is effective as of the beginning of fiscal years that begin
after December 15, 2006.


5





We
adopted FIN 48 effective July 1, 2007. There was no cumulative effect of
applying the provisions of FIN 48 and there was no material effect on our
provision for income taxes for the three and nine months ended March 31,
2008.  The adoption of FIN 48 had no material effect on our financial
condition or results of operations.








Note
2 – Earnings Per
Share





Basic
earnings per common share is net income divided by the weighted average number
of common shares outstanding during the period. ESOP shares are considered
outstanding for this calculation unless unearned. Diluted earnings per common
share includes the dilutive effect of additional potential common shares
issuable under stock options and stock awards.





Three
      months ended
              March
      31,
            
            
            
            Nine
      months ended
              March
      31,2008
            
            
            
            2007
            
            
            
            2008
            
            
            
            2007(Dollars
      in thousands)Net
      income
            
            $
            1,325
            
            
            
            $
            1,113
            
            
            
            $
            2,725
            
            
            
            $
            3,573Weighted
      average common shares outstanding
            
            
            13,543,148
            
            
            
            
            13,582,837
            
            
            
            
            13,559,650
            
            
            
            
            13,654,354Basic
      earnings per share
            
            $
            0.10
            
            
            
            $
            0.08
            
            
            
            $
            0.20
            
            
            
            $
            0.26Earnings
      per share assuming dilutionNet
      income available to common shareholders
            
            $
            1,325
            
            
            
            $
            1,113
            
            
            
            $
            2,725
            
            
            
            $
            3,573Weighted
      average common shares outstanding
            
            
            13,543,148
            
            
            
            
            13,582,837
            
            
            
            
            13,559,650
            
            
            
            
            13,654,354Dilutive
      effect of stock options
            
            
            —
            
            
            
            
            21,023
            
            
            
            
            —
            
            
            
            
            —Dilutive
      effect of stock awards
            
            
            —
            
            
            
            
            23,894
            
            
            
            
            —
            
            
            
            
            20,871Average
      common shares and dilutive potential common shares
            
            
            13,543,148
            
            
            
            
            13,627,754
            
            
            
            
            13,559,650
            
            
            
            
            13,675,225Diluted
      earnings per share
            
            $
            0.10
            
            
            
            $
            0.08
            
            
            
            $
            0.20
            
            
            
            $
            0.26





For the
three and nine months ended March 31, 2008, outstanding stock options to
purchase 339,400 shares and outstanding stock awards of 78,560 shares were not
considered in computing diluted earnings per common share because they were
anti-dilutive.













6





Item 2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





Forward-Looking
Information





This Quarterly Report on Form 10-Q
contains certain forward-looking statements and information relating to the
Company and the Bank that are based on the beliefs of management as well as
assumptions made by and information currently available to management. In
addition, in portions of this document the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “should” and similar expressions or the negative
thereof, as they relate to the Company or the Bank or their management, are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company and/or the Bank with respect to forward-looking
events and are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated, expected or intended. The
Company does not intend to update these forward-looking
statements.





Comparison
of Financial Condition at March 31, 2008 and June 30, 2007.





Assets: Cash and cash
equivalents increased $49.7 million, or 185.6% to $76.4 million at March 31,
2008 from $26.7 million at June 30, 2007. The increase related to federal funds
sold, which increased $53.5 million to $69.3 million at March 31, 2008 from
$15.8 million at June 30, 2007 offset by a $3.9 million decrease in cash and due
from banks to $7.1 million at March 31, 2008 from $11.0 million at June 30,
2007. The increase in federal funds sold was primarily due to an increase in
borrowings to fund multifamily and commercial real estate loan growth and
seasonal deposit outflows which have begun to reverse.





Our
investment portfolio decreased $15.4 million, or 44.4% to $19.3 million at March
31, 2008 from $34.7 million at June 30, 2007. The decrease was attributable to
maturities and normal repayments of principal on our mortgage-backed securities
and collateralized mortgage obligations.





Our gross
loan portfolio increased $30.8 million, or 4.4% to $732.8 million at March 31,
2008 from $702.0 million at June 30, 2007. The increase was primarily due to the
bank’s focus on multifamily and commercial real estate loans as a means of
diversifying the mortgage portfolio. One-to four-family real estate loans
decreased $30.2 million, or 6.4% to $439.3 million at March 31, 2008 from $469.5
million at June 30, 2007.  Commercial real estate loans increased
$23.7 million, or 30.4% to $101.5 million at March 31, 2008 from $77.8 million
at June 30, 2007.  Multifamily loans increased $30.7 million, or 34.9%
to $118.8 million at March 31, 2008 from $88.1 million at June 30,
2007.  Other loans which are comprised primarily of automobile loans
increased $6.5 million, or 9.8% to $73.1 million at March 31, 2008 from $66.6
million at June 30, 2007. Real estate loans comprised 90.0% of the total loan
portfolio at March 31, 2008, compared with 90.5% at June 30, 2007.





Deposits: Total deposits
increased $2.3 million, or 0.5% to $496.4 million at March 31, 2008 from $494.1
million at June 30, 2007. The increase was primarily due to growth in money
market products as a result of the Company’s promotional rates
program.





Borrowings: Advances from the
Federal Home Loan Bank of San Francisco increased $35.0 million, or 16.7% to
$245.0 million at March 31, 2008 from $210.0 million at June 30,
2007.  We interchange the use of deposits and borrowings to fund
assets, such as the origination and purchase of loans, depending on various
factors including liquidity and asset/liability management strategies. Other
borrowings are comprised of $25.0 million in deposits from the State of
California through the state’s time deposit program in exchange for pledging
certain investment securities and mortgage loans as collateral.





Stockholders’ Equity:
Stockholders’ equity increased $1.2 million to $93.5 million at March 31, 2008
from $92.3 million at June 30, 2007 primarily as a result of $2.7 million in net
income earned for the nine months ended March 31, 2008, an unrealized gain on
securities of $223,000 net of tax and the allocation of ESOP shares, stock
awards, and stock options earned totaling $976,000. This increase was offset by
cash payments of $1.5 million in dividends to stockholders of record, excluding
shares held by K-Fed Mutual Holding Company, of $0.31 per share for the nine
months ended March 31, 2008.





7


Average
Balances, Net Interest Income, Yields Earned and Rates Paid








For
      the three months ended March 31,2008
      (4)
            
            
            
            
            
            
            
            2007
      (4)Average
            
            
            
            
            
            
            
            AverageAverage
            
            
            
            Yield/
            
            
            
            Average
            
            
            
            Yield/Balance
            
            Interest
            
            Cost
            
            
            
            Balance
            
            Interest
            
            Cost(Dollars
      in thousands)INTEREST-EARNING
      ASSETSLoans
      receivable(1)
            
            $
            738,462
            
            $
            10,948
            
            5.93
            %
            
            
            $
            670,319
            
            $
            9,617
            
            5.74
            %Securities(2)
            
            
            19,631
            
            
            224
            
            4.56
            %
            
            
            
            32,992
            
            
            324
            
            3.93
            %Federal
      funds sold
            
            
            40,263
            
            
            268
            
            2.66
            %
            
            
            
            25,832
            
            
            333
            
            5.16
            %Federal
      Home Loan Bank stock
            
            
            12,257
            
            
            146
            
            4.76
            %
            
            
            
            9,142
            
            
            133
            
            5.82
            %Interest-earning
      deposits in other financial institutions
            
            
            —
            
            
            —
            
            —
            %
            
            
            
            2,970
            
            
            25
            
            3.37
            %Other
      interest-earning assets
            
            
            —
            
            
            —
            
            —
            %
            
            
            
            2,700
            
            
            36
            
            5.33
            %Total
      interest-earning assets
            
            
            810,613
            
            
            11,586
            
            5.72
            %
            
            
            
            743,955
            
            
            10,468
            
            5.63
            %Noninterest
      earning assets
            
            
            33,021
            
            
            
            
            
            
            
            
            
            34,177Total
      assets
            
            $
            843,634
            
            
            
            
            
            
            
            
            $
            778,132INTEREST-BEARING  LIABILITIESMoney
      market
            
            $
            74,833
            
            $
            446
            
            2.38
            %
            
            
            $
            88,028
            
            $
            631
            
            2.87
            %Savings
      deposits
            
            
            120,037
            
            
            402
            
            1.34
            %
            
            
            
            124,827
            
            
            585
            
            1.87
            %Certificates
      of deposit
            
            
            233,742
            
            
            2,727
            
            4.67
            %
            
            
            
            233,447
            
            
            2,651
            
            4.54
            %Other
      borrowings
            
            
            270,019
            
            
            2,924
            
            4.33
            %
            
            
            
            189,996
            
            
            2,071
            
            4.36
            %Total
      interest-bearing liabilities
            
            
            698,631
            
            
            6,499
            
            3.72
            %
            
            
            
            636,298
            
            
            5,938
            
            3.73
            %Noninterest
      bearing liabilities
            
            
            51,372
            
            
            
            
            
            
            
            
            
            49,986Total
      liabilities
            
            
            750,003
            
            
            
            
            
            
            
            
            
            686,284Equity
            
            
            93,631
            
            
            
            
            
            
            
            
            
            91,848Total
      liabilities and equity
            
            $
            843,634
            
            
            
            
            
            
            
            
            $
            778,132Net
      interest/spread
            
            
            
            
            $
            5,087
            
            2.00
            %
            
            
            
            
            
            $
            4,530
            
            1.90
            %Margin(3)
            
            
            
            
            
            
            
            2.51
            %
            
            
            
            
            
            
            
            
            2.44
            %Ratio
      of interest-earning assets to interest bearing liabilities
            
            
            116.03
            %
            
            
            
            
            
            
            
            
            116.92
            %(1)
      Calculated net of deferred fees and loss reserves.(2)
      Calculated based on amortized cost.(3)
      Net interest income divided by interest-earning assets.(4)
      Yields earned and rates paid have been annualized.













8









For
      the nine months ended March 31,2008
      (4)
              
              
              
              
              
              
              
              2007
      (4)Average
              
              
              
              
              
              
              
              AverageAverage
              
              
              
              Yield/
              
              
              
              Average
              
              
              
              Yield/Balance
              
              Interest
              
              Cost
              
              
              
              Balance
              
              Interest
              
              Cost(Dollars
      in thousands)INTEREST-EARNING
      ASSETSLoans
      receivable(1)
              
              $
              720,826
              
              $
              31,855
              
              5.89
              %
              
              
              $
              652,651
              
              $
              27,634
              
              5.65
              %Securities(2)
              
              
              26,328
              
              
              882
              
              4.47
              %
              
              
              
              34,255
              
              
              1,008
              
              3.92
              %Federal
      funds sold
              
              
              24,823
              
              
              598
              
              3.21
              %
              
              
              
              30,220
              
              
              1,166
              
              5.14
              %Federal
      Home Loan Bank stock
              
              
              10,952
              
              
              398
              
              4.85
              %
              
              
              
              8,998
              
              
              369
              
              5.47
              %Interest-earning
      deposits in other financial institutions
              
              
              1,485
              
              
              35
              
              3.14
              %
              
              
              
              5,911
              
              
              153
              
              3.45
              %Other
      interest-earning assets
              
              
              1,452
              
              
              57
              
              5.23
              %
              
              
              
              2,495
              
              
              109
              
              5.82
              %Total
      interest-earning assets
              
              
              785,866
              
              
              33,825
              
              5.74
              %
              
              
              
              734,530
              
              
              30,439
              
              5.53
              %Noninterest
      earning assets
              
              
              32,937
              
              
              
              
              
              
              
              
              
              28,575Total
      assets
              
              $
              818,803
              
              
              
              
              
              
              
              
              $
              763,105INTEREST-BEARING  LIABILITIESMoney
      market
              
              $
              74,391
              
              $
              1,484
              
              2.66
              %
              
              
              $
              100,273
              
              $
              2,145
              
              2.85
              %Savings
      deposits
              
              
              129,172
              
              
              1,527
              
              1.58
              %
              
              
              
              110,221
              
              
              1,221
              
              1.48
              %Certificates
      of deposit
              
              
              238,916
              
              
              8,482
              
              4.73
              %
              
              
              
              229,545
              
              
              7,422
              
              4.31
              %Other
      borrowings
              
              
              238,525
              
              
              7,955
              
              4.45
              %
              
              
              
              186,978
              
              
              6,162
              
              4.39
              %Total
      interest-bearing liabilities
              
              
              681,004
              
              
              19,448
              
              3.81
              %
              
              
              
              627,017
              
              
              16,950
              
              3.60
              %Noninterest
      bearing liabilities
              
              
              44,492
              
              
              
              
              
              
              
              
              
              43,622Total
      liabilities
              
              
              725,496
              
              
              
              
              
              
              
              
              
              670,639Equity
              
              
              93,307
              
              
              
              
              
              
              
              
              
              92,466Total
      liabilities and equity
              
              $
              818,803
              
              
              
              
              
              
              
              
              $
              763,105Net
      interest/spread
              
              
              
              
              $
              14,377
              
              1.93
              %
              
              
              
              
              
              $
              13,489
              
              1.93
              %Margin(3)
              
              
              
              
              
              
              
              2.44
              %
              
              
              
              
              
              
              
              
              2.45
              %Ratio
      of interest-earning assets to interest bearing liabilities
              
              
              115.40
              %
              
              
              
              
              
              
              
              
              117.15
              %(1)
      Calculated net of deferred fees and loss reserves.(2)
      Calculated based on amortized cost.(3)
      Net interest income divided by interest-earning assets.(4)
      Yields earned and rates paid have been annualized.


9








Comparison
of Results of Operations for the Three Months Ended March 31, 2008 and March 31,
2007.





General.Net income for the
three months ended March 31, 2008 was $1.3 million, an increase of $212,000, or
19.0%, compared to net income of $1.1 million for the three months ended March
31, 2007. Earnings per basic and diluted common share were $0.10 for the three
months ended March 31, 2008 compared to $0.08 for the three months ended March
31, 2007. The increase in net income was primarily the result of an increased
net interest margin resulting from a higher yielding loan
portfolio.





Interest Income.Interest
income increased by $1.1 million or 10.7%, to $11.6 million for the three months
ended March 31, 2008 from $10.5 million for the three months ended March 31,
2007. The primary factor for the increase in interest income was an increase in
the average loans receivable balance of $68.2 million or 10.2%, from $670.3
million for the three months ended March 31, 2007 to $738.5 million for the
three months ended March 31, 2008. Interest income was also positively impacted
by a 19 basis point increase in the average yield on loans receivable from 5.74%
for the three months ended March 31, 2007 to 5.93% for the three months ended
March 31, 2008.  The increase in the average yield on loans receivable
was primarily attributable to the addition of higher-yielding multifamily and
non-residential real estate loans to the Bank’s portfolio.





Interest
income on securities decreased by $100,000 or 30.9%, to $224,000 for the three
months ended March 31, 2008 from $324,000 for the three months ended March 31,
2007. The decrease was attributable to a $13.4 million decrease in the average
balance of investment securities from $33.0 million for the three months ended
March 31, 2007 to $19.6 million for the three months ended March 31,
2008.  The decrease was attributable to maturities and normal
repayments of principal on our mortgage-backed securities and collateralized
mortgage obligations.





Other
interest income decreased by $126,000 or 32.0% to $268,000 for the three months
ended March 31, 2008 from $394,000 for the three months ended March 31,
2007.  The decrease was primarily attributable to a 250 basis point
decrease in the average yield earned on Federal funds sold from 5.16% for the
three months ended March 31, 2007 to 2.66% for the three months ended March 31,
2008.  The decrease in the average yield on Federal funds sold was
primarily attributable to declines in the Federal funds rate during the
comparable periods as a result of actions taken by the Federal Reserve in
lowering the federal funds rate.





Interest Expense. Interest
expense increased $561,000 or 9.4% to $6.5 million for the three months ended
March 31, 2008 compared to $5.9 million for the three months ended March 31,
2007. The increase was primarily attributable to an increase in the average
balance of FHLB advances and other borrowings. The average balance of
interest-bearing liabilities increased $62.3 million or 9.8% to $698.6 million
for the three months ended March 31, 2008 from $636.3 million for the three
months ended March 31, 2007.





Net Interest
Income.  Net income before provision for loan losses increased
$557,000 or 12.3%, to $5.1 million for the three months ended March 31, 2008
from $4.5 million for the three months ended March 31, 2007.  The
increase was attributable to an increase in the net interest margin as a result
of higher yielding multifamily and non-residential loans.  The net
interest margin increased 7 basis points to 2.51% for the three months ended
March 31, 2008 from 2.44% for the three months ended March 31,
2007.




Provision for Loan
Losses.We
maintain an allowance for loan losses to absorb probable incurred losses
inherent in the loan portfolio. The allowance is based on ongoing, quarterly
assessments of the probable losses inherent in the loan portfolio. Our
methodology for assessing the appropriateness of the allowance consists of
several key elements, which include loss ratio analysis by type of loan and
specific allowances for identified problem loans, including the results of
measuring impaired loans as provided in Statement of Financial Accounting
Standards (“SFAS”) No. 114, “Accounting by Creditors for Impairment of a Loan”
and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan – Income
Recognition and Disclosures.”  These accounting standards prescribe
the measurement methods, income recognition and disclosures related to impaired
loans.




10




The loss
ratio analysis component of the allowance is calculated by applying loss factors
to outstanding loans based on the internal risk evaluation of the loans or pools
of loans. Changes in risk evaluations of both performing and nonperforming loans
affect the amount of the formula allowance. Loss factors are based both on our
historical loss experience as well as on significant factors that, in
management’s judgment, affect the collectibility of the portfolio as of the
evaluation date.




The
appropriateness of the allowance is reviewed and established by management based
upon its evaluation of then-existing economic and business conditions affecting
our key lending areas and other conditions, such as credit quality trends
(including trends in nonperforming loans expected to result from existing
conditions), collateral values, loan volumes and concentrations, specific
industry conditions within portfolio segments and recent loss experience in
particular segments of the portfolio that existed as of the balance sheet date
and the impact that such conditions were believed to have had on the
collectibility of the loan. Senior management reviews these conditions quarterly
in discussions with our senior credit officers. To the extent that any of these
conditions is evidenced by a specifically identifiable problem credit or
portfolio segment as of the evaluation date, management’s estimate of the effect
of such condition may be reflected as a specific allowance applicable to such
credit or portfolio segment. Where any of these conditions is not evidenced by a
specifically identifiable problem credit or portfolio segment as of the
evaluation date, management’s evaluation of the loss related to this condition
is reflected in the general allowance. The evaluation of the inherent loss with
respect to these conditions is subject to a higher degree of uncertainty because
they are not identified with specific problem credits or portfolio
segments.





Management
also evaluates the adequacy of the allowance for loan losses based on a review
of individual loans, historical loan loss experience, the value and adequacy of
collateral and economic conditions in our market area. This evaluation is
inherently subjective as it requires material estimates, including the amounts
and timing of future cash flows expected to be received on impaired loans that
may be susceptible to significant change. For all specifically reviewed loans
for which it is probable that we will be unable to collect all amounts due
according to the terms of the loan agreement, we determine impairment by
computing a fair value either based on discounted cash flows using the loan’s
initial interest rate or the fair value of the collateral if the loan is
collateral dependent. Large groups of smaller balance homogenous loans that are
collectively evaluated for impairment and are excluded from specific impairment
evaluation, and their allowance for loan losses is calculated in accordance with
the allowance for loan losses policy described above.




Because
the allowance for loan losses is based on estimates of losses inherent in the
loan portfolio, actual losses can vary significantly from the estimated amounts.
Our methodology as described above permits adjustments to any loss factor used
in the computation of the formula allowance in the event that, in management’s
judgment, significant factors which affect the collectibility of the portfolio
as of the evaluation date are not reflected in the loss factors. By assessing
the estimated losses inherent in the loan portfolio on a quarterly basis, we are
able to adjust specific and inherent loss estimates based upon any more recent
information that has become available. In addition, management’s determination
as to the amount of our allowance for loan losses is subject to review by the
Office of Thrift Supervision and the FDIC, which may require the establishment
of additional general or specific allowances based upon their judgment of the
information available to them at the time of their examination of Kaiser Federal
Bank.





Our
provision for loan losses was $200,000 for the three months ended March 31, 2008
compared to $116,000 for the three months ended March 31, 2007. The allowance
for loan losses as a percent of total loans was 0.42% at March 31, 2008 as
compared to 0.44% at March 31, 2007.   The balance of the
allowance for loan losses at March 31, 2008 and the related provision for the
quarter then ended was impacted by a decrease in the amount of classified loans,
increases in historical loss factors for consumer loans based on the recent
charge-off activity and some adjustments to the real estate loan subjective
factors based on current market conditions.  Our gross loan portfolio
increased $59.5 million, or 8.8% to $732.8 million at March 31, 2008 from $673.3
million at March 31, 2007.  The assumptions are based both on current
industry and economic trends in addition to our internal loan loss
history.  We used the same methodology and generally similar
assumptions in assessing the adequacy of the allowance for consumer and real
estate loans for both periods.





Noninterest Income.Our
noninterest income increased $39,000, or 3.6% to $1.13 million for the three
months ended March 31, 2008 compared to $1.09 million for the three months ended
March 31, 2007. The increase was primarily the result of stock redemption
proceeds related to the VISA IPO and an increase in referral commissions and
customer service charges offset by declines in ATM fees and charges and higher
losses attributable to our investment in a California Affordable Housing Program
Fund.


11





Noninterest Expense.Our
noninterest expense increased $77,000, or 2.0% to $3.93 million for the three
months ended March 31, 2008 from $3.85 million for the three months ended March
31, 2007. The increase was primarily due to increases in general operational
costs to support continued growth of the Bank.





Income Tax Expense. Income tax
expense increased $223,000, or 41.1% to $766,000 for the three months ended
March 31, 2008 compared to $543,000 for the three months ended March 31, 2007.
This increase was primarily the result of higher pre-tax income of $2.1 million
for the three months ended March 31, 2008 compared to $1.7 million for the three
months ended March 31, 2007. The effective tax rate was 36.6% and 32.8% for the
three months ended March 31, 2008 and 2007, respectively.  The
increase in effective tax rate was attributable to low income housing credits
which have a smaller impact on our tax rate when our taxable income is
higher.





Comparison
of Results of Operations for the Nine Months Ended March 31, 2008 and March 31,
2007.





General.Net income for the
nine months ended March 31, 2008 was $2.7 million, a decrease of $848,000, or
23.7%, compared to net income of $3.6 million for the nine months ended March
31, 2007. Earnings per basic and diluted common share were $0.20 for the nine
months ended March 31, 2008 compared to $0.26 for the nine months ended March
31, 2007. The decline in net income for the nine months ended March 31, 2008
compared to the nine months ended March 31, 2007 was primarily attributable to
recognizing $1.3 million in stock offering costs in December 2007 resulting from
the cancellation of the stock offering in connection with the proposed second
step conversion of K-Fed Mutual Holding Company.  If the stock
offering had been successful, these costs would have been deducted from the
proceeds of the offering as required by GAAP instead of being expensed. The
recognition of these expenses resulted in a decline of 5-cents-per-share in the
Company’s diluted earnings per share numbers for the nine months ended March 31,
2008.





Interest Income.Interest
income increased by $3.4 million or 11.1%, to $33.8 million for the nine months
ended March 31, 2008 from $30.4 million for the nine months ended March 31,
2007. The primary factor for the increase in interest income was an increase in
the average loans receivable balance of $68.1 million or 10.4%, from $652.7
million for the nine months ended March 31, 2007 to $720.8 million for the nine
months ended March 31, 2008. Interest income was also positively impacted by a
24 basis point increase in the average yield on loans receivable from 5.65% for
the nine months ended March 31, 2007 to 5.89% for the nine months ended March
31, 2008.  The increase in the average yield on loans receivable was
primarily attributable to the addition of higher-yielding multifamily and
non-residential real estate loans to the Bank’s portfolio.





Interest
income on securities decreased by $126,000 or 12.5%, to $882,000 for the nine
months ended March 31, 2008 from $1.0 million for the nine months ended March
31, 2007. The decrease was attributable to an $8.0 million or 23.1% decrease in
the average balance of investment securities from $34.3 million for the nine
months ended March 31, 2007 to $26.3 million for the nine months ended March 31,
2008.  The decrease was attributable to maturities and normal
repayments of principal on our mortgage-backed securities and collateralized
mortgage obligations.





Other
interest income decreased by $738,000 or 51.7% to $690,000 for the nine months
ended March 31, 2008 from $1.4 million for the nine months ended March 31,
2007.  The decrease was primarily attributable to a decrease in the
average balance of federal funds sold of $5.4 million or 17.9%, from $30.2
million for the nine months ended March 31, 2007 to $24.8 million for the nine
months ended March 31, 2008.  The decrease in federal funds was
attributable to increased loan growth during the comparable periods. Interest
income was also negatively impacted by a 193 basis point decrease in the average
yield earned on federal funds sold from 5.14% for the nine months ended March
31, 2007 to 3.21% for the nine months ended March 31, 2008.  The
decrease in the average yield on federal funds sold was primarily attributable
to declines in the federal funds rate during the comparable periods as a result
of actions taken by the Federal Reserve in lowering the federal funds
rate.





Interest Expense. Interest
expense increased $2.4 million, or 14.7% to $19.4 million for the nine months
ended March 31, 2008 compared to $17.0 million for the nine months ended March
31, 2007. The increase was primarily attributable to an increase in the average
balance of deposits and FHLB advances, combined with higher interest rate
levels. The average balance of interest-bearing liabilities increased $54.0
million or 8.6% to $681.0 million for the nine months ended March 31, 2008 from
$627.0 million for the nine months ended March 31, 2007.  Interest
expense was also negatively impacted by a 21 basis point increase in the average
interest rate paid on interest-bearing liabilities to 3.81% for the nine months
ended March 31, 2008 from 3.60% for the nine months ended March 31,
2007.








12





Provision for Loan Losses. Our
provision for loan losses was $551,000 for the nine months ended March 31, 2008
compared to $419,000 for the nine months ended March 31, 2007. The allowance for
loan losses as a percent of total loans was 0.42% at March 31, 2008 as compared
to 0.44% at March 31, 2007. The increase in provision for loan losses was
primarily attributable to an increase in multifamily and commercial real estate
lending, which generally has a higher risk than traditional one-to four-family
real estate lending.  Our gross loan portfolio increased $59.5
million, or 8.8% to $732.8 million at March 31, 2008 from $673.3 million at
March 31, 2007.  The assumptions are based both on current industry
and economic trends in addition to our internal loan loss history.  We
used the same methodology and generally similar assumptions in assessing the
adequacy of the allowance for consumer and real estate loans for both
periods.





Noninterest Income.Our
noninterest income decreased $33,000, or 1.0% to $3.21 million for the nine
months ended March 31, 2008 compared to $3.18 million for the nine months ended
March 31, 2007. The increase was primarily the result of stock redemption
proceeds related to the VISA IPO, an increase in fee and transaction income
related to increased customer service charges and fees and referral commissions
offset by an increase in losses attributable to our investment in a California
Affordable Housing Program Fund.





Noninterest Expense.Our
noninterest expense increased $2.0 million, or 18.9% to $12.9 million for the
nine months ended March 31, 2008 from $10.8 million for the nine months ended
March 31, 2007. The increase was primarily due to the recognition of $1.3
million in stock offering costs, a $311,000 increase in salaries and benefits, a
$157,000 increased in occupancy and equipment, a $73,000 increase in
professional services and a $217,000 increase in other operating
expense.





Total
salaries and benefit expense increased $311,000, or 5.4% to $6.1 million for the
nine months ended March 31, 2008 from $5.7 million for the nine months ended
March 31, 2007. The increase was primarily due to annual salary increases and an
increase in the number of full-time equivalent employees.





Occupancy
and equipment expense increased $157,000, or 10.2% to $1.7 million for the nine
months ended March 31, 2008 from $1.5 million for the nine months ended March
31, 2007. The increase was primarily due to a general increase in operating
lease rents and additional data processing costs.





Professional
service expense increased $73,000, or 11.5% to $709,000 for the nine months
ended March 31, 2008 from $636,000 for the nine months ended March 31, 2007. The
increase in professional services was primarily due to increased legal costs
stemming from the bankruptcy of U.S. Mortgage as discussed in Part II Item 1 —
Legal Proceedings.





Other
operating expense increased $217,000, or 19.3% to $1.3 million for the nine
months ended March 31, 2008 from $1.1 million for the nine months ended March
31, 2007. The increase was primarily attributable to the Federal Deposit
Insurance Corporation imposing additional deposit insurance assessments
effective January 1, 2007.





Income Tax Expense. Income tax
expense decreased $410,000, or 22.0% to $1.5 million for the nine months ended
March 31, 2008 compared to $1.9 million for the nine months ended March 31,
2007. This decrease was primarily the result of lower pre-tax income of $4.2
million for the nine months ended March 31, 2008 compared to $5.4 million for
the nine months ended March 31, 2007. The effective tax rate was 34.8% and 34.3%
for the nine months ended March 31, 2008 and 2007, respectively.








Asset
Quality





The asset
quality of the Bank has remained strong and consistent over the past quarter.
This has been accomplished by the strict adherence to its long standing
disciplined credit culture that emphasizes the consistent application of
underwriting standards to all loans. In this regard, the Bank fully underwrite
all loans based on an applicant’s employment history, credit history and an
appraised value of the subject property. With respect to purchased loans, the
Bank underwrites each loan based upon our own underwriting standards prior to
making the purchase.


13


The
following underwriting guidelines have been used by the Bank as underwriting
tools to further limit the Bank’s potential loss exposure:





1.
            All
      variable rate loans are underwritten using the fully indexed
      rate.


2.
            All
      interest-only loans are underwritten using the fully amortized
      payment.


3.
            We
      only lend up to 80% of the lesser of the appraised value or purchase price
      for one- to four-family residential loans. Should we grant a loan with a
      loan-to-value ratio in excess of 80%, we require private mortgage
      insurance in order to reduce our exposure below
  80%.





Additionally,
the Bank’s portfolio has remained strongly anchored in traditional mortgage
products. In this regard, we do not originate, purchase or hold in portfolio
teaser option-ARM loans, negatively amortizing loans or high LTV
loans.





Delinquent
Loans.The
following table sets forth certain information with respect to our loan
portfolio delinquencies at the dates indicated.




Loans
      Delinquent :60-89
      Days
            
            90
      Days or More
            
            Total
      Delinquent LoansNumber
      of Loans
            
            Amount
            
            Number
      of Loans
            
            Amount
            
            Number
      of Loans
            
            Amount(Dollars
      in thousands)At March 31, 2008Real
      estate loans:One-
      to four-family
            
            
            2
            
            $
            856
            
            
            3
            
            $
            1,439
            
            
            5
            
            $
            2,295Commercial
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Multi-family
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Other
      loans:Automobile
            
            
            11
            
            
            136
            
            
            2
            
            
            44
            
            
            13
            
            
            180Home
      equity
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Other
            
            
            15
            
            
            29
            
            
            10
            
            
            18
            
            
            25
            
            
            47Total
      loans
            
            
            28
            
            $
            1,021
            
            
            15
            
            $
            1,501
            
            
            43
            
            $
            2,522At June 30, 2007Real
      estate loans:One-
      to four-family
            
            
            —
            
            $
            —
            
            
            2
            
            $
            1,115
            
            
            2
            
            $
            1,115Commercial
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Multi-family
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Other
      loans:Automobile
            
            
            7
            
            
            111
            
            
            2
            
            
            19
            
            
            9
            
            
            130Home
      equity
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Other
            
            
            5
            
            
            8
            
            
            4
            
            
            7
            
            
            9
            
            
            15Total
      loans
            
            
            12
            
            $
            119
            
            
            8
            
            $
            1,141
            
            
            20
            
            $
            1,260At June 30, 2006Real
      estate loans:One-
      to four-family
            
            
            2
            
            $
            383
            
            
            —
            
            $
            —
            
            
            2
            
            $
            383Commercial
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Multi-family
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Other
      loans:Automobile
            
            
            8
            
            
            108
            
            
            7
            
            
            57
            
            
            15
            
            
            165Home
      equity
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Other
            
            
            3
            
            
            3
            
            
            6
            
            
            10
            
            
            9
            
            
            13Total
      loans
            
            
            13
            
            $
            494
            
            
            13
            
            $
            67
            
            
            26
            
            $
            561





14


Non-Performing
Assets.The following table sets forth the amounts and categories of
non-performing assets in our loan portfolio. Non-performing assets consist of
non-accrual loans and foreclosed assets. Loans to a customer whose financial
condition has deteriorated are considered for non-accrual status whether or not
the loan is 90 days and over past due. All loans past due 90 days and over are
classified as non-accrual. On non-accrual loans, interest income is not
recognized until actually collected. At the time the loan is placed on
non-accrual status, interest previously accrued but not collected is reversed
and charged against current income.  Interest is not accrued on loans
greater than 90 days or more delinquent. At each date presented, we had no
troubled debt restructurings (loans for which a portion of interest or principal
has been forgiven and loans modified at interest rates materially less than
current market rates).


Foreclosed
assets consist of real estate and other assets which have been acquired through
foreclosure on loans. At the time of foreclosure, assets are recorded at the
lower of their estimated fair value less selling costs or the loan balance, with
any write-down charged against the allowance for loan losses.




At
      March 31,
            
            At
      June 30,
            
            At
      June 30,2008
            
            2007
            
            2006(Dollars
      in thousands)Non-accrual loans:Real estate loans:One-
      to four-family
            
            $
            1,439
            
            $
            1,115
            
            $
            —Commercial
            
            
            —
            
            
            —
            
            
            —Multi-family
            
            
            —
            
            
            —
            
            
            —Other loans:Automobile
            
            
            44
            
            
            19
            
            
            57Home
      Equity
            
            
            —
            
            
            —
            
            
            —Other
            
            
            18
            
            
            7
            
            
            10Total
            
            
            1,501
            
            
            1,141
            
            
            67Real estate owned and Repossessed
      assets:Real estate loans:One-
      to four-family
            
            
            —
            
            
            238
            
            
            —Commercial
            
            
            —
            
            
            —
            
            
            —Multi-family
            
            
            —
            
            
            —
            
            
            —Other loans:Automobile
            
            
            89
            
            
            74
            
            
            69Home
      equity
            
            
            —
            
            
            —
            
            
            —Other
            
            
            —
            
            
            —
            
            
            —Total
            
            
            89
            
            
            312
            
            
            69Total
      non-performing assets
            
            $
            1,590
            
            $
            1,453
            
            $
            136Non-performing
      loans to total loans (1)
            
            
            0.20
            %
            
            0.16
            %
            
            0.01
            %Non-performing
      assets to total assets
            
            
            0.18
            %
            
            0.18
            %
            
            0.02
            %(1)
      Total loans are net of deferred fees and costs





15


Liquidity
and Commitments





Liquidity
may increase or decrease depending upon the availability of funds and
comparative yields on investments in relation to the return on loans.
Historically, we have maintained liquid assets at levels above the minimum
requirements imposed by Office of Thrift Supervision regulations and above
levels believed to be adequate to meet the requirements of normal operations,
including potential deposit outflows. Cash flow projections are regularly
reviewed and updated to assure that adequate liquidity is maintained. See
“Consolidated Statements of Cash Flows” contained in the unaudited Consolidated
Financial Statements included in this document.





Our
liquidity, represented by cash and cash equivalents and mortgage-backed and
related securities, is a product of operating, investing and financing
activities. Our primary sources of funds are deposits; amortization, prepayments
and maturities of outstanding loans and mortgage-backed and related securities,
and other short-term investments; and funds provided from operations. While
scheduled payments from the amortization of loans and mortgage-backed related
securities and maturing investment securities and short-term investments are
relatively predictable sources of funds, deposit flows and loan prepayments are
greatly influenced by general interest rates, economic conditions, and
competition. In addition, we invest excess funds in short-term interest-earning
assets, which provide liquidity to meet lending requirements. We also generate
cash through borrowings. We utilize Federal Home Loan Bank advances to leverage
our capital base and provide funds for our lending and investment activities and
enhance our interest rate risk management.





Liquidity
management is both a daily and long-term function of business management. Excess
liquidity is generally invested in short-term investments such as overnight
deposits. On a longer-term basis, we maintain a strategy of investing in various
lending products. We use our sources of funds primarily to meet ongoing
commitments, to pay maturing time deposits and savings withdrawals, to fund loan
commitments and to maintain our portfolio of mortgage-backed and related
securities. At March 31, 2008, the total approved loan commitments unfunded
amounted to $8.3 million, which includes the unadvanced portion of loans of $5.5
million.





During
the nine months ended March 31, 2008, the Bank pledged certain investment
securities and mortgage loans to obtain $25.0 million in deposits with the State
of California through the state’s time deposit program.  Time deposits
and advances from the Federal Home Loan Bank of San Francisco scheduled to
mature in one year or less at March 31, 2008, totaled $93.0 million and $38.0
million, respectively. Based on historical experience, management believes that
a significant portion of maturing deposits will remain with Kaiser Federal Bank.
We anticipate that we will continue to have sufficient funds, through deposits
and borrowings, to meet our current commitments.





At March
31, 2008, we had available additional advances from the Federal Home Loan Bank
of San Francisco in the amount of $83.0 million.  Kaiser Federal
Bank’s credit limit with the Federal Home Loan Bank is limited to 40% of the
Bank’s total assets.








Capital





The table
below sets forth Kaiser Federal Bank’s capital position relative to its Office
of Thrift Supervision capital requirements at March 31, 2008. The definitions of
the terms used in the table are those provided in the capital regulations issued
by the Office of Thrift Supervision.


Actual
            
            Minimum
      Capital Requirements
            
            Minimum
      required to be Well Capitalized Under Prompt Corrective Actions
      ProvisionsAmount
            
            Ratio
            
            Amount
            
            Ratio
            
            Amount
            
            Ratio(Dollars
      in thousands)Total
      risk-based capital (to risk-weighted assets)
            
            $72,163
            
            12.93
            %
            $44,650
            
            8.00
            %
            $55,813
            
            10.00
            %Tier
      1 risk-based capital (to risk-weighted assets)
            
            69,155
            
            12.39
            
            22,325
            
            4.00
            
            33,488
            
            6.00Tier
      1 (core) capital (to adjusted tangible assets)
            
            69,155
            
            8.14
            
            33,975
            
            4.00
            
            42,469
            
            5.00





Consistent
with our goal to operate a sound and profitable financial organization, we
actively seek to maintain a “well capitalized” institution in accordance with
regulatory standards.  At March 31, 2008, Kaiser Federal Bank was a
“well-capitalized” institution under regulatory standards.


16





Impact
of Inflation





The
consolidated financial statements presented herein have been prepared in
accordance with GAAP. These principles require the measurement of financial
position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation.





Our
primary assets and liabilities are monetary in nature. As a result, interest
rates have a more significant impact on our performance than the effects of
general levels of inflation. Interest rates, however, do not necessarily move in
the same direction or with the same magnitude as the price of goods and
services, since such prices are affected by inflation. In a period of rapidly
rising interest rates, the liquidity and maturity structure of our assets and
liabilities are critical to the maintenance of acceptable performance
levels.





The
principal effect of inflation, as distinct from levels of interest rates, on
earnings is in the area of noninterest expense. Such expense items as employee
compensation, employee benefits and occupancy and equipment costs may be subject
to increases as a result of inflation. An additional effect of inflation is the
possible increase in the dollar value of the collateral securing loans that we
have made. We are unable to determine the extent, if any, to which properties
securing our loans have appreciated in dollar value due to
inflation.








ITEM
3. Quantitative and Qualitative Disclosures About Market Risk





Our Risk When Interest Rates Change.The rates of interest we earn on assets and pay on liabilities generally
are established contractually for a period of time. Market interest rates change
over time. Our loans generally have longer maturities than our deposits.
Accordingly, our results of operations, like those of other financial
institutions, are impacted by changes in interest rates and the interest rate
sensitivity of our assets and liabilities. The risk associated with changes in
interest rates and our ability to adapt to these changes is known as interest
rate risk and is our most significant market risk.





How We Measure Our Risk of Interest
Rate Changes.As part of our attempt to manage our exposure to changes in
interest rates and comply with applicable regulations, we monitor our interest
rate risk. In monitoring interest rate risk we continually analyze and manage
assets and liabilities based on their payment streams and interest rates, the
timing of their maturities, and their sensitivity to actual or potential changes
in market interest rates.





In order
to minimize the potential for adverse effects of material and prolonged
increases in interest rates on our results of operations, we have adopted
investment/asset and liability management policies to better match the
maturities and repricing terms of our interest-earning assets and
interest-bearing liabilities. The board of directors sets and recommends the
asset and liability policies of Kaiser Federal Bank, which are implemented by
the asset/liability management committee.





The
purpose of the asset/liability management committee is to communicate,
coordinate and control asset/liability management consistent with our business
plan and board approved policies. The committee establishes and monitors the
volume and mix of assets and funding sources taking into account relative costs
and spreads, interest rate sensitivity and liquidity needs. The objectives are
to manage assets and funding sources to produce results that are consistent with
liquidity, capital adequacy, growth, risk and profitability goals.





The
asset/liability management committee generally meets on a weekly basis to
review, among other things, economic conditions and interest rate outlook,
current and projected liquidity needs and capital position, anticipated changes
in the volume and mix of assets and liabilities and interest rate risk exposure
limits versus current projections pursuant to net present value of portfolio
equity analysis and income simulations. The asset/liability management committee
regularly reviews interest rate risk by forecasting the impact of alternative
interest rate environments on net interest income and market value of portfolio
equity, which is defined as the net present value of an institution’s existing
assets, liabilities and off-balance sheet instruments, and evaluating such
impacts against the maximum potential changes in net interest income and market
value of portfolio equity that are authorized by the board of directors of
Kaiser Federal Bank. The asset/liability management committee recommends
appropriate strategy changes based on this review. The chairman or his designee
is responsible for reviewing and reporting on the effects of the policy
implementations and strategies to the board of directors at least
quarterly.





17


In order
to manage our assets and liabilities and achieve the desired liquidity, credit
quality, interest rate risk, profitability and capital targets, we have focused
our strategies on: (1) originating and purchasing adjustable rate loans; (2)
originating a reasonable volume of short- and intermediate-term consumer loans;
(3) managing our deposits to establish stable deposit relationships; and (4)
using Federal Home Loan Bank advances, and pricing on fixed-term non-core
deposits to align maturities and repricing terms.





At times,
depending on the level of general interest rates, the relationship between long-
and short-term interest rates, market conditions and competitive factors, the
asset/liability management committee may determine to increase our interest rate
risk position somewhat in order to maintain our net interest margin. In the
future, we intend to continue our existing strategy of originating and
purchasing relatively short-term and/or adjustable rate loans. The Bank does not
maintain any securities for trading purposes. The Bank does not currently engage
in trading activities or use instruments such as interest rate swaps, hedges, or
other similar derivatives to control interest rate risk.





The
Office of Thrift Supervision provides Kaiser Federal Bank with the information
presented in the following table, which is based on information provided to the
Office of Thrift Supervision by Kaiser Federal Bank. It presents the change in
Kaiser Federal Bank’s net portfolio value at December 31, 2007 which is the
latest information available that would occur upon an immediate change in
interest rates based on Office of Thrift Supervision assumptions but without
giving effect to any steps that management might take to counteract that
change.





December
      31, 2007Change
      in interest rates in basis points (“bp”)
              (Rate
      shock in rates)Net
      portfolio value (NPV)
            
            
            
            NPV
      as % of PV of assets$
      amount
            
            
            
            $
      change
            
            
            
            %
      change
            
            
            
            NPV
      ratio
            
            
            
            Change(bp)(Dollars
      in thousands)+300
      bp
            
            $
            53,672
            
            
            
            $
            (28,891
            )
            
            
            (35
            )%
            
            
            6.85
            %
            
            
            (302
            )bp+200
      bp
            
            
            65,058
            
            
            
            
            (17,505
            )
            
            
            (21
            )
            
            
            8.10
            
            
            
            (177
            )+100
      bp
            
            
            74,949
            
            
            
            
            (7,614
            )
            
            
            (9
            )
            
            
            9.13
            
            
            
            (74
            )0
      bp
            
            
            82,563
            
            
            
            
            —
            
            
            
            —
            
            
            
            9.87
            
            
            
            —-100
      bp
            
            
            84,139
            
            
            
            
            1,576
            
            
            
            2
            
            
            
            9.94
            
            
            
            7-200
      bp
            
            
            82,171
            
            
            
            
            (392)
            
            
            
            0
            
            
            
            9.63
            
            
            
            (24)





The
Office of Thrift Supervision uses certain assumptions in assessing the interest
rate risk of savings associations. These assumptions relate to interest rates,
loan prepayment rates, deposit decay rates, and the market values of certain
assets under differing interest rate scenarios.





As with
any method of measuring interest rate risk, shortcomings are inherent in the
method of analysis presented in the foregoing tables. For example, although
assets and liabilities may have similar maturities or periods to repricing, they
may react in different degrees to changes in the market interest rates. Also,
the interest rates on certain types of assets and liabilities may fluctuate in
advance of changes in market interest rates, while interest rates on other types
may lag behind changes in market rates. Additionally, certain assets, such as
adjustable rate mortgage loans, have features, that restrict changes in interest
rates on a short-term basis and over the life of the asset. Further, if interest
rates change, expected rates of prepayments on loans and early withdrawals from
certificates of deposit could deviate significantly from those assumed in
calculating the table.








ITEM
4. Controls and Procedures





Our
management evaluated, with the participation of our Chief Executive Officer and
Chief Financial Officer, the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the “Act”)) as of the end of the period covered by this
report. The Company’s Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures as of the end of
the period covered by this report are effective in ensuring that the information
required to be disclosed by the Company in the reports it files or submits under
the Act is (i) accumulated and communicated to the Company’s management
(including the Chief Executive Officer and Chief Financial Officer) in a timely
manner, and (ii) recorded, processed, summarized, and reported within the time
periods specified in the SEC’s rules and forms.








18







There
have been no changes in our internal control over financial reporting (as
defined in Rule 13a-15(f) under the Act) that occurred during the quarter ended
March 31, 2008 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.


19


PART
II. OTHER INFORMATION





Item 1. Legal Proceedings





In March
2007, U.S. Mortgage converted its Chapter 11 bankruptcy proceeding to a Chapter
7 in the District Court of Nevada. U.S. Mortgage was responsible for servicing
various commercial real estate participation loans totaling approximately $1.0
million that Kaiser Federal Bank purchased from the company. Through this
transition period, all servicing functions of U.S. Mortgage are being handled by
the Bankruptcy Trustee.





During
the course of these proceedings, U.S. Bank has asserted a claim against $500,000
in loan principal being serviced by U.S. Mortgage on the basis that U.S. Bank
has a priority right to the funds. Kaiser Federal Bank is vigorously contesting
this claim and believes it has the priority ownership interest in these
loans.





Item 1A. Risk
Factors





There
have been no material changes to the risk factors that were previously disclosed
in the Company’s annual report on Form 10-K for the fiscal year ended June 30,
2007.





Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds





Issuer
Purchases of Equity Securities


Period
            
            Total
      Number of Shares Purchased
            
            Weighted
      Average Price Paid Per Share
            
            Total
      Number of Shares Purchased as Part of Publicly Announced Plans*
            
            Maximum
      Number of Shares That May Yet be Purchased Under the Plan1/1/08  –
      1/31/08
            
            —
            
            $
            —
            
            —
            
            —2/1/08
      – 2/29/08
            
            71,886
            
            
            10.93
            
            71,886
            
            436,9023/1/08
      – 3/31/08
            
            47,300
            
            
            10.50
            
            119,186
            
            389,602





* On
January 26, 2008, the Company announced its intention to repurchase an
additional 10% of its outstanding publicly held common stock, or 508,788 shares
of stock.





Item 3. Defaults Upon Senior
Securities





None.





Item 4. Submission of Matters to a Vote of
Security Holders





None.





Item
5. Other Information





None.





Item 6. Exhibits





31.1           Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act


31.1           Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act


32.1           Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act


32.2           Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act





20





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.








K-Fed
Bancorp


Registrant











Date:
May 7,
2008


/s/ Kay M.
Hoveland


Kay M. Hoveland


President, Chief Executive
Officer





/s/ Dustin
Luton


Dustin Luton


Chief Financial Officer





21





EXHIBIT
31.1





Certification
of the Chief Executive Officer


Pursuant
to Section 302 of the Sarbanes-Oxley Act








I, Kay M.
Hoveland, certify that:





1.
            I
      have reviewed this Quarterly Report on Form 10-Q of K-Fed
      Bancorp;





2.
            Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;





3.
            Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      registrant as of, and for, the periods presented in this
      report;





4.
            The
      registrant’s other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and 15d-15(e)) and
      internal control over financial reporting (as defined in Exchange Act
      Rules 13a-15(f) and 15d-15(f)) for the registrant and
  have:





(a)
            Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;





(b)
            Designed
      such internal control over financial reporting, or cause such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;





(c)
            Evaluated
      the effectiveness of the registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and





(d)
            Disclosed
      in this report any changes in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
      annual report) that has materially affected, or is reasonably likely to
      materially effect, the registrant’s internal control over financial
      reporting; and








5.
            The
      registrant’s other certifying officer(s) and I have disclosed, based on
      our most recent evaluation of internal control over financial reporting,
      to the registrant’s auditors and the audit committee of the registrant’s
      board of directors (or persons performing the equivalent
      functions):





(a)
            All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant’s ability to record,
      process, summarize and report financial information;
  and





(b)
            Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant’s internal control
      over financial reporting.











Date:  May 7,
2008                                                                                               /s/ Kay M.
Hoveland


Kay M. Hoveland


President and Chief Executive
Officer


























EXHIBIT
31.2





Certification
of the Chief Financial Officer


Pursuant
to Section 302 of the Sarbanes-Oxley Act








I, Dustin
Luton, certify that:





1.
            I
      have reviewed this Quarterly Report on Form 10-Q of K-Fed
      Bancorp;





2.
            Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;





3.
            Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      registrant as of, and for, the periods presented in this
      report;





4.
            The
      registrant’s other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and 15d-15(e)) and
      internal control over financial reporting (as defined in Exchange Act
      Rules 13a-15(f) and 15d-15(f)) for the registrant and
  have:





(a)
            Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;





(b)
            Designed
      such internal control over financial reporting, or cause such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;





(c)
            Evaluated
      the effectiveness of the registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and





(d)
            Disclosed
      in this report any changes in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
      annual report) that has materially affected, or is reasonably likely to
      materially effect, the registrant’s internal control over financial
      reporting; and





5.
            The
      registrant’s other certifying officer(s) and I have disclosed, based on
      our most recent evaluation of internal control over financial reporting,
      to the registrant’s auditors and the audit committee of the registrant’s
      board of directors (or persons performing the equivalent
      functions):





(a)
            All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant’s ability to record,
      process, summarize and report financial information;
  and





(b)
            Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant’s internal control
      over financial reporting.











Date:  May 7,
2008                                                                                                /s/ Dustin
Luton


Dustin Luton


Chief Financial
Officer








EXHIBIT
32.1





Certification
of the Chief Executive Officer


Pursuant
to 18 U.S.C. Section 1350,


as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





In
connection with the Quarterly Report of K-Fed Bancorp (the “Company”) on Form
10-Q for the period ended March 31, 2008 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Kay M. Hoveland, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in
connection with this quarterly report on Form 10-Q that:





1.
            The
      Report fully complies with the requirements of sections 13(a) or 15(d) of
      the Securities Exchange Act of 1934, as amended,
  and





2.
            The
      information contained in the report fairly presents, in all material
      respects, the company’s financial condition and results of
      operations.








Date:
May 7,
2008                                                  
                                      /s/ Kay M.
Hoveland


Kay M. Hoveland


Chief Executive Officer


























EXHIBIT
32.2





Certification
of the Chief Financial Officer


Pursuant
to 18 U.S.C. Section 1350,


as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





In
connection with the Quarterly Report of K-Fed Bancorp (the “Company”) on Form
10-Q for the period ended March 31, 2008 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Dustin Luton, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in
connection with this quarterly report on Form 10-Q that:





1.
            The
      Report fully complies with the requirements of sections 13(a) or 15(d) of
      the Securities Exchange Act of 1934, as amended,
  and





2.
            The
      information contained in the report fairly presents, in all material
      respects, the company’s financial condition and results of
      operations.











Date:
May 7,
2008                                                                                         /s/ Dustin
Luton


Dustin Luton


Chief Financial
Officer