K-Fed Bancorp (KFED)

Market Area

          Our California market area provides a large, increasing base of potential customers with per capita income levels favorable to the national average. Los Angeles County is one of the largest counties, by area, in the United States and has the largest population of any county in the United States and is exceeded in population by only by eight states. Historically, Los Angeles County’s economy was tied to the aerospace, entertainment and tourism industries. In the early 1990s, the area suffered recessionary conditions due to the downsizing of the United States military and the economic downturn affecting the national economy. Los Angeles County’s economy has improved dramatically since the mid-1990s as a result of extensive overhauling and restructuring of the region’s basic economic sectors from one formerly dominated by the aerospace, tourism and entertainment industries to a more diversified mix of high-technology commercial endeavors and by-products of the defense related industries, which capitalized on the highly educated and skilled labor force. The largest employers consist of the County of Los Angeles, the Los Angeles United School District and the City of Los Angeles. Emerging growth areas include telecommunications, electronics, computers, software and biomedical technologies as well as international trade.

          The Counties of Riverside and San Bernadino are commonly referred to as the “Inland Empire.” While the Inland Empire covers a vast geographic area extending to the Nevada border, Kaiser Federal Bank’s operations are concentrated in the western portion of these counties. This area was also affected by the economic downtown of the early 1990s, but has since recovered. Many firms have moved from the congested and high priced regions of Los Angeles, Orange and San Diego Counties to the Inland Empire, a trend that is expected to continue. The Pacific portion of San Bernardino and Riverside Counties are adjacent to higher housing cost areas of Los Angeles, Orange and San Diego Counties and are a magnet for new residents seeking affordable housing. Manufacturing, transportation and distribution companies provide thousands of jobs in this area.

          Santa Clara County is home to a number of leading technology and telecommunication companies and is located in the “Silicon Valley” where the per capita income well exceeds the state and national averages.

          The sales of new and existing one- to four-family homes in Southern California is at a 15-year low. A decrease in home sales decreases lending opportunities and may negatively affect our income since a substantial portion of our loan portfolio consists of one- to four-family residential loans. In addition, default rates statewide in California on one- to four-family loans in the second quarter of 2007 were also at the highest levels in a decade. Despite these trends, real estate values have remained relatively stable through the second calendar quarter of 2007.

Market Area

Our expansive market area provides a large, increasing base of potential customers with per capita income levels favorable to the national average. Los Angeles County’s economy has improved dramatically since the mid 1990’s as a result of extensive overhauling and restructuring of the region’s basic economic sectors. This base consists of a diversified mix of high-technology commercial endeavors, by-products of the defense related industries, which capitalized on the highly educated and skilled labor force. Emerging growth areas include telecommunications, electronics, computers, software and biomedical technologies as well as international trade. The western portion of San Bernardino and Riverside Counties are adjacent to higher housing cost areas of Los Angeles, Orange and San Diego Counties and are a magnet for new residents seeking affordable housing as well as many local business operations. Manufacturing, transportation and distribution companies provide thousands of jobs in this area. Santa Clara County is in the “Silicon Valley” where high technology industries have down sized. However, the per capita income well exceeds the state and national average.

3