t68144_s1.htm

PROSPECTUS

KAISER FEDERAL FINANCIAL GROUP, INC.

(Proposed Holding Company for Kaiser Federal Bank)

Up to 9,200,000 Shares of Common Stock

(Subject to increase to up to 10,580,000 shares)

Kaiser Federal Financial Group, Inc., a Maryland corporation, is offering shares of common stock for sale at $10.00 per share in connection with the conversion of K-Fed Mutual Holding Company from the mutual to the stock form of organization. The shares of common stock we are offering represent the 66.7% ownership interest in K-Fed Bancorp currently owned by K-Fed Mutual Holding Company. K-Fed Bancorp’s common stock is currently traded on the Nasdaq Global Market under the trading symbol “KFED.” We expect that Kaiser Federal Financial Group, Inc.’s shares of common stock will also trade on the Nasdaq Global Market under the trading symbol “KFFG.”

We are offering the shares of common stock to eligible depositors of Kaiser Federal Bank in a “subscription offering.” Depositors of Kaiser Federal Bank with aggregate account balances of at least $50 as of the close of business on March 31, 2009 will have first priority rights to buy our shares of common stock. Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering.” We also may offer for sale shares of common stock not purchased in the subscription offering or the community offering through a “syndicated community offering” managed by Keefe, Bruyette & Woods, Inc.

We are offering up to 9,200,000 shares of common stock for sale on a best efforts basis. We may sell up to 10,580,000 shares of common stock because of demand for the shares of common stock or changes in market conditions, without resoliciting purchasers. In addition to the shares we are selling in the offering, we also will simultaneously issue up to 4,598,650 shares of common stock to existing public stockholders of K-Fed Bancorp in exchange for their existing shares. The number of shares to be issued in the exchange may be increased to up to 5,288,448 shares of common stock, if we sell 10,580,000 shares of common stock in the offering. We must sell a minimum of 6,800,000 shares in the offering and issue 3,399,002 shares in the exchange in order to complete the offering and the exchange of existing shares of common stock. Completion of the conversion and offering is subject to the approval of the Office of Thrift Supervision, the stockholders of K-Fed Bancorp and the members (depositors of Kaiser Federal Bank) of K-Fed Mutual Holding Company.

The minimum order is 25 shares. The offering will expire at 2:00 p.m., Pacific Time, on [expiration date]. We may extend this expiration date without notice to you until [Extension date #1]. Once submitted, orders are irrevocable unless the offering is terminated or is extended, with Office of Thrift Supervision approval, beyond [Extension date #1], or the number of shares of common stock to be sold is increased to more than 10,580,000 shares or decreased to less than 6,800,000 shares. If the offering is extended past [Extension date #1], or if the number of shares to be sold is increased to more than 10,580,000 shares or decreased to less than 6,800,000 shares, we will resolicit subscribers, and you will have the opportunity to maintain, change or cancel your order. If you do not provide us with a written indication of your intent, your funds will be promptly returned to you, with interest. Funds received in the subscription and the community offering prior to the completion of the offering will be held in a segregated account at Kaiser Federal Bank and will earn interest at 0.25%.

Keefe, Bruyette & Woods, Inc. will assist us in selling our shares of common stock on a best efforts basis in the subscription and community offerings. Keefe, Bruyette & Woods, Inc. is not required to purchase any shares of common stock that are being offered for sale.

OFFERING SUMMARY

Price: $10.00 per Share

	Minimum		Midpoint		Maximum		Adjusted Maximum
Number of shares		6,800,000		8,000,000		9,200,000		10,580,000
Gross offering proceeds	$	68,000,000	$	80,000,000	$	92,000,000	$	105,800,000
Estimated offering expenses, excluding selling agent commissions and expenses	$	1,450,000	$	1,450,000	$	1,450,000	$	1,450,000
Selling agent commissions and expenses (1)	$	2,123,990	$	3,060,790	$	3,497,590	$	3,999,910
Estimated net proceeds	$	63,926,010	$	75,489,210	$	87,052,410	$	100,350,090
Estimated net proceeds per share	$	9.40	$	9.44	$	9.46	$	9.48

(1)

The amounts shown assume that 40.0% of the shares are sold in the subscription and community offerings and the remaining 60.0% are sold in a syndicated community offering. The amounts shown include: (i) selling commissions payable by us to Keefe, Bruyette & Woods, Inc. in connection with the subscription offering equal to 1.0% of the aggregate dollar amount of common stock sold in the subscription offering and community offering (net of insider purchases and shares purchased by our employee stock ownership plan), or approximately $358,510, at the adjusted maximum of the offering range; (ii) fees and selling commissions payable by us to Keefe, Bruyette & Woods, Inc. and any other broker-dealers participating in the syndicated offering equal to 5.5% of the aggregate dollar amount of common stock sold in the syndicated community offering, or approximately $3,641,400 at the adjusted maximum of the offering; and (iii) other expenses of the offering payable to Keefe, Bruyette & Woods, Inc. as selling agent estimated to be $80,000, which is included in the fixed offering expenses. See “Pro Forma Data” and “The Conversion and Offering—Plan of Distribution; Selling Agent Compensation” for information regarding compensation to be received by Keefe, Bruyette & Woods, Inc. and the other broker-dealers that may participate in the syndicated community offering, including the assumptions regarding the number of shares that may be sold in the subscription and community offerings and the syndicated community offering used to determine the estimated offering expenses. If all shares of common stock are sold in the syndicated community offering, the maximum selling agent commissions and expenses would be $4.0 million, $4.6 million, $5.3 million and $6.0 million at the minimum, midpoint, maximum, and adjusted maximum levels of the offering, respectively.

This investment involves a degree of risk, including the possible loss of principal.

Please read “Risk Factors” beginning on page 20.

These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Neither the Securities and Exchange Commission, the Office of Thrift Supervision, nor any state securities regulator has approved or disapproved of these securities or determined if this Prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

Keefe, Bruyette & Woods

For assistance, please contact the Stock Information Center, toll-free, at [Stock Information Number].

The date of this prospectus is [Prospectus Date].

[MAP TO BE INSERTED ON INSIDE FRONT COVER]

TABLE OF CONTENTS


		Page

SUMMARY		1
RISK FACTORS		20
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF K-FED BANCORP AND SUBSIDIARY		35
FORWARD-LOOKING STATEMENTS		37
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING		39
OUR DIVIDEND POLICY		41
MARKET FOR THE COMMON STOCK		42
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE		44
CAPITALIZATION		45
PRO FORMA DATA		47
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		54
BUSINESS OF KAISER FEDERAL FINANCIAL GROUP, INC.		75
BUSINESS OF K-FED BANCORP AND KAISER FEDERAL BANK		75
SUPERVISION AND REGULATION		106
TAXATION		115
MANAGEMENT		117
BENEFICIAL OWNERSHIP OF COMMON STOCK		136
SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS		138
THE CONVERSION AND OFFERING		139
COMPARISON OF STOCKHOLDERS’ RIGHTS FOR EXISTING STOCKHOLDERS OF K-FED BANCORP		166
RESTRICTIONS ON ACQUISITION OF KAISER FEDERAL FINANCIAL GROUP, INC.		173
DESCRIPTION OF CAPITAL STOCK OF KAISER FEDERAL FINANCIAL GROUP, INC. FOLLOWING THE CONVERSION		178
TRANSFER AGENT		179
EXPERTS		179
LEGAL MATTERS		179
WHERE YOU CAN FIND ADDITIONAL INFORMATION		180
K-FED BANCORP INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

SUMMARY

The following summary explains the significant aspects of the conversion, the offering and the exchange of existing shares of K-Fed Bancorp common stock for shares of Kaiser Federal Financial Group, Inc. common stock. It may not contain all of the information that is important to you. Before making an investment decision, you should read this entire document carefully, including the consolidated financial statements and the notes to the consolidated financial statements, and the section entitled “Risk Factors.”

The Companies

Kaiser Federal Financial Group, Inc.

Kaiser Federal Financial Group, Inc. is a Maryland corporation that will own all of the outstanding common stock of Kaiser Federal Bank upon completion of the conversion and the offering, and will be the successor to K-Fed Bancorp.

Kaiser Federal Financial Group, Inc.’s executive offices are located at 1359 North Grand Avenue, Covina, California 91724, and its telephone number at this address is (626) 339-9663.

K-Fed Mutual Holding Company

K-Fed Mutual Holding Company is the federally chartered mutual holding company of K-Fed Bancorp. K-Fed Mutual Holding Company’s principal business activity is the ownership of 8,861,750 shares of common stock of K-Fed Bancorp, or 66.7% of the outstanding shares as of March 31, 2010. Upon completion of the conversion and offering, K-Fed Mutual Holding Company will no longer exist.

K-Fed Mutual Holding Company’s executive offices are located at 1359 North Grand Avenue, Covina, California 91724, and its telephone number at this address is (626) 339-9663.

K-Fed Bancorp

K-Fed Bancorp is a federally chartered corporation that owns all of the outstanding common stock of Kaiser Federal Bank. At March 31, 2010, K-Fed Bancorp had consolidated assets of $893.1 million, deposits of $648.7 million and stockholders’ equity of $93.0 million. After the completion of the conversion and offering, K-Fed Bancorp will cease to exist, but will be succeeded by Kaiser Federal Financial Group, Inc., a Maryland corporation. As of March 31, 2010, K-Fed Bancorp had 13,291,325 shares of common stock outstanding. As of that date, K-Fed Mutual Holding Company owned 8,861,750 shares of common stock of K-Fed Bancorp, representing 66.7% of the outstanding shares of common stock. The remaining shares were owned by the public.

K-Fed Bancorp’s executive offices are located at 1359 North Grand Avenue, Covina, California 91724, and its telephone number at this address is (626) 339-9663.

Kaiser Federal Bank

Kaiser Federal Bank is a federally chartered savings bank headquartered in Covina, California. It was originally founded in 1953 as a credit union to serve the employees of the Kaiser Foundation Hospital in Los Angeles, California and converted to a federal mutual savings bank in 1999. Our banking facilities are generally located in close proximity to Kaiser Permanente Medical Centers in Southern California. Kaiser Federal Bank reorganized into the mutual holding company structure in 2003 and became the wholly owned subsidiary of K-Fed Bancorp. Kaiser Federal Bank conducts its business from three full-service banking offices and six financial service centers that provide the same services as a full service branch except they do not dispense or accept cash except through an on-site automated teller machine or ATM. We currently have 57 ATMs.

Kaiser Federal Bank’s principal business activity consists of attracting retail deposits from the general public and originating primarily loans secured by first mortgages on owner-occupied, one-to-four family residences and multi-family residences located in its market area and, to a lesser extent, automobile and other consumer loans. Prior to 2007, Kaiser Federal Bank purchased, using its own underwriting standards, a significant amount of first mortgages on owner-occupied, one-to-four family residences secured by properties located throughout California. Kaiser Federal Bank also originated commercial real estate loans, but made the strategic decision to cease such lending in January 2009 in light of the downturn in economic conditions. Historically, Kaiser Federal Bank has not originated, or purchased, commercial business, commercial construction or residential construction loans and has no current plans to do so.

Kaiser Federal Bank offers a variety of deposit accounts, including savings accounts, money market accounts, demand deposit accounts, individual retirement accounts and certificate of deposit accounts with varied terms ranging from 90 days to five years, and emphasizes personal and efficient service for its customers. See “Business of Kaiser Federal Bank—General.”

Kaiser Federal Bank is subject to regulation and examination by the Office of Thrift Supervision.

Kaiser Federal Bank’s executive offices are located at 1359 North Grand Avenue, Covina, California 91724, and its telephone number at this address is (626) 339-9663. Its website address is www.k-fed.com. Information on this website is not and should not be considered to be a part of this prospectus.

Business Strategy

Our goal is to promote the financial well being of our customers and the communities we serve, through the delivery of high quality financial services and prudent management. We seek to accomplish this goal by:

●

continuing our emphasis on maintaining cost efficiencies by utilizing internet banking, and maintaining easily accessible financial service centers and ATMs;

●

branch expansion through leasing new branch/financial service center facilities or by acquiring branches from other financial institutions in close proximity to Kaiser Permanente Medical Centers in Southern California and surrounding communities. We have no current understandings or agreements for the establishment of any new branch/financial service center;

●

reducing our non-performing assets by devoting additional personnel to collection efforts;

●

capitalizing on our customer relationships by expanding such relationships through internet banking and on-line bill payment services and developing new customer relationships to increase our core deposits;

●

increasing our origination of multi-family residential lending while maintaining a moderate growth of one-to-four family residential real estate loans and consumer loans; and

●

expanding our market presence through acquisitions of other financial institutions, including FDIC-assisted acquisitions, primarily in Southern California. We have no current understandings or agreements for any specific acquisition.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Business Strategy” for a more complete discussion of our business strategy.

Our Current Organizational Structure

In March 2004, K-Fed Bancorp completed a minority stock offering by selling approximately 39.09% of its shares of common stock to depositors of Kaiser Federal Bank. The majority of the outstanding shares of common stock of K-Fed Bancorp are owned by K-Fed Mutual Holding Company, which is a mutual holding company with no stockholders. K-Fed Bancorp owns 100% of the outstanding shares of common stock of Kaiser Federal Bank.

Pursuant to the terms of K-Fed Mutual Holding Company’s plan of conversion and reorganization, K-Fed Mutual Holding Company will convert from the mutual holding company to the stock holding company corporate structure. As part of the conversion, we are offering for sale in a subscription offering and possibly in a community offering and a syndicated community offering the majority ownership interest in K-Fed Bancorp that is currently held by K-Fed Mutual Holding Company. Upon the completion of the conversion and offering, K-Fed Mutual Holding Company and K-Fed Bancorp will cease to exist, and we will complete the transition of our organization from being partially owned by public stockholders to being fully owned by public stockholders. Upon completion of the conversion, public stockholders of K-Fed Bancorp will receive shares of common stock of Kaiser Federal Financial Group, Inc. in exchange for their shares of K-Fed Bancorp, excluding fractional shares which will be paid in cash.

The following diagram shows our current organizational structure, which is commonly referred to as the “two-tier” mutual holding company structure:

After the conversion and offering are completed, we will be organized as a fully public holding company, as follows:

Our Market Area

Our success depends primarily on the general economic conditions in the California counties of Los Angeles, Orange, San Bernardino, Riverside and Santa Clara, as nearly all of our loans are to customers in this market area.

Our historical focus has allowed us to capitalize on the convenience of our banking locations to provide Kaiser Permanente employees and their family members with our financial services and products and enabling them to select Kaiser Federal Bank as their primary financial institution by, for example, the direct deposit of their bi-weekly or monthly paychecks. Our three branch offices and six financial service centers are located in close proximity to Kaiser Permanente medical centers making Kaiser Federal Bank an attractive choice. Financial service centers provide all the services of a branch office but do not accept or dispense cash except through an on-site ATM. Most of our ATMs are strategically located at or near Kaiser Permanente facilities. By utilizing a “cashless” branch we are able to reduce personnel costs at the branch and improve our efficiency in the delivery of financial services. We intend to expand our deposit base by building upon our base of Kaiser Permanente employees and our presence in the communities we serve.

See “Business of Kaiser Federal Bank—Market Area” for information with respect to the markets in which we operate.

Reasons for the Conversion and Offering

Our board of directors decided at this time to convert to a fully public stock form of ownership and conduct the offering in order to increase our capital position and support future growth. Completing the conversion and offering is necessary for us to execute our business strategy. We believe that our conversion to a fully public company and the increased capital resources that will result from the sale of our shares of common stock will provide us with the flexibility to:

●

eliminate some of the uncertainties associated with proposed financial regulatory reform which may result in changes to our primary bank regulator and holding company regulator as well as changes in regulations applicable to us, including, but not limited to, capital requirements, treatment of waived dividends by the mutual holding company, payment of dividends and conversion to full stock form;

●

support internal growth through increased lending in the communities we serve;

●

improve the liquidity of our shares of common stock and implement more flexible capital management strategies;

●

lease new branch/financial service center facilities or acquire branches from other financial institutions, although we do not currently have any understandings or agreements regarding any specific branch; and

●

finance the acquisition of financial institutions, including FDIC-assisted transactions, or other financial service companies primarily in Southern California, although we do not currently have any understandings or agreements regarding any specific acquisition transaction.

Terms of the Conversion and Offering

Pursuant to K-Fed Mutual Holding Company’s plan of conversion and reorganization, our organization will convert from a partially public to a fully public holding company structure. In connection with the conversion, we are selling shares that represent the 66.7% ownership interest in K-Fed Bancorp currently held by K-Fed Mutual Holding Company.

We are offering between 6,800,000 and 9,200,000 shares of common stock to eligible depositors of Kaiser Federal Bank, to our tax-qualified employee benefit plans and, to the extent shares remain available, to residents of the California counties of Los Angeles, Orange, San Bernardino, Riverside and Santa Clara, to our existing public stockholders and to the general public in a community offering and, if necessary, a syndicated community offering. The number of shares of common stock to be sold may be increased to up to 10,580,000 shares as a result of demand for the shares of common stock in the offering or changes in market conditions. Unless the number of shares of common stock to be offered is increased to more than 10,580,000 shares or decreased to fewer than 6,800,000 shares, or the offering is extended beyond [Extension date #1], subscribers will not have the opportunity to change or cancel their stock orders once submitted. If the offering is extended past [Extension date #1], or if the number of shares to be sold is increased to more than 10,580,000 shares or decreased to less than 6,800,000 shares, subscribers will have the right to maintain, change or cancel their orders. If we do not receive a written response from a subscriber regarding any resolicitation, the subscriber’s order will be canceled and all funds received will be returned promptly with interest, and deposit account withdrawal authorizations will be canceled.

The purchase price of each share of common stock to be offered for sale in the offering is $10.00. All investors will pay the same purchase price per share. Investors will not be charged a commission to purchase shares of common stock in the offering. Keefe, Bruyette & Woods, Inc., our marketing agent in the offering, will use its best efforts to assist us in selling shares of our common stock. Keefe, Bruyette & Woods, Inc. is not obligated to purchase any shares of common stock in the offering.

As a final step in the conversion, the plan of conversion and reorganization provides that, if feasible, all shares of common stock not purchased in the subscription offering and community offering, if any, may be offered for sale to selected members of the general public in a syndicated community offering. Keefe, Bruyette & Woods, Inc. as agent of Kaiser Federal Financial Group, Inc. will seek to form a syndicate of registered broker-dealers to assist in the sale of the common stock on a best efforts basis in the syndicated community offering. We expect that the syndicated community offering will begin as soon as practicable after termination of the subscription offering and the community offering, if any. We, in our sole discretion, have the right to reject orders, in whole or in part, received in the syndicated community offering. Neither Keefe, Bruyette & Woods, Inc. nor any registered broker-dealer shall have any obligation to take or purchase any shares of common stock in the syndicated community offering.

How We Determined the Offering Range, the Exchange Ratio and the $10.00 Per Share Stock Price

The amount of common stock we are offering and the exchange ratio are based on an independent appraisal of the estimated market value of Kaiser Federal Financial Group, Inc., assuming the conversion, exchange and offering are completed. RP Financial, LC., our independent appraiser, has estimated that, as of May 7, 2010, this market value was $120.0 million. Based on Office of Thrift Supervision regulations, this market value forms the midpoint of a valuation range with a minimum of $102.0 million and a maximum of $138.0 million. Based on this valuation and the valuation range, the 66.7% ownership interest of K-Fed Mutual Holding Company in K-Fed Bancorp being sold in the offering and the $10.00 per share price, the number of shares of common stock being offered for sale by Kaiser Federal Financial Group, Inc. will range from 6,800,000 shares to 9,200,000 shares. The $10.00 per share price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions. The exchange ratio will range from 0.7673 shares at the minimum of the offering range to 1.0382 at the maximum of the offering range, and will preserve the existing percentage ownership of public stockholders of K-Fed Bancorp (excluding any new shares purchased by them in the stock offering and their receipt of cash in lieu of fractional shares). If demand for shares or market conditions warrant, the appraisal can be increased by 15%, which would result in an appraised value of $158.7 million, an offering of 10,580,000 shares of common stock and an exchange ratio of 1.1939.

The independent appraisal is based in part on K-Fed Bancorp’s financial condition and results of operations, the pro forma effect of the additional capital raised by the sale of shares of common stock in the offering, and an analysis of a peer group of ten publicly traded savings banks and thrift holding companies that RP Financial, LC. considers comparable to K-Fed Bancorp. The appraisal peer group consists of the following companies. Asset size for all companies is as of either December 31, 2009 or March 31, 2010.

Company Name	Ticker Symbol	Exchange	Headquarters	Total Assets
				(in millions)
Parkvale Financial Corp.	PVSA	Nasdaq	Monroeville, PA	$	1,896	(1)
BankFinancial Corp.	BFIN	Nasdaq	Burr Ridge, IL		1,559	(1)
United Financial Bancorp	UBNK	Nasdaq	W. Springfield, MA		1,513	(1)
Pulaski Financial Corp.	PULB	Nasdaq	St. Louis, MO		1,434	(2)
BofI Holding, Inc.	BOFI	Nasdaq	San Diego, CA		1,401	(1)
Abington Bancorp, Inc.	ABBC	Nasdaq	Jenkintown, PA		1,267	(1)
First PacTrust Bancorp	FPTB	Nasdaq	Chula Vista, CA		894	(2)
Home Federal Bancorp, Inc.	HOME	Nasdaq	Nampa, ID		852	(1)
Fidelity Bancorp, Inc.	FSBI	Nasdaq	Pittsburgh, PA		708	(1)
Hampden Bancorp, Inc.	HBNK	Nasdaq	Springfield, MA		575	(2)

(1)	As of March 31, 2010.

(2)	As of December 31, 2009.

Our board of directors carefully reviewed the information provided to it by RP Financial, LC. through the appraisal process, but did not make any determination regarding whether prior mutual-to-stock conversions had been undervalued. Instead, we engaged RP Financial, LC. to help us understand the regulatory process as it applies to the appraisal and to advise the board of directors as to how much capital we would be required to raise under the regulatory appraisal guidelines.

	Price-to-earnings multiple			Price-to-book value ratio			Price-to-tangible book value ratio
Kaiser Federal Financial Group, Inc. (on a pro forma basis, assuming completion of the conversion)
Adjusted Maximum		52.10	x		86.81	%		88.81	%
Maximum		46.40	x		80.78	%		82.71	%
Midpoint		41.20	x		74.74	%		76.69	%
Minimum		35.79	x		67.93	%		69.83	%

Valuation of peer group companies, all of which are fully converted (on an historical basis)
Averages		16.99	x(1)		81.47	%		84.91	%
Medians		11.84	x(1)		77.80	%		83.60	%

(1)	Only four out of a total of 10 peer group companies had meaningful earnings multiples.

The independent appraisal does not indicate market value. Do not assume or expect that our valuation as indicated in the appraisal means that after the conversion and offering the shares of our common stock will trade at or above the $10.00 per share purchase price. Furthermore, the pricing ratios presented in the appraisal were utilized by RP Financial, LC. to estimate our market value and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location.

For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, see “The Conversion and Offering—Stock Pricing and Number of Shares to be Issued.”

After-Market Stock Price Performance of Second-Step Conversion Offerings Provided by Independent Appraiser

The following table presents after-market stock price performance information for all second-step conversions completed between January 1, 2009 and May 7, 2010. None of these companies were included in the group of 10 comparable public companies utilized in RP Financial, LC.’s valuation analysis.


	Conversion		Percentage Price Appreciation From Initial Trading Date
Company Name and	Completion											Through May 7,
Ticker Symbol	Date	Exchange	One Day			One Week			One Month			2010

Eagle Bancorp Montana, Inc. (EBMT)	4/5/10	Nasdaq		5.5	%		6.5	%		4.1	%		3.5	%
Ocean Shore Holding Co. (OSHC)	12/21/09	Nasdaq		7.5	%		12.3	%		13.1	%		30.3	%
Northwest Bancshares, Inc. (NWBI)	12/18/09	Nasdaq		13.5	%		13.0	%		14.0	%		16.8	%

Average				8.8	%		10.6	%		10.4	%		16.9	%
Median				7.5	%		12.3	%		13.1	%		16.8	%

Stock price performance is affected by many factors, including, but not limited to: general market and economic conditions; the interest rate environment; the amount of proceeds a company raises in its offering; and numerous factors relating to the specific company, including the experience and ability of management, historical and anticipated operating results, the nature and quality of the company’s assets, and the company’s market area. None of the companies listed in the table above are exactly similar to Kaiser Federal Financial Group, Inc., the pricing ratios for their stock offerings may have been different from the pricing ratios for Kaiser Federal Financial Group, Inc. shares of common stock and the market conditions in which these offerings were completed may have been different from current market conditions. Furthermore, this table presents only short-term performance with respect to companies that recently completed their second-step conversions and may not be indicative of the longer-term stock price performance of these companies. The performance of these stocks may not be indicative of how our stock will perform.

Our stock price may trade below $10.00 per share, as the stock prices of many second-step conversions completed prior to 2009 have decreased below the initial offering price. Before you make an investment decision, we urge you to carefully read this prospectus, including, but not limited to, the section entitled “Risk Factors” beginning on page 20 .

The Exchange of Existing Shares of K-Fed Bancorp Common Stock

If you are currently a stockholder of K-Fed Bancorp, your shares will be canceled at the completion of the conversion and will become the right to receive shares of common stock of Kaiser Federal Financial Group, Inc. The number of shares of common stock you receive will be based on the exchange ratio, which will depend upon our final appraised value. The following table shows how the exchange ratio will adjust, based on the valuation of Kaiser Federal Financial Group, Inc. and the number of shares of common stock issued in the offering. The table also shows the number of shares of Kaiser Federal Financial Group, Inc. common stock a hypothetical owner of K-Fed Bancorp common stock would receive in exchange for 100 shares of K-Fed Bancorp common stock owned at the completion of the conversion, depending on the number of shares of common stock issued in the offering.

	Shares to be Sold in This Offering					Shares of Kaiser Federal Financial Group, Inc. to be Issued for Shares of K-Fed Bancorp					Total Shares of Common Stock to be Issued in Conversion and Offering		Exchange Ratio		Equivalent Value of Shares Based Upon Offering Price (1)		Equivalent Pro Forma Book Value Per Exchanged Share (2)		New Shares to be Received for 100 Existing Shares
	Amount		Percent			Amount		Percent					Exchange Ratio		Equivalent Value of Shares Based Upon Offering Price (1)		Equivalent Pro Forma Book Value Per Exchanged Share (2)		New Shares to be Received for 100 Existing Shares

Minimum		6,800,000		66.7	%		3,399,002		33.3	%		10,199,002		0.7673	$	7.67	$	11.30		76
Midpoint		8,000,000		66.7			3,998,826		33.3			11,998,826		0.9028		9.03		12.08		90
Maximum		9,200,000		66.7			4,598,650		33.3			13,798,650		1.0382		10.38		12.85		103
15% above Maximum		10,580,000		66.7			5,288,448		33.3			15,868,448		1.1939		11.94		13.75		119

(1)	Represents the value of shares of Kaiser Federal Financial Group, Inc. common stock to be received in the conversion by a holder of one share of K-Fed Bancorp, pursuant to the exchange ratio, based upon the $10.00 per share purchase price.

(2)	Represents the pro forma book value per share at each level of the offering range multiplied by the respective exchange ratio.

If you own shares of K-Fed Bancorp common stock in a brokerage account in “street name,” your shares will be automatically exchanged, and you do not need to take any action to exchange your shares of common stock. If you own shares in the form of K-Fed Bancorp stock certificates after the completion of the conversion and stock offering, our exchange agent will mail to you a transmittal form with instructions to surrender your stock certificates. New certificates of Kaiser Federal Financial Group, Inc. common stock will be mailed to you within five business days after the exchange agent receives properly executed transmittal forms and your K-Fed Bancorp stock certificates. You should not submit a stock certificate until you receive a transmittal form.

No fractional shares of Kaiser Federal Financial Group, Inc. common stock will be issued to any stockholder of K-Fed Bancorp. For each fractional share that otherwise would be issued, Kaiser Federal Financial Group, Inc. will pay in cash an amount equal to the product obtained by multiplying the fractional share interest to which the holder otherwise would be entitled by the $10.00 per share subscription price.

Outstanding options to purchase shares of K-Fed Bancorp common stock also will convert into and become options to purchase new shares of Kaiser Federal Financial Group, Inc. common stock based upon the exchange ratio. The aggregate exercise price, duration and vesting schedule of these options will not be affected by the conversion. At March 31, 2010, there were 484,400 outstanding options to purchase shares of K-Fed Bancorp common stock, 308,400 of which have vested. Such outstanding options will be converted into options to purchase 371,680 shares of common stock at the minimum of the offering range and 502,904 shares of common stock at the maximum of the offering range. Because Office of Thrift Supervision regulations prohibit us from repurchasing our common stock during the first year following the conversion unless compelling business reasons exist for such repurchases, we may use authorized but unissued shares to fund option exercises that occur during the first year following the conversion. If all existing options were exercised for authorized, but unissued shares of common stock following the conversion, stockholders would experience dilution of approximately 3.52% at both the minimum and the maximum of the offering range.

How We Intend to Use the Proceeds From the Offering

We intend to invest at least 50% of the net proceeds from the stock offering in Kaiser Federal Bank, loan funds to our employee stock ownership plan to fund its purchase of our shares of common stock in the stock offering and retain the remainder of the net proceeds from the offering. Therefore, assuming we sell 8,000,000 shares of common stock in the stock offering, and we have net proceeds of $75.5 million, we intend to invest $37.7 million in Kaiser Federal Bank, loan $4.8 million to our employee stock ownership plan to fund its purchase of our shares of common stock and retain the remaining $32.9 million of the net proceeds.

We may use the funds we retain for investments, to pay cash dividends, to repurchase shares of common stock, to acquire other financial institutions and for other general corporate purposes. We also expect to use a portion of the net proceeds we retain to fund a loan for the purchase of shares of common stock in the offering by the employee stock ownership plan. Kaiser Federal Bank expects to use part of the proceeds it receives from us to repay a $20 million Federal Home Loan Bank of San Francisco borrowing that matures on November 29, 2010 and has a fixed rate of interest of 4.77%, to expand its branch network or to acquire other financial institutions, including FDIC-assisted transactions, or other financial services companies primarily in Southern California as opportunities arise, to support increased lending and other products and services and for other general corporate purposes. We do not currently have any agreements or understandings regarding any specific acquisition or branch purchase.

Please see the section of this prospectus entitled “How We Intend to Use the Proceeds from the Offering” for more information on the proposed use of the proceeds from the offering.

Persons Who May Order Shares of Common Stock in the Offering

We are offering the shares of common stock in a “subscription offering” in the following descending order of priority:

(i)

First, to depositors with accounts at Kaiser Federal Bank with aggregate balances of at least $50 at the close of business on March 31, 2009.

(ii)

Second, to our tax-qualified employee benefit plans (including Kaiser Federal Bank’s employee stock ownership plan and 401(k) plan), which will receive, without payment therefor, nontransferable subscription rights to purchase in the aggregate up to 10% of the shares of common stock sold in the offering. We expect our employee stock ownership plan to purchase 6% of the shares of common stock sold in the stock offering.

(iii)

Third, to depositors with accounts at Kaiser Federal Bank with aggregate balances of at least $50 at the close of business on [Supplemental Record Date].

(iv)

Fourth, to depositors of Kaiser Federal Bank at the close of business on [Member Record Date].

Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering,” with a preference given first to natural persons (including trusts of natural persons) residing in the California counties of Los Angeles, Orange, San Bernardino, Riverside and Santa Clara, and then to K-Fed Bancorp’s public stockholders as of [Stockholder Record Date]. The community offering, if held, may begin concurrently with, during or promptly after the subscription offering as we may determine at any time. Any shares of common stock not purchased in the subscription offering or the community offering will be offered for sale through a “syndicated community offering” managed by Keefe, Bruyette & Woods, Inc. We have the right to accept or reject, in our sole discretion, orders received in the community offering or syndicated community offering. Any determination to accept or reject stock orders in the community offering and the syndicated community offering will be based on the facts and circumstances available to management at the time of the determination.

If we receive orders for more shares than we are offering, we may not be able to fully or partially fill your order. Shares will be allocated first to categories in the subscription offering. A detailed description of the subscription offering, the community offering and the syndicated community offering, as well as a discussion regarding allocation procedures, can be found in the section of this prospectus entitled “The Conversion and Offering.”

Limits on How Much Common Stock You May Purchase

The minimum number of shares of common stock that may be purchased is 25.

If you are not currently a K-Fed Bancorp stockholder –

No individual may purchase more than $500,000 (50,000 shares) of common stock. If any of the following persons purchases shares of common stock, their purchases, in all categories of the offering, when combined with your purchases, cannot exceed $1,000,000 (100,000 shares) of common stock:

●

your spouse or relatives of you or your spouse living in your house;

●

companies, trusts or other entities in which you are a trustee, have a substantial beneficial interest or hold a senior position; or

●

other persons who may be your associates or persons acting in concert with you.

Unless we determine otherwise, persons having the same address and persons exercising subscription rights through qualifying deposit accounts registered to the same address will be subject to the overall purchase limitation of $1,000,000 (100,000 shares).

See the detailed description of the purchase limitations in the section of this prospectus entitled “The Conversion and Offering—Additional Limitations on Common Stock Purchases.”

If you are currently a K-Fed Bancorp stockholder –

In addition to the above purchase limitations, there is an ownership limitation for stockholders other than our employee stock ownership plan. Shares of common stock that you purchase in the offering individually and together with persons described above, plus any shares you and they receive in exchange for existing shares of K-Fed Bancorp common stock, may not exceed 5% of the total shares of common stock to be issued and outstanding after the completion of the conversion.

Subject to Office of Thrift Supervision approval, we may increase or decrease the purchase and ownership limitations at any time.

How You May Purchase Shares of Common Stock in the Subscription Offering and the Community Offering

In the subscription offering and community offering, you may pay for your shares only by:

●

personal check, bank check or money order made payable directly to Kaiser Federal Financial Group, Inc.; or

●

authorizing us to withdraw funds without penalty from the types of Kaiser Federal Bank deposit accounts designated on the stock order form.

Kaiser Federal Bank is not permitted to lend funds to anyone for the purpose of purchasing shares of common stock in the offering. Additionally, you may not use a Kaiser Federal Bank line of credit check or any type of third party check to pay for shares of common stock. Please do not submit cash or wire transfers. You may not designate withdrawal from Kaiser Federal Bank’s accounts with check-writing privileges. You may not authorize direct withdrawal from a Kaiser Federal Bank retirement account. See “—Using Individual Retirement Accounts.”

You can subscribe for shares of common stock in the offering by delivering a signed and completed original stock order form (copies or facsimiles are not acceptable), together with full payment payable to Kaiser Federal Financial Group, Inc. or authorization to withdraw funds from one or more of your Kaiser Federal Bank deposit accounts, provided that the stock order form is received before 2:00 p.m., Pacific Time, on [expiration date], which is the end of the offering period. You may submit your stock order form and payment by mail using the stock order reply envelope provided, or by overnight delivery to our Stock Information Center at the address noted on the stock order form. You may hand-deliver stock order forms to Kaiser Federal Bank’s main office, located at 1359 North Grand Avenue, Covina, California. Hand-delivered stock order forms will only be accepted at this location. We will not accept stock order forms at our branch offices. Please do not mail stock order forms to Kaiser Federal Bank. Once tendered, a stock order form cannot be modified or revoked without our consent.

Please see “The Conversion and Offering— Procedure for Purchasing Shares—Payment for Shares” for a complete description of how to purchase shares in the stock offering.

Using Individual Retirement Account Funds to Purchase Shares of Common Stock

You may be able to subscribe for shares of common stock using funds in your individual retirement account, or IRA. If you wish to use some or all of the funds in your Kaiser Federal Bank individual retirement account, the applicable funds must be transferred to a self-directed account maintained by an independent trustee, such as a brokerage firm, and the purchase must be made through that account. If you do not have such an account, you will need to establish one before placing your stock order. An annual administrative fee may be payable to the independent trustee. Because individual circumstances differ and the processing of retirement fund orders takes additional time, we recommend that you contact our Stock Information Center promptly, preferably at least two weeks before the [expiration date] offering deadline, for assistance with purchases using your individual retirement account or other retirement account that you may have at Kaiser Federal Bank or elsewhere. Whether you may use such funds for the purchase of shares in the stock offering may depend on timing constraints and, possibly, limitations imposed by the institution where the funds are held.

See “The Conversion and Offering—Procedure for Purchasing Shares—Payment for Shares” and “—Using Individual Retirement Account Funds” for a complete description of how to use IRA funds to purchase shares in the stock offering.

Purchases by Officers and Directors

We expect our directors and executive officers, together with their associates, to subscribe for 12,100 shares of common stock in the offering, representing 0.2% of shares to be sold at the minimum of the offering range. The purchase price paid by them will be the same $10.00 per share price paid by all other persons who purchase shares of common stock in the offering. Following the conversion, our directors and executive officers, together with their associates, are expected to beneficially own 480,654 shares of common stock, or 4.71% of our total outstanding shares of common stock at the minimum of the offering range, which includes shares they currently own that will be exchanged for new shares of Kaiser Federal Financial Group, Inc.

See “Subscriptions by Directors and Executive Officers” for more information on the proposed purchases of our shares of common stock by our directors and executive officers.

Deadline for Orders of Shares of Common Stock in the Subscription and Community Offering

The deadline for purchasing shares of common stock in the subscription and community offering is 2:00 p.m., Pacific Time, on [expiration date], unless we extend this deadline. If you wish to purchase shares of common stock, a properly completed and signed original stock order form, together with full payment, must be received (not postmarked) by this time.

Although we will make reasonable attempts to provide this prospectus and offering materials to holders of subscription rights, the subscription offering and all subscription rights will expire at 2:00 p.m., Pacific Time, on [expiration date], whether or not we have been able to locate each person entitled to subscription rights.

TO ENSURE THAT EACH PERSON RECEIVES A PROSPECTUS AT LEAST 48 HOURS PRIOR TO THE EXPIRATION DATE OF [EXPIRATION DATE] IN ACCORDANCE WITH FEDERAL LAW, NO PROSPECTUS WILL BE MAILED ANY LATER THAN FIVE DAYS PRIOR TO [EXPIRATION DATE] OR HAND-DELIVERED ANY LATER THAN TWO DAYS PRIOR TO [EXPIRATION DATE].

See “The Conversion and Offering— Procedure for Purchasing Shares—Expiration Date” for a complete description of the deadline for purchasing shares in the stock offering.

You May Not Sell or Transfer Your Subscription Rights

Office of Thrift Supervision regulations prohibit you from transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to state that you are purchasing the common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights. We intend to take legal action, including reporting persons to federal agencies, against anyone who we believe has sold or transferred his or her subscription rights. We will not accept your order if we have reason to believe that you have sold or transferred your subscription rights. On the order form, you may not add the names of others for joint stock registration who do not have subscription rights or who qualify only in a lower subscription offering priority than you do. You may add only those who were eligible to purchase shares of common stock in the subscription offering at your date of eligibility. In addition, the stock order form requires that you list all deposit accounts, giving all names on each account and the account number at the applicable eligibility date. Failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation, if there is an oversubscription.

Delivery of Stock Certificates

Certificates representing shares of common stock sold in the subscription offering and community offering will be mailed to the certificate registration address noted by purchasers on the stock order form. Stock certificates will be sent to purchasers by first-class mail as soon as practicable after the completion of the conversion and stock offering. We expect trading in the stock to begin on the business day of or on the business day following the completion of the conversion and stock offering. The conversion and stock offering are expected to be completed as soon as practicable following satisfaction of the conditions described below in “—Conditions to Completion of the Conversion and the Offering.” It is possible that until certificates for the common stock are delivered to purchasers, purchasers might not be able to sell the shares of common stock that they ordered, even though the common stock will have begun trading. Your ability to sell the shares of common stock before receiving your stock certificate will depend on arrangements you may make with a brokerage firm. If you are currently a stockholder of K-Fed Bancorp, see “The Conversion and Offering—Exchange of Existing Stockholders’ Stock Certificates.”

Conditions to Completion of the Conversion

We cannot complete the conversion and offering unless:

●

The plan of conversion and reorganization is approved by at least a majority of votes eligible to be cast by members of K-Fed Mutual Holding Company (depositors of Kaiser Federal Bank as of [Member Record Date];

●

The plan of conversion and reorganization is approved by at least two-thirds of the outstanding shares of common stock of K-Fed Bancorp as of [Stockholder Record Date], including shares held by K-Fed Mutual Holding Company;

●

The plan of conversion and reorganization is approved by at least a majority of the outstanding shares of common stock of K-Fed Bancorp as of [Stockholder Record Date], excluding those shares held by K-Fed Mutual Holding Company;

●

We sell at least the minimum number of shares of common stock offered; and

●

We receive the final approval of the Office of Thrift Supervision to complete the conversion and offering; however, such approval does not constitute a recommendation or endorsement of the plan of conversion and reorganization by that agency.

K-Fed Mutual Holding Company intends to vote its ownership interest in favor of the plan of conversion and reorganization. At [Stockholder Record Date], K-Fed Mutual Holding Company owned 66.7% of the outstanding shares of common stock of K-Fed Bancorp. The directors and executive officers of K-Fed Bancorp and their affiliates owned 610,653 shares of K-Fed Bancorp (including exercisable options), or 4.6% of the outstanding shares of common stock and 13.8% of the outstanding shares of common stock, excluding shares owned by K-Fed Mutual Holding Company. They intend to vote those shares in favor of the plan of conversion and reorganization.

Steps We May Take if We Do Not Receive Orders for the Minimum Number of Shares

If we do not receive orders for at least 6,800,000 shares of common stock, we may take several steps in order to issue the minimum number of shares of common stock in the offering range. Specifically, we may:

(i)

increase the purchase and ownership limitations; and/or

(ii)

seek regulatory approval to extend the offering beyond [Extension date #1], so long as we resolicit subscriptions that we have previously received in the offering; and/or

(iii)

increase the purchase of shares by the employee stock ownership plan.

If one or more purchase limitations are increased, subscribers in the subscription offering who ordered the maximum amount will be, and, in our sole discretion, some other large purchasers may be, given the opportunity to increase their subscriptions up to the then-applicable limit.

Possible Change in the Offering Range

RP Financial, LC. will update its appraisal before we complete the offering. If, as a result of demand for the shares or changes in market conditions, RP Financial, LC. determines that our pro forma market value has increased, we may sell up to 10,580,000 shares in the offering without further notice to you. If our pro forma market value at that time is either below $102.0 million or above $158.7 million, then, after consulting with the Office of Thrift Supervision, we may:

●

terminate the stock offering and promptly return all funds;

●

set a new offering range; or

●

take such other actions as may be permitted by the Office of Thrift Supervision and the Securities and Exchange Commission.

If we set a new offering range, we will notify you and subscribers will have the right to maintain, change or cancel their orders. If we do not receive a written response from a subscriber regarding any resolicitation, the subscriber’s order will be canceled and all funds received will be returned promptly with interest, and deposit account withdrawal authorizations will be canceled.

Possible Termination of the Offering

We may terminate the offering at any time prior to the special meeting of members of K-Fed Mutual Holding Company that is being called to vote upon the conversion, and at any time after member approval with the approval of the Office of Thrift Supervision. If we terminate the offering, we will promptly return your funds with interest at 0.25% and we will cancel deposit account withdrawal authorizations.

Benefits to Management and Potential Dilution to Stockholders Resulting from the Conversion

We expect our employee stock ownership plan, which is a tax-qualified retirement plan for the benefit of all of our employees, to purchase up to 6.0% of the shares of common stock we sell in the offering. These shares, when combined with shares owned by our existing employee stock ownership plan, will be less than 8% of the shares outstanding following the conversion. If we receive orders for more shares of common stock than the maximum of the offering range, the employee stock ownership plan will have first priority to purchase shares over this maximum, up to a total of 6% of the shares of common stock sold in the offering. This would reduce the number of shares available for allocation to eligible account holders. We plan to enter into employment agreements with each of our executive officers following the completion of the conversion and offering. For further information, see “Management—Benefits to be Considered Following the Conversion—Employment Agreements.”

Office of Thrift Supervision regulations permit us to implement one or more new stock-based benefit plans no earlier than six months after completion of the conversion. Our current intention is to implement one or more new stock-based incentive plans no earlier than twelve months after completion of the conversion. Stockholder approval of these plans would be required. If implemented within 12 months following the completion of the conversion, the stock-based benefit plans will reserve a number of shares up to 4% of the shares of common stock sold in the offering (reduced by amounts purchased in this stock offering by our 401(k) plan using its purchase priority in the stock offering) for awards of restricted stock to key employees and directors, at no cost to the recipients. If implemented within 12 months following the completion of the conversion, the stock-based benefit plans will also reserve a number of shares up to 10% of the shares of common stock sold in the offering for issuance pursuant to grants of stock options to key employees and directors. The total grants available under the stock-based benefit plans are subject to adjustment as may be required by Office of Thrift Supervision regulations or policy to reflect shares of common stock or stock options previously granted by K-Fed Bancorp or Kaiser Federal Bank. Current Office of Thrift Supervision policy would require the aggregate amount of outstanding restricted stock (including prior grants) to be 4% or less of our total outstanding shares following the conversion and outstanding stock options (including prior grants) to be 10% or less of our total outstanding shares following the conversion. If the stock-based benefit plan is adopted more than one year after the completion of the conversion, awards of restricted stock or grants of stock options under the plan may exceed the percentage limitations set forth above. We have not yet determined the number of shares that would be reserved for issuance under these plans. For a description of our current stock-based benefit plans, see “Management—Compensation Discussion and Analysis—Long-Term Stock-Based Compensation.”

The following table summarizes the number of shares of common stock and the aggregate dollar value of grants that are available under one or more stock-based benefit plans if such plans reserve a number of shares of common stock equal to not more than 4% and 10% of the shares sold in the stock offering for restricted stock awards and stock options. The table shows the dilution to stockholders if all such shares are issued from authorized but unissued shares, instead of shares purchased in the open market. A portion of the stock grants shown in the table below may be made to non-management employees. The table also sets forth the number of shares of common stock to be acquired by the employee stock ownership plan for allocation to all employees.

	Number of Shares to be Granted or Purchased							Dilution Resulting From Issuance of Shares for Stock-Based Benefit Plans
					As a Percentage of Common Stock to be Sold in the Offering						Value of Grants (1)
	At Minimum of Offering Range		At Adjusted Maximum of Offering Range									At Minimum of Offering Range		At Adjusted Maximum of Offering Range

Employee stock ownership plan		408,000		634,800		6.0	%		N/A	(2)		$	4,080,000	$	6,348,000
Restricted stock awards		272,000		423,200		4.0			2.60	%			2,720,000		4,232,000
Stock options		680,000		1,058,000		10.0			6.25	%			1,210,400		1,883,240
Total		1,360,000		2,116,000		20.0	%		8.54	%		$	8,010,400	$	12,463,240

(1)

The actual value of restricted stock awards will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value for stock awards is assumed to be the same as the offering price of $10.00 per share. The fair value of stock options has been estimated at $2.02 per option using the Black-Scholes option pricing model, adjusted for the exchange ratio, with the following assumptions: a grant-date share price and option exercise price of $10.00; an expected option life of seven years; a dividend yield of 4.99%; a risk-free rate of return of 2.55%; and a volatility rate of 33.32% based on the volatility of K-Fed Bancorp common stock. The actual value of option grants will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted.

(2)	No dilution is reflected for the employee stock ownership plan because such shares are assumed to be purchased in the stock offering.

We may fund our stock-based benefit plans through open market purchases, as opposed to new issuances of stock; however, if any options previously granted under our existing 2004 Stock Option Plan are exercised during the first year following completion of the offering, they will be funded with newly issued shares as Office of Thrift Supervision regulations do not permit us to repurchase our shares during the first year following the completion of this offering except to fund the grants of restricted stock under our stock-based benefit plan or under extraordinary circumstances. We have been advised by the staff of the Office of Thrift Supervision that the exercise of outstanding options and cancellation of treasury shares in the conversion will not constitute an extraordinary circumstance for purposes of this test.

The following table presents information as of March 31, 2010 regarding our employee stock ownership plan, our 2004 Stock Option Plan, 2004 Recognition and Retention Plan and our proposed stock-based benefit plan. The table below assumes that 13,798,650 shares are outstanding after the offering, which includes the sale of 9,200,000 shares in the offering at the maximum of the offering range and the issuance of shares in exchange for shares of K-Fed Bancorp using an exchange ratio of 1.0382. It also assumes that the value of the stock is $10.00 per share.

Existing and New Stock Benefit Plans	Participants	Shares at Maximum of Offering Range			Estimated Value of Shares			Percentage of Shares Outstanding After the Conversion

Employee Stock Ownership Plan:	Employees
Shares purchased in 2004 offering (1)			472,319	(2)	$	4,723,187			3.42	%
Shares to be purchased in this offering			552,000			5,520,000			4.00
Total employee stock ownership plan shares			1,024,319		$	10,243,187			7.42	%

Restricted Stock Awards:	Directors, Officers and Employees
2004 Recognition and Retention Plan (1)			236,159	(3)	$	2,361,593	(4)		1.71	%
New shares of restricted stock			368,000			3,680,000	(4)		2.67
Total shares of restricted stock			604,159		$	6,041,593			4.38	% (5)

Stock Options:	Directors, Officers and Employees
2004 Stock Option Plan (1)			590,398	(6)	$	1,192,604			4.28	%
New stock options			920,000			1,858,400	(7)		6.67
Total stock options			1,510,398		$	3,051,004			10.95	% (5)

Total of stock benefit plans			3,138,876		$	19,355,783			22.75	%

(1)	The number of shares indicated has been adjusted for the 1.0382 exchange ratio at the maximum of the offering range.

(2)	As of March 31, 2010, 283,391 of these shares, or 272,964 shares prior to adjustment for the exchange, have been allocated.

(3)	As of March 31, 2010, 174,646 of these shares, or 168,220 shares prior to adjustment for the exchange, have been awarded, and 148,691 shares, or 143,220 shares prior to adjustment for the exchange, have vested.

(4)	The value of restricted stock awards is determined based on their fair value as of the date grants are made. For purposes of this table, the fair value of awards under the new stock-based benefit plan is assumed to be the same as the offering price of $10.00 per share.

(5)

The number of shares of restricted stock and stock options set forth in the table would exceed regulatory limits if a stock-based incentive plan was adopted within one year of the completion of the conversion. Accordingly, the number of new shares of restricted stock and stock options set forth in the table would have to be reduced such that the aggregate amount of stock awards would be 4% or less of our outstanding shares and the aggregate amount of stock options would be 10% or less of our outstanding shares, unless we obtain a waiver from the Office of Thrift Supervision, or we implement the incentive plan after twelve months following the completion of the conversion. Our current intention is to implement a new stock-based incentive plan no earlier than twelve months after completion of the conversion.

(6)	As of March 31, 2010, options to purchase 502,904 of these shares, or 484,400 shares prior to adjustment for the exchange, have been awarded, and options to purchase 75,326 of these shares, or 72,555 shares prior to adjustment for the exchange, remain available for future grants.

(7)

The weighted-average fair value of stock options has been estimated at $2.02 per option, adjusted for the exchange ratio, using the Black-Scholes option pricing model. The fair value of stock options uses the Black-Scholes option pricing model with the following assumptions: exercise price, $10.00; trading price on date of grant, $10.00; dividend yield, 4.99%; expected life, seven years; expected volatility, 33.32%; and risk-free rate of return, 2.55%. The actual value of option grants will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted.

Market for Common Stock

Existing publicly held shares of K-Fed Bancorp’s common stock are quoted on the Nasdaq Global Market under the symbol “KFED.” Upon completion of the conversion, the shares of common stock of Kaiser Federal Financial Group, Inc. will replace the existing shares. We expect that Kaiser Federal Financial Group, Inc.’s shares of common stock will trade on the Nasdaq Global Market under the trading symbol “KFFG.” In order to list our stock on the Nasdaq Global Market, we are required to have at least three broker-dealers who will make a market in our common stock. K-Fed Bancorp currently has more than three market makers, including Keefe, Bruyette & Woods, Inc. Persons purchasing shares of common stock in the offering may not be able to sell their shares at or above the $10.00 price per share.

Our Dividend Policy

We have paid quarterly cash dividends since the second quarter of fiscal 2005. We currently pay a quarterly cash dividend of $0.11 per share, or $0.44 on an annualized basis. After we complete the conversion, we intend to continue to pay cash dividends on a quarterly basis, the amount of which will be determined following completion of the conversion. However, the dividend rate and the continued payment of dividends will depend on a number of factors including our capital requirements, our financial condition and results of operations, the rate of tax on dividends, statutory and regulatory limitations, and general economic conditions. We cannot assure you that we will not reduce or eliminate dividends in the future.

See “Selected Consolidated Financial and Other Data of K-Fed Bancorp and Subsidiary” and “Market for the Common Stock” for information regarding our historical dividend payments.

Tax Consequences

K-Fed Mutual Holding Company, K-Fed Bancorp, Kaiser Federal Bank and Kaiser Federal Financial Group, Inc. have received an opinion of counsel, Luse Gorman Pomerenk & Schick, P.C., regarding all of the material federal income tax consequences of the conversion. As a general matter, the conversion will not be a taxable transaction for purposes of federal or state income taxes to K-Fed Mutual Holding Company, K-Fed Bancorp (except for cash paid for fractional shares), Kaiser Federal Bank, Kaiser Federal Financial Group, Inc., persons eligible to subscribe in the subscription offering, or existing stockholders of K-Fed Bancorp. Existing stockholders of K-Fed Bancorp who receive cash in lieu of fractional share interests in shares of Kaiser Federal Financial Group, Inc. will recognize a gain or loss equal to the difference between the cash received and the tax basis of the fractional share.

How You Can Obtain Additional Information—Stock Information Center

Our banking personnel may not, by law, assist with investment-related questions about the offering. If you have any questions regarding the conversion or offering, please call our Stock Information Center. The toll-free telephone number is [Stock Information Number]. The Stock Information Center is open Monday through Friday between 10:00 a.m. and 4:00 p.m., Pacific Time. The Stock Information Center will be closed on weekends and bank holidays.

RISK FACTORS

You should consider carefully the following risk factors in evaluating an investment in the shares of common stock. An investment in our common stock is subject to risks inherent in our business. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included in this prospectus. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and results of operations. The value or market price of our common stock could decline due to any of these identified or other risks, and you could lose all or part of your investment.

Risks Related to Our Business

Further deterioration of economic conditions in our primary market of Southern California, could seriously impair the value of our loan portfolio and adversely affect our results of operations

All our real estate loans are secured by properties located in California. Decreases in California real estate values beginning in 2008 and continuing through the current period have adversely affected the value of properties collateralizing our loans. As of March 31, 2010, 93.8% or $717.6 million of our loan portfolio consisted of loans secured by real estate. As a result of the weak economy in Southern California, our level of non-performing and delinquent loans has increased dramatically in recent periods. At March 31, 2010, loans delinquent 90 days or more totaled $16.0 million, compared to $6.2 million at June 30, 2009. At March 31, 2010, non-performing loans totaled $28.9 million, compared to $8.9 million at June 30, 2009. In the event that we are required to foreclose on a property securing a mortgage loan or pursue other remedies in order to protect our investment, there can be no assurance that we will recover funds in an amount equal to any remaining loan balance as a result of prevailing general economic or local conditions, real estate values and other factors associated with the ownership of real property. As a result, the market value of the real estate or other collateral underlying the loans may not, at any given time, be sufficient to satisfy the outstanding principal amount of the loans. Consequently, we would sustain significant loan losses and potentially incur a higher provision for loan loss expense. Adverse changes in the economy may also have a negative effect on the ability of borrowers to make timely repayments of their loans, which could have an adverse impact on earnings. See “Business of Kaiser Federal Bank, Market Area, Asset Quality.”

Our loan portfolio possesses increased risk due to our level of multi-family residential real estate, commercial real estate and consumer loans which could increase our level of provision for loan losses.

Our outstanding multi-family residential real estate, commercial real estate and consumer loans accounted for 55.1% of our total loan portfolio as of March 31, 2010. Generally, management considers these types of loans to involve a higher degree of risk compared to permanent first mortgage loans on one-to-four family, owner occupied residential properties. These loans have higher risks than permanent loans secured by residential real estate for the following reasons:

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Multi-Family Residential Real Estate Loans. These loans are underwritten on the income producing potential of the property, financial strength of the borrower and any guarantors. Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. At March 31, 2010, 34.0% of our total loan portfolio consisted of multi-family loans, and we intend, subject to market conditions, to increase our origination of multi-family residential loans.

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Commercial Real Estate Loans. These loans are underwritten on the income producing potential of the property or the successful operation of the borrowers’ or tenants’ businesses, financial strength of the borrower and any guarantors. Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service.

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Consumer Loans. Collateralized consumer loans (such as automobile loans) are collateralized by assets that may not provide adequate source of repayment of the loan due to depreciation, damage or loss. As a result, consumer loan collections are dependent on the borrower’s continuing financial stability and thus, are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

Management plans to continue its increased emphasis on higher yielding products such as multi-family residential real estate loans, while maintaining a moderate growth of one-to-four family residential real estate loans. Many of our commercial and multi-family residential real estate loans are not fully amortizing and contain large balloon payments upon maturity. These balloon payments may require the borrower to either sell or refinance the underlying property in order to make the balloon payment. Further, commercial and multi-family residential real estate loans generally have relatively large balances to single borrowers or related groups of borrowers. Accordingly, if we make any errors in judgment in the collectability of our commercial and multi-family residential real estate loans, any resulting charge-offs may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios. As a result of the above factors, management may determine it necessary to increase the level of provision for loan losses. Increased provisions for loan losses could negatively affect our results of operations.

Our loan portfolio possesses increased risk due to its amount of nonconforming loans.

A significant portion of our one-to-four family residential loans are nonconforming to secondary market requirements, and are therefore, not saleable to Freddie Mac or Fannie Mae. At March 31, 2010, about 18.8% of our one-to-four family residential loan portfolio consisted of loans that were considered nonconforming due to loan size. Included in non-accrual loans at March 31, 2010 were four loans totaling $2.3 million that were nonconforming due to each loan’s principal amount.

As of March 31, 2010, we held in portfolio one-to-four family interest-only mortgage loans totaling $46.8 million or 6.1% of gross loans as compared to $59.7 million or 7.9% of gross loans at June 30, 2009. The interest rates on these loans are generally initially fixed for three, five, seven or ten year terms and then adjust in accordance with the terms of the loan to require payment of both principal and interest in order to amortize the loan for the remainder of the term. At March 31, 2010, $11.7 million of these loans convert to fully-amortizing status within the next five years. From February, 2004 until February, 2007, we originated or purchased interest-only loans on the basis that the loans were underwritten at the fully indexed and fully amortized rate. During such period, we also purchased loans to borrowers who provide limited or no documentation of income, known as stated income loans. A stated income loan is a loan where the borrower’s income source is not subject to verification through the application process, but the reasonableness of the stated income is verified through review of other sources, such as compensation surveys. At March 31, 2010, we had $80.6 million in stated income loans, or 10.5% of gross loans, as compared to $94.3 million, or 12.6% of gross loans at June 30, 2009. Included in our stated income loans at March 31, 2010 were $10.9 million in interest-only loans. We have not purchased any one- to four-family loans since 2007.

Nonconforming one-to-four family residential loans are generally considered to have an increased risk of delinquency and foreclosure than conforming loans and may result in higher levels of provision for loan losses. For example, if the interest rate adjustment results in the borrower being unable to make higher payments of both interest and principal or to refinance the loan, we would be required to initiate collection efforts including foreclosure in order to protect our investment. The percentage of nonconforming loans that are either performing or less than 60 days delinquent at March 31, 2010 was 88.5% as compared to 95.2% at June 30, 2009. There can be no assurance that our nonconforming loan portfolio would not be adversely affected should regional and national economic conditions deteriorate further. In addition, there can be no assurance, that we will recover funds in an amount equal to any remaining loan balance. Consequently, we could sustain loan losses and potentially incur a higher provision for loan losses.

High loan-to-value ratios on a portion of our residential mortgage loan portfolio expose us to greater risk of loss.

Many of our residential mortgage loans are secured by liens on mortgage properties in which the borrowers have little or no equity because of the decline in home values in our market areas. Residential loans with high loan-to-value ratios will be more sensitive to declining property values than those with lower combined loan-to-value ratios and, therefore, may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, such borrowers may be unable to repay their loans in full from the sale. As a result, these loans may experience higher rates of delinquencies, defaults and losses.

If the allowance for loan losses is not sufficient to cover actual losses, our results of operations may be negatively affected.

In the event that loan customers do not repay their loans according to their terms and the collateral security for the payments of these loans is insufficient to pay any remaining loan balance, we may experience significant loan losses. Such credit risk is inherent in the lending business, and failure to adequately assess such credit risk could have a material adverse affect on our financial condition and results of operations. Management makes various assumptions and judgments about the collectability of the loan portfolio, including the creditworthiness of the borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of the loans. In determining the amount of the allowance for loans losses, management reviews the loan portfolio and historical loss and delinquency experience, as well as overall economic conditions. If management’s assumptions are incorrect, the allowance for loan losses may be insufficient to cover probable incurred losses in the loan portfolio, resulting in additions to the allowance. The allowance for loan losses is also periodically reviewed by the Office of Thrift Supervision, who may disagree with the allowance and require us to increase such amount. Additions to the allowance for loans losses would be made through increased provisions for loan losses and could negatively affect our results of operations. At March 31, 2010, our allowance for loan losses was $12.8 million, or 1.7% of total loans and 44.4% of non-performing loans as compared to $4.6 million, or 0.6% of total loans and 51.7% of non-performing loans at June 30, 2009.

If our non-performing assets continue to increase, our earnings will suffer.

At March 31, 2010, our non-performing assets totaled $29.9 million, which was an increase of $20.5 million or 218.8% over non-performing assets at June 30, 2009. Our non-performing assets adversely affect our net income in various ways. We do not record interest income on non-accrual loans or real estate owned. We must establish an allowance for loan losses that reserves for losses inherent in the loan portfolio that are both probable and reasonably estimable through current period provisions for loan losses. From time to time, we also write down the value of properties in our real estate owned portfolio to reflect changing market values. Additionally, there are legal fees associated with the resolution of problem assets as well as carrying costs such as taxes, insurance and maintenance related to our real estate owned. Further, the resolution of non-performing assets requires the active involvement of management, which can distract them from our overall supervision of operations and other income-producing activities. Finally, if our estimate of the allowance for loan losses is inadequate, we will have to increase the allowance for loan losses accordingly.

A major portion of our one-to-four family residential loan portfolio is serviced by third parties which limits our ability to foreclose on such loans and foreclosure is further limited by California law.

At March 31, 2010, $218.6 million or 63.7% of our one-to-four family residential loans were serviced by third parties. Of this amount, $13.9 million or 6.4% percent were non-performing. Our policy is to timely pursue our foreclosure rights to maximize our ability to obtain control of the property, however, our ability to implement this policy requires the timely cooperation of our third party servicers.

When a loan goes into default, it is the responsibility of the third party servicer to enforce the borrower’s obligation to repay the outstanding indebtedness. In the event the borrower is unable to bring the loan current or a loan modification is not agreed to, the servicer is obligated to foreclose on the property on behalf of Kaiser Federal Bank. Due to a number of factors, including the high rate of loan delinquencies, we believe that our servicers have not vigorously pursued collection efforts on our behalf. We have attempted to exercise our rights under servicing agreements to have the loan servicing returned to us so that we can aggressively resolve the delinquency status of these loans. We are currently attempting to negotiate the transfer of these servicing rights to us.

In addition, the State of California recently enacted a law that places severe restrictions on the ability of a lender to foreclose on owner occupied real estate securing one-to-four family residential loans. This law prohibits a foreclosure until the later of at least three months plus 90 days after the filing of the notice of default. Other similar bills placing additional temporary moratoriums on foreclose sales otherwise modifying the foreclosure procedures to the benefit of borrowers and the detriment of lenders may be enacted by the United State Congress or the State of California in the future.

Delays in our ability to foreclose on property, whether caused by restrictions under state or federal law or the failure of a third party servicer to timely pursue foreclosure action, can increase our potential loss on such property, due to other factors such as lack of maintenance, unpaid property taxes and adverse changes in market conditions. These delays may adversely affect our ability to limit our credit losses.

If property taken into real estate owned is not properly valued or sufficiently reserved to cover actual losses, or if we are required to increase our valuation reserves, our earnings could be reduced.

We obtain updated valuations in the form of appraisals and broker price opinions when a loan has been foreclosed and the property taken is real estate owned, and at certain other times during the asset’s holding period. Our net book value in the loan at the time of foreclosure and thereafter is compared to the lower of adjusted cost basis or updated market value of the foreclosed property less estimated selling costs (fair value). A charge-off is recorded for any excess in the asset’s net book value over its fair value when the loan is transferred to real estate owned. If our valuation determination is inaccurate, the fair value of our investments in real estate may not be sufficient to recover our net book value in such assets, resulting in the need for additional charge-offs. Additional charge-offs to our investments in real estate could have an adverse effect on our financial condition and results of operations.

In addition, bank regulators periodically review our real estate owned and may require us to recognize further charge-offs. Any increase in our charge-offs, as required by such regulators, may have an adverse effect on our financial condition and results of operations.

Our litigation related costs might continue to increase

Kaiser Federal Bank is subject to a variety of legal proceedings that have arisen in the ordinary course of its business. In the current economic environment, our involvement in litigation has increased significantly, primarily as a result of the increase in our non-performing assets. In addition, we may incur additional litigation costs related to our seeking to terminate our third-party servicers. There can be no assurance that our loan workout and other activities will not result in increased litigation expense that may have a material adverse effect on our profitability.

We depend on our management team to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.

We are dependent upon the services of our senior management team. Our strategy and operations are directed by the senior management team. Upon completion of the conversion and offering, our President and Chief Executive Officer and our four other executive officers will enter into employment agreements with Kaiser Federal Bank. Any loss of the services of the President and Chief Executive Officer or other members of the management team could impact our ability to implement our business strategy, and have a material adverse effect on our results of operations and our ability to compete in our markets. See “Management– Benefits to be Considered Following Completion of the Conversion—Employment Agreements.”

Strong competition in our primary market area may reduce our ability to attract and retain deposits and also may increase our cost of funds.

We operate in a very competitive market for the attraction of deposits, the primary source of our funding. Historically, our most direct competition for deposits has come from credit unions, community banks, large commercial banks and thrift institutions within our primary market areas. In recent years competition has also come from institutions that largely deliver their services over the internet. Such competitors have the competitive advantage of lower infrastructure costs. Particularly in times of extremely low or extremely high interest rates, we have faced significant competition for investors’ funds from short-term money market securities and other corporate and government securities. During periods of regularly increasing interest rates, competition for interest bearing deposits increases as customers, particularly certificate of deposit customers, tend to move their accounts between competing businesses to obtain the highest rates in the market. As a result, Kaiser Federal Bank incurs a higher cost of funds in an effort to attract and retain customer deposits. We strive to grow our lower cost deposits, such as non-interest bearing checking accounts, in order to reduce our cost of funds.

Strong competition in our primary market area may reduce our ability to originate loans and also decrease our yield on loans.

We are located in a competitive market that affects our ability to obtain loans through origination as well as originating them at rates that provide an attractive yield. Competition for loans comes principally from mortgage bankers, commercial banks, other thrift institutions, nationally based homebuilders and credit unions. Internet based lenders have also become a greater competitive factor in recent years. Such competition for the origination of loans may limit future growth and earnings prospects.

Changes in interest rates could adversely affect our results of operations and financial condition.

Our results of operations and financial condition are significantly affected by changes in interest rates. Our results of operations depend substantially on our net interest income, which is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest expense we pay on our interest-bearing liabilities, such as deposits and borrowings. Because our interest-bearing liabilities generally reprice or mature more quickly than our interest-earning assets, an increase in interest rates generally would tend to result in a decrease in net interest income.

Changes in interest rates may also affect the average life of loans and mortgage-related securities. Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce their borrowing costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities. Additionally, increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans. Also, increases in interest rates may extend the life of fixed-rate assets, which would restrict our ability to reinvest in higher yielding alternatives, and may result in customers withdrawing certificates of deposit early so long as the early withdrawal penalty is less than the additional interest they could receive on an alternative investment.

If our investment in the Federal Home Loan Bank of San Francisco becomes impaired, our earnings and stockholders’ equity could decrease.

We are required to own common stock of the Federal Home Loan Bank of San Francisco to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the Federal Home Loan Bank’s advance program. Our investment in Federal Home Loan Bank common stock as of March 31, 2010 was $12.6 million. Federal Home Loan Bank common stock is not a marketable security and can only be redeemed by the Federal Home Loan Bank.

Federal Home Loan Banks may be subject to accounting rules and asset quality risks that could materially lower their regulatory capital. In an extreme situation, it is possible that the capitalization of a Federal Home Loan Bank, including the Federal Home Loan Bank of San Francisco, could be substantially diminished or reduced to zero. Consequently, there is a risk that our investment in Federal Home Loan Bank of San Francisco common stock could be deemed impaired at some time in the future, and if this occurs, it would cause our earnings and stockholders’ equity to decrease by the amount of the impairment charge.

The United States economy remains weak and unemployment levels are high. A prolonged recession, especially one affecting our geographic market area, will adversely affect our business and financial results.

The United States experienced a severe economic recession in 2008 and 2009, which effects have continued into 2010. Recent growth has been slow and unemployment remains at very high levels and is not expected to improve in the near future. Loan portfolio quality has deteriorated at many financial institutions reflecting, in part, the weak United States economy and high unemployment rates. In addition, the value of real estate collateral supporting many commercial loans and home mortgages has declined and may continue to decline, increasing the risk that we would incur losses if borrowers default on their loans. Bank and bank holding company stock prices have declined substantially, and it is significantly more difficult for banks and bank holding companies to raise capital or borrow funds.

The Federal Deposit Insurance Corporation Quarterly Banking Profile has reported that non-performing assets as a percentage of assets for Federal Deposit Insurance Corporation-insured financial institutions rose to 3.32% as of December 31, 2009, compared to 0.95% as of December 31, 2007. For the year ended December 31, 2009, the Federal Deposit Insurance Corporation Quarterly Banking Profile has reported that return on average assets was 0.09% for Federal Deposit Insurance Corporation-insured financial institutions compared to 0.81% for the year ended December 31, 2007. The NASDAQ Bank Index declined 29.8% between December 31, 2007 and March 31, 2010. At March 31, 2010, our non-performing assets as a percentage of total assets was 3.34%, and our return on average assets was 0.20% for the nine months ended March 31, 2010.

Continued negative developments in the financial services industry and the domestic and international credit markets may significantly affect the markets in which we do business, the market for and value of our loans and investments, and our ongoing operations, costs and profitability. Continued declines in both the volume of real estate sales and the sale price couple with the current recession and the associated increase in unemployment may result in higher than expected loan delinquencies or problem assets, a decline in demand for our products and services, or lack of growth or a decrease in deposits. These potential negative events may cause us to incur losses, adversely affect our capital, liquidity, financial condition and business operations. These declines may have a greater affect on our earning and capital than on the earnings and capital of financial institutions whose loan portfolios are more diversified. Moreover, continued declines in the stock market in general, or stock values of financial institutions and their holding companies specifically, could adversely affect our stock performance.

Any future Federal Deposit Insurance Corporation insurance premiums and/or special assessments will adversely impact our earnings.

Due to the costs of resolving the increasing numbers of bank failures in 2008 and 2009, on May 22, 2009, the FDIC adopted a final rule levying a five basis point special insurance premium assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. We recorded an expense of $400,000 during the quarter ended June 30, 2009, to reflect the special assessment. Any further special assessments that the FDIC levies will be recorded as an expense during the appropriate period. In addition, the FDIC increased the general assessment rate and, therefore, our federal deposit general insurance premium expense will increase compared to prior periods.

The FDIC also issued a final rule pursuant to which all insured depository institutions were required to prepay on December 30, 2009 their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. The assessment rate for the fourth quarter of 2009 and for 2010 was based on each institution’s total base assessment rate for the third quarter of 2009, modified to assume that the assessment rate in effect on September 30, 2009 had been in effect for the entire third quarter, and the assessment rate for 2011 and 2012 would be equal to the modified third quarter assessment rate plus an additional three basis points. In addition, each institution’s base assessment rate for each period was calculated using its third quarter assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of 2012. We made a payment of $3.6 million to the FDIC on December 30, 2009, and recorded the payment as a prepaid expense, which will be amortized to expense over three years.

In the event that the special assessment and the prepayment do not provide sufficient funds for the FDIC to resolve future bank failures, the FDIC may require another special assessment or increase assessment rates for all FDIC insured institutions. An increase in assessments will adversely affect our results of operations.

We may engage in FDIC-assisted transactions, which could present additional risks to our business.

We may have opportunities to acquire the assets and liabilities of failed banks in FDIC-assisted transactions, including transactions in Southern California. Although these FDIC-assisted transactions typically provide for FDIC assistance to an acquirer to mitigate certain risks, such as sharing exposure to loan losses and providing indemnification against certain liabilities of the failed institution, we are (and would be in future transactions) subject to many of the same risks we would face in acquiring another bank in a negotiated transaction, including risks associated with maintaining customer relationships and failure to realize the anticipated acquisition benefits in the amounts and within the timeframes we expect. In addition, because these acquisitions are structured in a manner that would not allow us the time and access to information normally associated with preparing for and evaluating a negotiated acquisition, we may face additional risks in FDIC-assisted transactions, including additional strain on management resources, management of problem loans, problems relating to integration of personnel and operating systems and impact to our capital resources requiring us to raise additional capital. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered in connection with any FDIC-assisted transactions. Our inability to overcome these risks could have a material adverse effect on our business, financial condition and results of operations. Moreover, even though we may desire to participate in an FDIC-assisted transaction, we can offer no assurances that the FDIC would allow us to participate, or what the terms of such transaction might be or whether we would be successful in acquiring the bank or assets and/or deposits that we are seeking.

We operate in a highly regulated environment and may be adversely affected by changes in laws and regulations.

We are subject to extensive regulation, supervision and examination by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation. Such regulators govern the activities in which we may engage, primarily for the protection of depositors and the Deposit Insurance Fund. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on a bank’s operations, reclassify assets, determine the adequacy of a bank’s allowance for loan losses and determine the level of deposit insurance premiums assessed. Any change in such regulation and oversight, whether in the form of regulatory policy, new regulations or legislation or additional deposit insurance premiums could have a material impact on our operations. Because our business is highly regulated, the laws and applicable regulations are subject to frequent change. Any new laws, rules and regulations could make compliance more difficult or expensive or otherwise adversely affect our business, financial condition or prospects.

Legislative proposals have been introduced that would eliminate the Office of Thrift Supervision and would require Kaiser Federal Bank and Kaiser Federal Financial Group, Inc. to become regulated by other federal regulatory agencies.

Legislation has been introduced in the United States Senate and House of Representatives that would implement sweeping changes to the current bank regulatory structure. A bill passed by the House of Representatives would eliminate our current primary federal regulator, the Office of Thrift Supervision, by merging the Office of Thrift Supervision into the Comptroller of the Currency (the primary federal regulator for national banks). The House legislation would grant the Board of Governors of the Federal Reserve System exclusive authority to regulate all bank and thrift holding companies. If the House bill is enacted, Kaiser Federal Financial Group, Inc. would become a bank holding company subject to supervision by the Federal Reserve Board as opposed to the Office of Thrift Supervision, and would become subject to the Federal Reserve’s regulations, including holding company capital requirements, that Kaiser Federal Financial Group, Inc. would not be subject to as a savings and loan holding company regulated by the Office of Thrift Supervision.

A bill passed by the Senate would also eliminate the Office of Thrift Supervision by merging it into the Office of the Comptroller of the Currency who would become Kaiser Federal Bank’s primary federal regulator. The Federal Reserve Board would be responsible for promulgating regulations for bank and savings and loan holding companies such as Kaiser Federal Financial Group, Inc. with the Office of the Comptroller of the Currency being responsible for the application and enforcement of such regulations.

Both the House and the Senate bills would establish new government entities to write consumer protection rules, and in certain cases, to conduct examinations and to implement enforcement actions relating to consumer protection. Compliance with new regulations and being supervised by one or more new regulatory agencies would likely increase our operating expenses.

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and our income.

In response to the financial crisis of 2008 and early 2009, Congress has taken actions that are intended to strengthen confidence and encourage liquidity in financial institutions, and the Federal Deposit Insurance Corporation has taken actions to increase insurance coverage on deposit accounts. In addition, there have been proposals made by members of Congress and others that would reduce the amount delinquent borrowers are otherwise contractually obligated to pay on their mortgage loans and limit an institution’s ability to foreclose on mortgage collateral.

The potential exists for additional federal or state laws and regulations, or changes in policy, affecting lending and funding practices and liquidity standards. Moreover, bank regulatory agencies have been active in responding to concerns and trends identified in examinations, and have issued many formal enforcement orders requiring capital ratios in excess of regulatory requirements. Bank regulatory agencies, such as the Office of Thrift Supervision and the Federal Deposit Insurance Corporation, govern the activities in which we may engage, primarily for the protection of depositors, and not for the protection or benefit of potential investors. In addition, new laws and regulations may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the fees we can charge, and our ongoing operations, costs and profitability. Legislative proposals limiting our rights as a creditor could result in credit losses or increased expense in pursuing our remedies as a creditor.

System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities.

The computer systems and network infrastructure we use could be vulnerable to unforeseen problems. Our operations are dependent upon our ability to protect our computer equipment against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Any damage or failure that causes an interruption in our operations could have a material adverse effect on our financial condition and results of operations. Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us. Although we, with the help of third-party service providers, intend to continue to implement security technology and establish operational procedures to prevent such damage, there can be no assurance that these security measures will be successful. In addition, advances in computer capabilities, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms we and our third-party service providers use to encrypt and protect customer transaction data. A failure of such security measures could have a material adverse effect on our financial condition and results of operations.

Risks Related to the Offering

The future price of the shares of common stock may be less than the $10.00 purchase price per share in the offering.

If you purchase shares of common stock in the offering, you may not be able to sell them later at or above the $10.00 purchase price in the offering. In several cases, shares of common stock issued by newly converted savings institutions or mutual holding companies have traded below the initial offering price. The aggregate purchase price of the shares of common stock sold in the offering will be based on an independent appraisal. The independent appraisal is not intended, and should not be construed, as a recommendation of any kind as to the advisability of purchasing shares of common stock. The independent appraisal is based on certain estimates, assumptions and projections, all of which are subject to change from time to time. After our shares begin trading, the trading price of our common stock will be determined by the marketplace, and may be influenced by many factors, including prevailing interest rates, the overall performance of the economy, investor perceptions of Kaiser Federal Financial Group, Inc. and the outlook for the financial services industry in general. Price fluctuations may be unrelated to the operating performance of particular companies.

Our failure to effectively deploy the net proceeds may have an adverse impact on our financial performance and the value of our common stock.

We intend to invest between $32.0 million and $43.5 million of the net proceeds of the offering (or $50.2 million at the adjusted maximum of the offering range) in Kaiser Federal Bank. We may use the remaining net proceeds to invest in short-term investments, pay cash dividends, repurchase shares of common stock, acquire other financial institutions or for other general corporate purposes. We also expect to use a portion of the net proceeds we retain to fund a loan for the purchase of shares of common stock in the offering by the employee stock ownership plan. Kaiser Federal Bank expects to use part of the proceeds it receives from us to repay a $20 million Federal Home Loan Bank of San Francisco borrowing that matures on November 29, 2010 and has a fixed rate of interest of 4.77%, to expand its branch network or to acquire other financial institutions, including FDIC-assisted transactions, or other financial services companies primarily in Southern California as opportunities arise, to support increased lending and other products and services and for other general corporate purposes. However, with the exception of the loan to the employee stock ownership plan and the repayment of outstanding borrowings from the Federal Home Loan Bank of San Francisco, we have not allocated specific amounts of the net proceeds for any of these purposes, and we will have significant flexibility in determining the amount of the net proceeds we apply to different uses and the timing of such applications. We have not established a timetable for reinvesting of the net proceeds, and we cannot predict how long we will require to reinvest the net proceeds. See “How We Intend to Use the Proceeds from the Offering.”

Our return on equity will be low following the stock offering. This could negatively affect the trading price of our shares of common stock.

Net income divided by average equity, known as “return on equity,” is a ratio many investors use to compare the performance of a financial institution to its peers. Following the stock offering, we expect our consolidated equity to be between $150.1 million at the minimum of the offering range and $182.8 million at the adjusted maximum of the offering range. Based upon our income for the nine months ended March 31, 2010, and these pro forma equity levels, our return on equity would be 1.17% and 0.96% at the minimum and adjusted maximum of the offering range, respectively, on an annualized basis. We expect our return on equity to remain low until we are able to leverage the additional capital we receive from the stock offering. Although we will be able to increase net interest income using proceeds of the stock offering, our return on equity will be negatively affected by our continuing expenses of being a public company and added expenses associated with our employee stock ownership plan and the stock-based benefit plan we intend to adopt. Until we can increase our net interest income and non-interest income and leverage the capital raised in the stock offering, we expect our return on equity to remain low, which may reduce the market price of our shares of common stock.

Our stock-based benefit plans would increase our expenses and reduce our income.

We intend to adopt one or more new stock-based benefit plans after the offering, subject to stockholder approval, which would increase our annual employee compensation and benefit expenses related to the stock options and shares granted to participants under our stock-based benefit plan. The actual amount of these new stock-related compensation and benefit expenses will depend on the number of options and stock awards actually granted under the plan, the fair market value of our stock or options on the date of grant, the vesting period and other factors which we cannot predict at this time. If the stock-based benefit plan is implemented within one year of the completion of the offering, the number of shares of common stock reserved for issuance for awards of restricted stock or grants of options under such stock-based benefit plan may not exceed 4% and 10%, respectively, of the shares sold in the offering, subject to adjustment as may be required by Office of Thrift Supervision regulations or policy to reflect stock options or restricted stock previously granted by K-Fed Bancorp or Kaiser Federal Bank. If we award restricted shares of common stock or grant options in excess of these amounts under stock-based benefit plans adopted more than one year after the completion of the offering, our costs would increase further.

In addition, we would recognize expense for our employee stock ownership plan when shares are committed to be released to participants’ accounts (i.e., as the loan used to acquire these shares is repaid), and we would recognize expense for restricted stock awards and stock options over the vesting period of awards made to recipients. The expense in the first year following the offering has been estimated to be approximately $460,000 ($312,000 after tax) at the adjusted maximum of the offering range as set forth in the pro forma financial information under “Pro Forma Data,” assuming the $10.00 per share purchase price as fair market value. Actual expenses, however, may be higher or lower, depending on the price of our common stock. For further discussion of our proposed stock-based plans, see “Management—Compensation Discussion and Analysis—Long-Term Stock-Based Compensation.”

The implementation of stock-based benefit plans may dilute your ownership interest. Historically, stockholders have approved these stock-based benefit plans.

We intend to adopt one or more new stock-based benefit plans following the stock offering. These plans may be funded either through open market purchases or from the issuance of authorized but unissued shares of common stock. Our ability to repurchase shares of common stock to fund these plans will be subject to many factors, including, but not limited to, applicable regulatory restrictions on stock repurchases, the availability of stock in the market, the trading price of the stock, our capital levels, alternative uses for our capital and our financial performance. While our intention is to fund this plan through open market purchases, stockholders would experience a 8.54% reduction in ownership interest at the adjusted maximum of the offering range in the event newly issued shares of our common stock are used to fund stock options or shares of restricted common stock under the plan in an amount equal to up to 10% and 4%, respectively, of the shares sold in the offering. In the event we adopt the plan within one year following the conversion, shares of common stock reserved for issuance pursuant to awards of restricted stock and grants of options under the stock-based benefit plan would be limited to 4% and 10%, respectively, of the total shares sold in the offering, subject to adjustment as may be required by Office of Thrift Supervision regulations or policy to reflect stock options or restricted stock previously granted by K-Fed Bancorp or Kaiser Federal Bank. In the event we adopt the plan more than one year following the conversion, the plan would not be subject to these limitations.

Although the implementation of the stock-based benefit plan will be subject to stockholder approval, historically, the overwhelming majority of stock-based benefit plans adopted by savings institutions and their holding companies following mutual-to-stock conversions have been approved by stockholders.

Our current intention is to adopt stock-based benefit plans more than one year following the stock offering. Stock-based benefit plans adopted more than one year following the stock offering may exceed regulatory restrictions on the size of stock-based benefit plans adopted within one year, which would further increase our costs.

If we adopt stock-based benefit plans more than one year following the completion of the stock offering, then grants of shares of common stock or stock options under our stock-based benefit plans may exceed 4% and 10%, respectively, of our total outstanding shares. Stock-based benefit plans that provide for awards in excess of these amounts would increase our costs beyond the amounts estimated in “—Our stock-based benefit plans would increase our expenses, which would reduce our income.” Stock-based benefit plans that provide for awards in excess of these amounts could also result in dilution to stockholders in excess of that described in “—The implementation of stock-based benefit plans may dilute your ownership interest.” Although the implementation of the stock-based benefit plan would be subject to stockholder approval, the determination as to the timing of the implementation of such a plan would be at the discretion of our board of directors.

Various factors may make takeover attempts more difficult to achieve.

Our board of directors has no current intention to sell control of Kaiser Federal Financial Group, Inc. Provisions of our articles of incorporation and bylaws, federal regulations, Maryland law and various other factors may make it more difficult for companies or persons to acquire control of Kaiser Federal Financial Group, Inc. without the consent of our board of directors. You may want a takeover attempt to succeed because, for example, a potential acquiror could offer a premium over the then prevailing price of our common stock. The factors that may discourage takeover attempts or make them more difficult include:

●

Office of Thrift Supervision regulations. Office of Thrift Supervision regulations prohibit, for three years following the completion of a conversion, the direct or indirect acquisition of more than 10% of any class of equity security of a savings institution regulated by the Office of Thrift Supervision without the prior approval of the Office of Thrift Supervision.

●

Articles of Incorporation of Kaiser Federal Financial Group, Inc. and statutory provisions. Provisions of the articles of incorporation and bylaws of Kaiser Federal Financial Group, Inc. and Maryland law may make it more difficult and expensive to pursue a takeover attempt that management opposes, even if the takeover is favored by a majority of our stockholders. These provisions also would make it more difficult to remove our current board of directors or management, or to elect new directors. Specifically, under our articles of incorporation, directors will be divided into three classes, and directors may only be removed for cause by the holders of a majority of our outstanding common stock entitled to vote on the matter. In addition, under Maryland law, any person who acquires more than 10% of the common stock of Kaiser Federal Financial Group, Inc. without the prior approval of its board of directors would be prohibited from engaging in any type of business combination with Kaiser Federal Financial Group, Inc. for a five-year period. Any business combination after the five year prohibition would be subject to super-majority stockholder approval or minimum price requirements. Additional provisions include limitations on voting rights of beneficial owners of more than 10% of our common stock, the election of directors to staggered terms of three years and not permitting cumulative voting in the election of directors. Our articles of incorporation and bylaws provide that special meetings of stockholders can be called by our president, a majority of the whole board of directors, or by stockholders entitled to cast a majority of all votes entitled to vote at the meeting. Our articles of incorporation provide that at least 80% of the total votes eligible to be voted are required to approve certain amendments to the articles of incorporation, as described in “Comparison of Stockholders’ Rights For Existing Stockholders of K-Fed Bancorp—Amendment of Governing Instruments.” Our articles of incorporation permit our board of directors to evaluate all relevant factors in exercising its business judgment with respect to transactions that could result in a change in control. Our bylaws also contain provisions regarding the timing and content of stockholder proposals and nominations and qualification for service on the board of directors.

●

Charter of Kaiser Federal Bank. The charter of Kaiser Federal Bank will provide that for a period of five years from the closing of the conversion and stock offering, no person other than Kaiser Federal Financial Group, Inc. may offer directly or indirectly to acquire the beneficial ownership of more than 10% of any class of equity security of Kaiser Federal Bank. This provision does not apply to any tax-qualified employee benefit plan we establish, as well as other acquisitions specified in the charter. In addition, during this five-year period, all shares owned over the 10% limit may not be voted on any matter submitted to stockholders for a vote.

●

Stock options and restricted stock. We have previously granted to key employees and directors stock options and shares of restricted stock that will require payments to these persons in the event of a change in control of Kaiser Federal Financial Group, Inc. We currently expect to issue additional stock options and shares of restricted stock following the conversion. These payments may have the effect of increasing the costs of acquiring Kaiser Federal Financial Group, Inc., thereby discouraging future takeover attempts.

●

Significant ownership by our directors, executive officers and stock benefit plans. Following the conversion and stock offering, our directors, executive officers and stock benefit plans are expected to beneficially own in the aggregate approximately 10.1% of our shares of common stock to be outstanding based upon sales of shares at the minimum of the offering range. The significant ownership percentage could make it more difficult to obtain the required vote for a takeover or merger that management opposes.

●

Employment agreements. Kaiser Federal Financial Group, Inc will implement employment agreements with each of its executive officers following the stock offering. These agreements may have the effect of increasing the costs of acquiring Kaiser Federal Financial Group, Inc., thereby discouraging future takeover attempts.

See “Restrictions on Acquisition of Kaiser Federal Financial Group, Inc.”

There may be a decrease in stockholders’ rights for existing stockholders of K-Fed Bancorp.

As a result of the conversion, existing stockholders of K-Fed Bancorp will become stockholders of Kaiser Federal Financial Group, Inc. In addition to the provisions discussed above that may discourage takeover attempts that are favored by stockholders, some rights of stockholders of Kaiser Federal Financial Group, Inc. will be reduced compared to the rights stockholders currently have in K-Fed Bancorp. The reduction in stockholder rights results from differences between the federal and Maryland charters and bylaws, and from distinctions between federal and Maryland law. Many of the differences in stockholder rights under the articles of incorporation and bylaws of Kaiser Federal Financial Group, Inc. are not mandated by Maryland law but have been chosen by management as being in the best interests of Kaiser Federal Financial Group, Inc. and its stockholders. The articles of incorporation and bylaws of Kaiser Federal Financial Group, Inc. include the following provisions: (i) allowing the board of directors to change the authorized number of shares without stockholder approval; (ii) the restriction on the payment of dividends under Maryland corporate law; (iii) filling vacancies on the board of directors; (iv) limitations on liability for directors and officers; (v) indemnification of directors, officers, employees and agents; (vi) the calling of special meetings of stockholders; (vii) greater lead time required for stockholders to submit proposals for new business or to nominate directors; (viii) the right of a stockholder to examine the books and records of the company; (ix) limitations on the voting rights of stockholders owning more than 10% of our voting shares; (x) restrictions on certain types of business combinations with interested stockholders; (xi) consideration by the board of directors of certain factors when considering a change in control of the company; and (xii) approval by at least 80% of the outstanding shares of capital stock entitled to vote generally is required to amend the bylaws and certain provisions of the articles of incorporation. See “Comparison of Stockholders’ Rights For Existing Stockholders of K-Fed Bancorp” for a discussion of these differences.

You may not revoke your decision to purchase Kaiser Federal Financial Group, Inc. common stock in the subscription or community offerings after you send us your order.

Funds submitted or automatic withdrawals authorized in connection with a purchase of shares of common stock in the subscription and community offerings will be held by us until the completion or termination of the conversion and offering, including any extension of the expiration date. Because completion of the conversion and offering will be subject to regulatory approvals and an update of the independent appraisal prepared by RP Financial, LC., among other factors, there may be one or more delays in the completion of the conversion and offering. Orders submitted in the subscription and community offerings are irrevocable, and purchasers will have no access to their funds unless the offering is terminated, or extended beyond [Extension date #1], or the number of shares to be sold in the offering is increased to more than 10,580,000 shares or decreased to fewer than 6,800,000 shares.

An active trading market for our common stock may not develop.

K-Fed Bancorp’s common stock is currently quoted on the Nasdaq Global Market. Upon completion of the conversion, the common stock of Kaiser Federal Financial Group, Inc. will replace the existing shares. An active public trading market for Kaiser Federal Financial Group, Inc.’s common stock may not develop or be sustained after this stock offering. If an active trading market for our common stock does not develop, you may not be able to sell all of your shares of common stock on short notice, and the sale of a large number of shares at one time could depress the market price.

The distribution of subscription rights could have adverse income tax consequences.

If the subscription rights granted to certain depositors of Kaiser Federal Bank are deemed to have an ascertainable value, receipt of such rights may be taxable in an amount equal to such value. Whether subscription rights are considered to have ascertainable value is an inherently factual determination. We have received an opinion of counsel, Luse Gorman Pomerenk & Schick, P.C., that such rights have no value. Such opinion is not binding, however, on the Internal Revenue Service.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

OF K-FED BANCORP AND SUBSIDIARY

The following tables set forth selected consolidated historical financial and other data of K-Fed Bancorp and its subsidiary for the periods and at the dates indicated. The following is only a summary and you should read it in conjunction with the consolidated financial statements of K-Fed Bancorp and notes beginning on page F-1 of this prospectus. The information at June 30, 2009 and 2008 and for the years ended June 30, 2009, 2008 and 2007 is derived in part from the audited consolidated financial statements that appear in this prospectus. The information at June 30, 2007, 2006 and 2005 and for the years ended June 30, 2006 and 2005 is derived in part from audited consolidated financial statements that do not appear in this prospectus. The operating data for the nine months ended March 31, 2010 and 2009 and the financial condition data at March 31, 2010 were not audited. However, in the opinion of management of K-Fed Bancorp, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the unaudited periods have been made. No adjustments were made other than normal recurring entries. The results of operations for the nine months ended March 31, 2010 are not necessarily indicative of the results of operations that may be expected for the entire year.

	At March 31,		At June 30,
	2010		2009		2008		2007		2006		2005
	(Unaudited)
	(Dollars in thousands)
Selected Financial Condition Data:
Total assets	$	893,134	$	895,097	$	849,291	$	799,870	$	739,114	$	640,097
Cash and cash equivalents		66,137		73,705		51,240		22,339		25,579		17,315
Loans receivable, net		752,607		746,875		742,191		699,143		634,093		537,567
Securities available-for-sale		2,748		4,236		8,539		13,579		11,289		18,848
Securities held-to-maturity		4,101		5,528		7,504		21,096		24,738		30,834
Interest earning time deposits in other financial institutions		24,146		25,508		—		7,363		9,010		9,010
Federal Home Loan Bank stock		12,649		12,649		12,540		9,870		8,746		4,027
Total deposits		648,738		566,193		495,058		494,128		463,454		475,792
Borrowings		147,000		207,004		235,019		210,016		179,948		70,777
State of California time deposit		—		25,000		25,000		—		—		—
Total stockholders’ equity		93,021		92,558		90,328		91,957		92,337		90,440

	For the nine months ended March 31,				For the year ended June 30,
	2010		2009		2009		2008		2007		2006		2005
	(Unaudited)
	(Dollars in thousands, except per share data)
Selected Operating Data:
Total interest income	$	33,788	$	33,902	$	45,173	$	45,238	$	41,166	$	35,821	$	28,168
Total interest expense		13,926		17,654		22,883		25,769		23,140		17,464		10,800
Net interest income		19,862		16,248		22,290		19,469		18,026		18,357		17,368
Provision for loan losses		8,787		2,007		2,586		962		529		652		406
Net interest income after provision for loan losses		11,075		14,241		19,704		18,507		17,497		17,705		16,962
Total non-interest income		3,508		3,426		4,549		4,320		4,259		3,426		3,056
Terminated stock offering costs		—		—		—		1,279		—		—		—
Noninterest expense		12,843		12,120		16,749		15,547		14,588		13,476		12,041
Total non-interest expense		12,843		12,120		16,749		16,826		14,588		13,476		12,041
Income before income tax expense		1,740		5,547		7,504		6,001		7,168		7,655		7,977
Income tax expense		427		2,013		2,755		2,133		2,504		2,726		2,980
Net income	$	1,313	$	3,534	$	4,749	$	3,868	$	4,664	$	4,929	$	4,997
Basic earnings per share	$	0.10	$	0.27	$	0.36	$	0.29	$	0.34	$	0.36	$	0.36
Diluted earnings per share	$	0.10	$	0.27	$	0.36	$	0.29	$	0.34	$	0.36	$	0.36
Dividends per share	$	0.33	$	0.33	$	0.44	$	0.42	$	0.39	$	0.28	$	0.16

	At or for the nine months ended March 31,						At or for the year ended June 30,
	2010			2009			2009			2008			2007			2006			2005
	(unaudited)
Selected Operating Ratios:
Return on assets (ratio of net income to average total assets)		0.20	%		0.55	%		0.55	%		0.47	%		0.61	%		0.68	%		0.82	%
Return on equity (ratio of net income to average total equity)		1.88	%		5.16	%		5.21	%		4.18	%		5.07	%		5.33	%		5.49	%
Dividend payout ratio (1)		328.71	%		122.75	%		121.52	%		146.82	%		113.66	%		78.62	%		44.80	%
Ratio of non-interest expense to average total assets (2)		1.92	%		1.89	%		1.94	%		2.03	%		1.90	%		1.87	%		1.97	%
Efficiency ratio (3)		54.95	%		61.60	%		62.41	%		65.35	%		65.46	%		61.86	%		58.96	%
Ratio of average interest-earning assets to average interest-bearing liabilities		115.78	%		115.34	%		115.01	%		115.99	%		117.84	%		119.38	%		124.49	%
Average interest rate spread		2.77	%		2.21	%		2.29	%		1.93	%		1.87	%		2.17	%		2.48	%
Interest rate spread at end of period		2.84	%		2.45	%		2.57	%		2.11	%		1.84	%		2.18	%		2.33	%
Net interest margin (4)		3.11	%		2.65	%		2.71	%		2.45	%		2.43	%		2.66	%		2.93	%

Asset Quality Ratios:
Non-performing assets to total assets		3.34	%		0.78	%		1.05	%		0.35	%		0.18	%		0.02	%		0.13	%
Allowance for loan losses to non-performing loans(5)		44.40	%		70.98	%		51.69	%		186.66	%		245.84	%		4,062.69	%		305.97	%
Allowance for loan losses to total loans (5) (6)		1.68	%		0.57	%		0.61	%		0.43	%		0.40	%		0.43	%		0.45	%
Net charge-offs to average outstanding loans		0.10	%		0.17	%		0.16	%		0.07	%		0.07	%		0.06	%		0.06	%
Non-performing loans to total loans		3.77	%		0.80	%		1.18	%		0.23	%		0.16	%		0.01	%		0.15	%

Capital Ratios:
Equity to total assets at end of period		10.42	%		10.39	%		10.34	%		10.64	%		11.50	%		12.54	%		14.18	%
Average equity to average assets		10.44	%		10.69	%		10.57	%		11.17	%		11.95	%		12.84	%		14.85	%
Tier 1 leverage (Kaiser Federal Bank only)		8.89	%		8.65	%		8.65	%		8.40	%		8.27	%		9.58	%		10.17	%
Tier 1 risk-based (Kaiser Federal Bank only)		12.74	%		12.68	%		12.76	%		12.31	%		12.69	%		15.42	%		16.12	%
Total risk-based (Kaiser Federal Bank only)		13.99	%		13.21	%		13.32	%		12.81	%		13.23	%		16.03	%		16.74	%

Other Data:
Number of branches		9			9			9			9			9			7			5
Number of ATMs		57			56			56			54			54			52			30
Number of loans		7,516			9,095			8,800			10,480			9,442			8,942			8,847
Number of deposit accounts		67,334			66,402			66,988			65,668			66,330			64,995			65,724
Assets in millions per total number of full-time equivalent employees	$	9.02		$	9.48		$	9.62		$	9.54		$	8.79		$	7.46		$	7.44

(1)	The dividend payout ratio is calculated using dividends declared, including those waived by K-Fed Bancorp’s mutual holding company parent, K-Fed Mutual Holding Company, divided by net income. The following table shows information regarding cash dividends paid to our stockholders:

	For the nine months ended March 31,				For the year ended June 30,
	2010		2009		2009		2008		2007		2006		2005
Dividends paid to public stockholders	$	1,392	$	1,414	$	1,872	$	1,957	$	1,844	$	1,394	$	821
Dividends paid to K-Fed Mutual Holding Company		—		—		—		—		—		—		—
Total dividends paid	$	1,392	$	1,414	$	1,872	$	1,957	$	1,844	$	1,394	$	821
Total dividends waived by K-Fed Mutual Holding Company	$	2,924	$	2,924	$	3,899	$	3,722	$	3,456	$	2,481	$	1,418
Total dividends paid and total dividends waived by K-Fed Mutual Holding Company	$	4,316	$	4,338	$	5,771	$	5,679	$	5,300	$	3,875	$	2,239

(2)	Noninterest expense, exclusive of terminated stock offering costs.

(3)	Efficiency ratio represents noninterest expense as a percentage of net interest income plus noninterest income, exclusive of securities gains and losses and terminated stock offering costs.

(4)	Net interest income divided by average interest-earning assets.

(5)	The allowance for loan losses at March 31, 2010, June 30, 2009, 2008, 2007, 2006, and 2005 was $12.8 million, $4.6 million, $3.2 million, $2.8 million, $2.7 million, and $2.4 million, respectively.

(6)	Total loans are net of deferred fees and costs.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but are not limited to:

●

statements of our goals, intentions and expectations;

●

statements regarding our business plans, prospects, growth and operating strategies;

●

statements regarding the asset quality of our loan and investment portfolios; and

●

estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

●

general economic conditions, either nationally or in our market areas, that are worse than expected;

●

fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market area;

●

the credit risks of lending activities, including changes in the levels and trends in loans delinquencies and write-offs and changes in our allowance for loans losses and provisions for loan losses that may be impacted by deterioration in the housing and commercial real estate markets;

●

competition among depository and other financial institutions;

●

inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;

●

adverse changes in the securities markets;

●

changes in laws or government regulations or policies affecting financial institutions, including changes in our primary federal regulator, regulatory fees and capital requirements;

●

results of examinations of us by the Office of Thrift Supervision or other regulatory authorities, including the possibility that any such authority may, among other things, require us to increase our allowance for loan losses, write-down assets, adjust our regulatory capital position or affect our ability to borrow funds or maintain or increase our deposits which could adversely affect our liquidity and earnings;

●

our ability to enter new markets successfully and capitalize on growth opportunities;

●

our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

●

changes in consumer spending, borrowing and savings habits;

●

the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions;

●

our ability to pay dividends;

●

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board the Securities and Exchange Commission and the Public Company Accounting Oversight Board;

●

changes in our organization, compensation and benefit plans;

●

changes in the financial condition or future prospects of issuers of securities that we own; and

●

other economic competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services and the other risks described elsewhere in this Prospectus.

Some of these and other factors are discussed in this prospectus under the caption “Risk Factors” and elsewhere in this prospectus. Such developments could have an adverse impact on our financial position and our results of operations. Please see “Risk Factors” beginning on page 20 .

Any forward-looking statements are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise and forward-looking statements included in this prospectus or to update the reasons why actual results could differ from those contained in such statements, whether as the result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this prospectus might not occur, and you should not put undue reliance on any forward-looking statements.

HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING

Although we cannot determine what the actual net proceeds from the sale of the shares of common stock in the offering will be until the offering is completed, we anticipate that the net proceeds will be between $63.9 million and $87.1 million, or $100.4 million if the offering range is increased by 15%.

We intend to distribute the net proceeds as follows:

	Based Upon the Sale at $10.00 Per Share of
	6,800,000 Shares						8,000,000 Shares						9,200,000 Shares						10,580,000 Shares (1)
	Amount			Percent of Net Proceeds			Amount			Percent of Net Proceeds			Amount			Percent of Net Proceeds			Amount			Percent of Net Proceeds
	(Dollars in thousands)

Offering proceeds	$	68,000					$	80,000					$	92,000					$	105,800
Less offering expenses		(4,074	)					(4,511	)					(4,948	)					(5,450	)
Net offering proceeds	$	63,926			100.0	%	$	75,489			100.0	%	$	87,052			100.0	%	$	100,350			100.0	%

Distribution of net proceeds:
To Kaiser Federal Bank	$	31,963			50.0	%	$	37,745			50.0	%	$	43,526			50.0	%	$	50,175			50.0	%
To fund loan to employee stock ownership plan	$	4,080			6.4	%	$	4,800			6.4	%	$	5,520			6.3	%	$	6,348			6.3	%
Retained by Kaiser Federal Financial Group, Inc.	$	27,883			43.6	%	$	32,944			43.6	%	$	38,006			43.7	%	$	43,827			43.7	%

(1)	As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

Payments for shares of common stock made through withdrawals from existing deposit accounts will not result in the receipt of new funds for investment but will result in a reduction of Kaiser Federal Bank’s deposits. The net proceeds may vary because total expenses relating to the offering may be more or less than our estimates. For example, our expenses would increase if a syndicated community offering were used to sell shares of common stock not purchased in the subscription and community offerings. In addition, amounts shown for the distribution of the net proceeds at the minimum of the offering range to fund the loan to the employee stock ownership plan and to be proceeds retained by Kaiser Federal Financial Group, Inc. may change if we exercise our right to have the employee stock ownership plan purchase more than 6% of the shares of common stock offered if necessary to complete the offering at the minimum of the offering range.

Kaiser Federal Financial Group, Inc. may use the proceeds it retains from the offering:

●

to fund a loan to the employee stock ownership plan to purchase shares of common stock in the offering;

●

to invest in securities;

●

to finance the acquisition of financial institutions, although we do not currently have any agreements or understandings regarding any specific acquisition transaction;

●

to pay cash dividends to stockholders;

●

to repurchase shares of our common stock; and

●

for other general corporate purposes.

Initially, a substantial portion of the net proceeds will be invested in short-term investments, investment-grade debt obligations and mortgage-backed securities.

Under current Office of Thrift Supervision regulations, we may not repurchase shares of our common stock during the first year following the completion of the conversion, except when extraordinary circumstances exist and with prior regulatory approval.

Kaiser Federal Bank may use the net proceeds it receives from the offering:

●

to repay a $20 million Federal Home Loan Bank of San Francisco borrowing that matures on November 29, 2010 and has a fixed rate of interest of 4.77%;

●

to fund the origination of new loans, including multi-family residential, one-to-four family residential, and consumer loans;

●

to enhance existing products and services and to support the development of new products and services;

●

to expand our retail banking franchise by acquiring branches from other financial institutions or by leasing new branches primarily in Southern California, although we do not currently have any agreements or understandings regarding the establishment of specific branches;

●

to acquire other financial institutions, including FDIC-assisted transactions, or other financial services companies primarily in Southern California as opportunities arise, although we do not currently have any agreements or understandings regarding any specific acquisition;

●

to invest in securities; and

●

and for other general corporate purposes.

Initially, a substantial portion of the net proceeds will be invested in short-term investments, investment-grade debt obligations and mortgage-backed securities. We have not determined specific amounts of the net proceeds that would be used for the purposes described above. The use of the proceeds outlined above may change based on many factors, including, but not limited to, changes in interest rates, equity markets, laws and regulations affecting the financial services industry, our relative position in the financial services industry, the attractiveness of potential acquisitions to expand our operations, and overall market conditions.

We expect our return on equity to decrease as compared to our performance in recent years, until we are able to reinvest effectively the additional capital raised in the offering. Until we can increase our net interest income and non-interest income, we expect our return on equity to be below the industry average, which may negatively affect the value of our common stock. See “Risk Factors—Our failure to effectively deploy the net proceeds may have an adverse impact on our financial performance and the value of our common stock.”

OUR DIVIDEND POLICY

We have paid quarterly cash dividends since the second quarter of fiscal 2005. We currently pay a quarterly cash dividend of $0.11 per share, or $0.44 on an annualized basis. After we complete the conversion, we intend to continue to pay cash dividends on a quarterly basis, although at a reduced level, the amount of which will be determined following completion of the conversion. The dividend rate and the continued payment of dividends will depend on a number of factors including our capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions. No assurance can be given that we will continue to pay dividends or that they will not be reduced or eliminated in the future.

Under the rules of the Office of Thrift Supervision, Kaiser Federal Bank will not be permitted to pay dividends on its capital stock to Kaiser Federal Financial Group, Inc., its sole stockholder, if Kaiser Federal Bank’s stockholder’s equity would be reduced below the amount of the liquidation account established in connection with the conversion. In addition, Kaiser Federal Bank will not be permitted to make a capital distribution if, after making such distribution, it would be undercapitalized. Any payment of dividends by Kaiser Federal Bank to us that would be deemed to be drawn out of Kaiser Federal Bank’s bad debt reserves, if any, would require a payment of taxes at the then-current tax rate by Kaiser Federal Bank on the amount of earnings deemed to be removed from the reserves for such distribution. Kaiser Federal Bank does not intend to make any distribution to us that would create such a federal tax liability. See “The Conversion and Offering—Liquidation Rights.” For information concerning additional federal and state law and regulations regarding the ability of Kaiser Federal Bank to make capital distributions, including the payment of dividends to K-Fed Bancorp, see “Taxation—Federal Taxation” and “Supervision and Regulation—Federal Banking Regulation.”

Unlike Kaiser Federal Bank, Kaiser Federal Financial Group, Inc. is not restricted by Office of Thrift Supervision regulations on the payment of dividends to its stockholders, although the source of dividends will depend on the net proceeds retained by us and earnings thereon, and dividends from Kaiser Federal Bank. K-Fed Bancorp currently does not receive cash dividends from Kaiser Federal Bank. In addition, Kaiser Federal Financial Group, Inc. will be subject to state law limitations on the payment of dividends. Maryland law generally limits dividends to an amount equal to the excess of our capital surplus over payments that would be owed upon dissolution to stockholders whose preferential rights upon dissolution are superior to those receiving the dividend, and to an amount that would not make us insolvent.

We will file a consolidated federal tax return with Kaiser Federal Bank. Accordingly, it is anticipated that any cash distributions made by us to our stockholders would be treated as cash dividends and not as a non-taxable return of capital for federal tax purposes. Additionally, pursuant to Office of Thrift Supervision regulations, during the three-year period following the conversion, we will not take any action to declare an extraordinary dividend to stockholders that would be treated by recipients as a tax-free return of capital for federal income tax purposes.

MARKET FOR THE COMMON STOCK

K-Fed Bancorp’s common stock is currently quoted on the Nasdaq Global Market under the symbol “KFED.” Upon completion of the conversion, the new shares of common stock of Kaiser Federal Financial Group, Inc. will replace the existing shares. We expect that Kaiser Federal Financial Group, Inc.’s shares of common stock will trade on the Nasdaq Global Market under the trading symbol “KFFG.” In order to list our stock on the Nasdaq Global Market, we are required to have at least three broker-dealers who will make a market in our common stock. K-Fed Bancorp currently has more than three market makers, including Keefe, Bruyette & Woods, Inc.

The development of a public market having the desirable characteristics of depth, liquidity and orderliness depends on the existence of willing buyers and sellers, the presence of which is not within our control or that of any market maker. The number of active buyers and sellers of our common stock at any particular time may be limited, which may have an adverse effect on the price at which our common stock can be sold. There can be no assurance that persons purchasing the common stock will be able to sell their shares at or above the $10.00 price per share in the offering. Purchasers of our common stock should have a long-term investment intent and should recognize that there may be a limited trading market in our common stock.

The following table sets forth the high and low trading prices for shares of K-Fed Bancorp common stock and cash dividends paid per share for the periods indicated. As of the close of business on [Stockholder Record Date], there were 13,290,200 shares, outstanding, including 4,428,450 publicly held shares of K-Fed Bancorp common stock outstanding (excluding shares held by K-Fed Mutual Holding Company), and approximately _____ stockholders of record. In connection with the conversion, each existing publicly held share of common stock of K-Fed Bancorp will be converted into a right to receive a number of shares of Kaiser Federal Financial Group, Inc. common stock, based upon the exchange ratio that is described in other sections of this prospectus. See “The Conversion and Offering—Share Exchange Ratio for Current Stockholders.”

The high and low trading prices for the quarterly periods noted below were obtained from the Nasdaq Stock Market.

	Market Price Range
	High		Low		Dividends
Fiscal Year ending June 30, 2010
Quarter ended September 30, 2009	$	10.30	$	8.16	$	0.11
Quarter ended December 31, 2009		9.50		8.00		0.11
Quarter ended March 31, 2010		9.27		7.30		0.11

Fiscal Year ended June 30, 2009
Quarter ended September 30, 2008	$	10.99	$	8.46	$	0.11
Quarter ended December 31, 2008		9.70		6.20		0.11
Quarter ended March 31, 2009		8.49		6.15		0.11
Quarter ended June 30, 2009		10.33		6.76		0.11

Fiscal Year ended June 30, 2008
Quarter ended September 30, 2007	$	16.09	$	12.43	$	0.10
Quarter ended December 31, 2007		14.12		9.68		0.10
Quarter ended March 31, 2008		12.25		7.61		0.11
Quarter ended June 30, 2008		11.98		10.35		0.11

On May____, 2010, the business day immediately preceding the public announcement of the conversion, and on __________________, the closing prices of K-Fed Bancorp common stock as reported on the Nasdaq Global Market were $_____ per share and $____ per share, respectively. On the effective date of the conversion, all publicly held shares of K-Fed Bancorp common stock, including shares of common stock held by our officers and directors, will be converted automatically into and become the right to receive a number of shares of Kaiser Federal Financial Group, Inc. common stock determined pursuant to the exchange ratio. See “The Conversion and Offering—Share Exchange Ratio for Current Stockholders.” Options to purchase shares of K-Fed Bancorp common stock will be converted into options to purchase a number of shares of Kaiser Federal Financial Group, Inc. common stock determined pursuant to the exchange ratio, for the same aggregate exercise price. See “Beneficial Ownership of Common Stock.”

HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

At March 31, 2010, Kaiser Federal Bank exceeded all of the applicable regulatory capital requirements and was considered “well capitalized.” The table below sets forth the historical equity capital and regulatory capital of Kaiser Federal Bank at March 31, 2010, and the pro forma regulatory capital of Kaiser Federal Bank, after giving effect to the sale of shares of common stock at $10.00 per share. The table assumes the receipt by Kaiser Federal Bank of 50% of the net offering proceeds. See “How We Intend to Use the Proceeds from the Offering.”


	Kaiser Federal Bank Historical at March 31, 2010					Pro Forma at March 31, 2010, Based Upon the Sale in the Offering of (1)
	Kaiser Federal Bank Historical at March 31, 2010					6,800,000 Shares							8,000,000 Shares						9,200,000 Shares						10,580,000 Shares (2)
	Amount		Percent of Assets (3)				Amount			Percent of Assets (3)			Amount			Percent of Assets (3)			Amount			Percent of Assets (3)			Amount			Percent of Assets (3)
	(Dollars in thousands)

Equity	$	82,332		9.25	%		$	107,490			11.65	%	$	112,072			12.08	%	$	116,653			12.49	%	$	121,922			12.96	%

Core capital	$	78,798		8.89	%		$	103,956			11.31	%	$	108,538			11.74	%	$	113,119			12.16	%	$	118,388			12.63	%
Core requirement (4)		35,473		4.00				36,752			4.00			36,983			4.00			37,215			4.00			37,480			4.00
Excess	$	43,325		4.89	%		$	67,204			7.31	%	$	71,555			7.74	%	$	75,904			8.16	%	$	80,908			8.63	%

Tier 1 risk-based capital (5)	$	78,798		12.74	%		$	103,956			16.38	%	$	108,538			17.03	%	$	113,119			17.67	%	$	118,388			18.39	%
Risk-based requirement		24,759		4.00				25,383			4.00			25,498			4.00			25,614			4.00			25,747			4.00
Excess	$	54,039		8.74	%		$	78,573			12.38	%	$	83,040			13.03	%	$	87,505			13.67	%	$	92,641			14.39	%

Total risk-based capital (5)	$	86,535		13.99	%		$	111,693			17.60	%	$	116,275			18.24	%	$	120,856			18.87	%	$	126,125			19.59	%
Risk-based requirement		49,487		8.00				50,766			8.00			50,997			8.00			51,228			8.00			51,494			8.00
Excess	$	37,048		5.99	%		$	60,927			9.60	%	$	65,278			10.24	%	$	69,628			10.87	%	$	74,631			11.59	%

Reconciliation of capital infused into Kaiser Federal Bank:
Net proceeds							$	31,963					$	37,745					$	43,526					$	50,175
Less: Common stock acquired by employee stock ownership plan								(4,080	)					(4,800	)					(5,520	)					(6,348	)
Less: Common stock acquired by stock-based benefit plan								(2,720	)					(3,200	)					(3,680	)					(4,232	)
Less: MHC net liability								(5	)					(5	)					(5	)					(5	)
Pro forma increase in capital							$	25,158					$	29,740					$	34,321					$	39,590

(1)

Pro forma capital levels assume that the employee stock ownership plan purchases 6% of the shares of common stock sold in the stock offering with funds we lend. Pro forma generally accepted accounting principles (“GAAP”) and regulatory capital have been reduced by the amount required to fund this plan. See “Management” for a discussion of the employee stock ownership plan.

(2)	As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(3)	Tangible and core capital levels are shown as a percentage of total adjusted assets. Risk-based capital levels are shown as a percentage of risk-weighted assets.

(4)

The current Office of Thrift Supervision core capital requirement for financial institutions is 3% of total adjusted assets for financial institutions that receive the highest supervisory rating for safety and soundness and a 4% to 5% core capital ratio requirement for all other financial institutions.

(5)	Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 50% risk weighting.

CAPITALIZATION

The following table presents the historical consolidated capitalization of K-Fed Bancorp at March 31, 2010 and the pro forma consolidated capitalization of Kaiser Federal Financial Group, Inc. after giving effect to the conversion and offering, based upon the assumptions set forth in the “Pro Forma Data” section.


	K-Fed Bancorp Historical at March 31, 2010			Pro Forma at March 31, 2010 Based upon the Sale in the Offering at $10.00 per Share of
	K-Fed Bancorp Historical at March 31, 2010			6,800,000 Shares			8,000,000 Shares			9,200,000 Shares			10,580,000 Shares (1)
	(Dollars in thousands)

Deposits (2)	$	648,738		$	648,738		$	648,738		$	648,738		$	648,738
Borrowed funds		147,000			147,000			147,000			147,000			147,000
Total deposits and borrowed funds	$	795,738		$	795,738		$	795,738		$	795,738		$	795,738

Stockholders’ equity:
Preferred stock, $0.01 par value, 25,000,000 shares authorized (post-conversion) (3)		—			—			—			—			—
Common stock, $0.01 par value, 100,000,000 shares authorized (post-conversion); shares to be issued as reflected (3) (4)		147			102			120			138			159
Additional paid-in capital (3)		59,473			123,444			134,989			146,534			159,811
Retained earnings (5)		53,433			53,433			53,433			53,433			53,433
MHC net liability		—			(5	)		(5	)		(5	)		(5	)
Accumulated other comprehensive income		54			54			54			54			54
Less:
Common stock to be acquired by ESOP (6)		(1,820	)		(5,900	)		(6,620	)		(7,340	)		(8,168	)
Common stock to be acquired by stock-based benefit plan (7)		—			(2,720	)		(3,200	)		(3,680	)		(4,232	)
Treasury Stock		(18,266	)		(18,266	)		(18,266	)		(18,266	)		(18,266	)
Total stockholders’ equity	$	93,021		$	150,142		$	160,505		$	170,868		$	182,786

Pro Forma Shares Outstanding:
Exchange shares issued		—			3,399,002			3,998,826			4,598,650			5,288,448
Shares offered for sale		—			6,800,000			8,000,000			9,200,000			10,580,000
Total shares outstanding		13,291,325			10,199,002			11,998,826			13,798,650			15,868,448

Total stockholders’ equity as a percentage of total assets (2)		10.42	%		15.80	%		16.71	%		17.60	%		18.60	%

(1)	As adjusted to give effect to an increase in the number of shares of common stock that could occur due to a 15% increase in the offering range to reflect demand for shares or changes in market conditions following the commencement of the subscription and community offerings.

(2)	Does not reflect withdrawals from deposit accounts for the purchase of shares of common stock in the conversion and offering. These withdrawals would reduce pro forma deposits and assets by the amount of the withdrawals.

(3)

K-Fed Bancorp currently has 2,000,000 authorized shares of preferred stock and 18,000,000 authorized shares of common stock, par value $0.01 per share. On a pro forma basis, common stock and additional paid-in capital have been revised to reflect the number of shares of Kaiser Federal Financial Group, Inc. common stock to be outstanding.

(4)

No effect has been given to the issuance of additional shares of Kaiser Federal Financial Group, Inc. common stock pursuant to the exercise of options under one or more stock-based benefit plans. If the plans are implemented within the first year after the closing of the offering, an amount up to 10% of the shares of Kaiser Federal Financial Group, Inc. common stock sold in the offering will be reserved for issuance upon the exercise of options under the plans. No effect has been given to the exercise of options currently outstanding. See “Management.”

(5)	The retained earnings of Kaiser Federal Bank will be substantially restricted after the conversion. See “The Conversion and Offering—Liquidation Rights” and “Supervision and Regulation—Federal Banking Regulation.”

(6)

Assumes that 6% of the shares sold in the offering will be acquired by the employee stock ownership plan financed by a loan from Kaiser Federal Financial Group, Inc. The loan will be repaid principally from Kaiser Federal Bank’s contributions to the employee stock ownership plan. Since Kaiser Federal Financial Group, Inc. will finance the employee stock ownership plan debt, this debt will be eliminated through consolidation and no liability will be reflected on Kaiser Federal Financial Group, Inc.’s consolidated financial statements. Accordingly, the amount of shares of common stock acquired by the employee stock ownership plan is shown in this table as a reduction of total stockholders’ equity.

(Footnotes continue on following page)

(continued from previous page)

(7)

Assumes a number of shares of common stock equal to 4% of the shares of common stock to be sold in the offering will be purchased for grant by one or more stock-based benefit plans. If the stock-based benefit plans are adopted within 12 months following the conversion and stock offering, the amount reserved for restricted stock awards would be reduced by amounts purchased in the stock offering by our 401(k) plan using its purchase priority in the stock offering. The funds to be used by the plan to purchase the shares will be provided by Kaiser Federal Financial Group, Inc. The dollar amount of common stock to be purchased is based on the $10.00 per share subscription price in the offering and represents unearned compensation. This amount does not reflect possible increases or decreases in the value of common stock relative to the subscription price in the offering. As Kaiser Federal Financial Group, Inc. accrues compensation expense to reflect the vesting of shares pursuant to the plan, the credit to capital will be offset by a charge to operations. Implementation of the plan will require stockholder approval.

PRO FORMA DATA

The following table summarizes historical data of K-Fed Bancorp and pro forma data at and for the nine months ended March 31, 2010 and at and for the year ended June 30, 2009. This information is based on assumptions set forth below and in the tables, and should not be used as a basis for projections of market value of the shares of common stock following the conversion and offering.

The net proceeds in the tables are based upon the following assumptions:

●

12,100 shares of common stock will be purchased by our executive officers and directors, and their associates;

●

our employee stock ownership plan will purchase 6% of the shares of common stock sold in the offering, with a loan from Kaiser Federal Financial Group, Inc. The loan will be repaid in substantially equal payments of principal and interest (at the prime rate of interest plus 1%, calculated as of the date of the origination of the loan) over a period of 12 years. Interest income that we earn on the loan will offset the interest paid by Kaiser Federal Bank;

●

Keefe, Bruyette & Woods, Inc. will receive a fee equal to 1.0% of the dollar amount of shares of common stock sold in the subscription offering and 5.5% of the dollar amount of shares sold in the syndicated offering, with 40% of the total shares sold being subscribed for in the subscription offering and 60% in the syndicated community offering. No fee will be paid with respect to shares of common stock purchased by our qualified and non-qualified employee stock benefit plans, or stock purchased by our officers, directors and employees, and their immediate families; and

●

total expenses of the offering, other than the fees and expenses to be paid to Keefe, Bruyette & Woods, Inc., will be $1.4 million.

We calculated pro forma consolidated net income for the nine months ended March 31, 2010 and for the year ended June 30, 2009 as if the estimated net proceeds we received had been invested at the beginning of the year at an assumed interest rate of 3.15% (1.86% on an after-tax basis). This represents the average yield on 15-year fixed-rate mortgage backed securities and the five-year U.S. Treasury Note as of March 31, 2010, which, in light of current market interest rates, we consider to more accurately reflect the pro forma reinvestment rate than the arithmetic average of the weighted average yield earned on our interest earning assets and the weighted average rate paid on our deposits, which is the reinvestment rate generally required by Office of Thrift Supervision regulations.

We further believe that the reinvestment rate is factually supportable because:

●

each of the mortgage-backed securities rate and the U.S Treasury Note can be determined and/or estimated from third-party sources;

●

we believe that 15-year fixed-rate mortgage-backed securities are not subject to credit losses due to their issuance by a U.S. Government-sponsored enterprise (in this case Freddie Mac) and the financing agreements established by the U.S. Department of Treasury to support the securities; and

●

we believe that U.S. Treasury securities are not subject to credit losses due to a U.S. Government guarantee of payment of principal and interest.

The assumed U.S. Treasury Note yield was 2.55% based on the five-year U.S. Treasury Note yield reported by SNL Financial as of March 31, 2010. The assumed 15-year fixed-rate mortgage-backed securities yield was 3.55% based on the 15-year average rate from Freddie Mac’s Primary Mortgage Market Survey® for the week ending March 31, 2010 for a 15-year fixed rate mortgage (4.37%) less a servicing fee of 0.25% and a guarantee fee of 0.375%.

We calculated historical and pro forma per share amounts by dividing historical and pro forma amounts of consolidated net income and stockholders’ equity by the indicated number of shares of common stock. We adjusted these figures to give effect to the shares of common stock purchased by the employee stock ownership plan. We computed per share amounts for each period as if the shares of common stock were outstanding at the beginning of each period, but we did not adjust per share historical or pro forma stockholders’ equity to reflect the earnings on the estimated net proceeds.

The pro forma table gives effect to the implementation of one or more stock-based benefit plans. Subject to the receipt of stockholder approval, we have assumed that the stock-based benefit plans will acquire for restricted stock awards a number of shares of common stock equal to 4% of the shares of common stock sold in the stock offering at the same price for which they were sold in the stock offering. We assume that awards of common stock granted under the plans vest over a five-year period.

We have also assumed that the stock-based benefit plans will grant options to acquire shares of common stock equal to 10% of the shares of common stock sold in the stock offering. In preparing the table below, we assumed that stockholder approval was obtained, that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the stock options had a term of ten years and vested over five years. We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $2.02 for each option. In addition to the terms of the options described above, the Black-Scholes option pricing model assumed an estimated volatility rate of 33.32% for the shares of common stock (based on the volatility of K-Fed Bancorp common stock), a dividend yield of 4.99%, an expected option life of seven years and a risk-free rate of return of 2.55%.

We may grant options and award shares of common stock under one or more stock-based benefit plans in excess of 10% and 4%, respectively, of the shares of common stock sold in the stock offering and that vest sooner than over a five-year period if the stock-based benefit plans are adopted more than one year following the stock offering.

As discussed under “How We Intend to Use the Proceeds from the Stock Offering,” we intend to contribute 50% of the net proceeds from the stock offering to Kaiser Federal Bank, and we will retain the remainder of the net proceeds from the stock offering. We will use a portion of the proceeds we retain for the purpose of making a loan to the employee stock ownership plan and retain the rest of the proceeds for future use.

The pro forma table does not give effect to:

●

withdrawals from deposit accounts for the purpose of purchasing shares of common stock in the stock offering;

●

our results of operations after the stock offering; or

●

changes in the market price of the shares of common stock after the stock offering.

The following pro forma information may not be representative of the financial effects of the offering at the dates on which the offering actually occurs, and should not be taken as indicative of future results of operations. Pro forma consolidated stockholders’ equity represents the difference between the stated amounts of our assets and liabilities. The pro forma stockholders’ equity is not intended to represent the fair market value of the shares of common stock and may be different that the amounts that would be available for distribution to stockholders if we liquidated. Moreover, pro forma stockholders’ equity per share does not give effect to the liquidation account to be established in the conversion or, in the unlikely event of a liquidation of Kaiser Federal Bank, to the tax effect of the recapture of the bad debt reserve. See “The Conversion and Offering—Liquidation Rights.”

	At or for the Nine Months Ended March 31, 2010 Based upon the Sale at $10.00 Per Share of
	6,800,000 Shares			8,000,000 Shares			9,200,000 Shares			10,580,000 Shares (1)
	(Dollars in thousands, except per share amounts)

Gross proceeds of offering	$	68,000		$	80,000		$	92,000		$	105,800
Market value of shares issued in the exchange		33,990			39,988			45,987			52,884
Pro forma market capitalization	$	101,990		$	119,988		$	137,987		$	158,684

Gross proceeds of offering	$	68,000		$	80,000		$	92,000		$	105,800
Expenses		(4,074	)		(4,511	)		(4,948	)		(5,450	)
Net liability from the MHC		(5	)		(5	)		(5	)		(5	)
Estimated net proceeds		63,921			75,484			87,047			100,345
Common stock purchased by employee stock ownership plan		(4,080	)		(4,800	)		(5,520	)		(6,348	)
Common stock purchased by stock-based benefit plan		(2,720	)		(3,200	)		(3,680	)		(4,232	)
Estimated net proceeds, as adjusted	$	57,121		$	67,484		$	77,847		$	89,765

For the Nine Months Ended March 31, 2010
Consolidated net earnings:
Historical	$	1,313		$	1,313		$	1,313		$	1,313
Pro forma adjustments:
Income on adjusted net proceeds		795			939			1,083			1,250
Employee stock ownership plan (2)		(150	)		(177	)		(203	)		(234	)
Stock awards (3)		(240	)		(283	)		(326	)		(374	)
Stock options (4)		(185	)		(218	)		(250	)		(288	)
Pro forma net income	$	1,533		$	1,574		$	1,617		$	1,667

Earning per share (5):
Historical	$	0.13		$	0.11		$	0.10		$	0.09
Pro form adjustments:
Income on adjusted net proceeds		0.08			0.08			0.08			0.08
Employee stock ownership plan (2)		(0.02	)		(0.02	)		(0.02	)		(0.02	)
Stock awards (3)		(0.02	)		(0.02	)		(0.02	)		(0.02	)
Stock options (4)		(0.02	)		(0.02	)		(0.02	)		(0.02	)
Pro forma earnings per share (5) (6)	$	0.15		$	0.13		$	0.12		$	0.11

Offering price to pro forma net earnings per share		50.00	x		57.69	x		62.50	x		68.18	x
Number of shares used in earnings per share calculations		9,816,502			11,548,826			13,281,150			15,273,323

At March 31, 2010
Stockholders’ equity:
Historical	$	93,021		$	93,021		$	93,021		$	93,021
Estimated net proceeds		63,926			75,489			87,052			100,350
Equity decrease from MHC		(5	)		(5	)		(5	)		(5	)
Common stock purchased by employee stock ownership plan		(4,080	)		(4,800	)		(5,520	)		(6,348	)
Common stock purchased by stock-based benefit plan (3)		(2,720	)		(3,200	)		(3,680	)		(4,232	)
Pro forma stockholders equity	$	150,142		$	160,505		$	170,868		$	182,786
Intangible assets	$	(4,049	)	$	(4,049	)	$	(4,049	)	$	(4,049	)
Pro forma tangible stockholders equity	$	146,093		$	156,456		$	166,819		$	178,737

Stockholders’ equity per share: (7)
Historical	$	9.12		$	7.75		$	6.73		$	5.86
Estimated net proceeds		6.27			6.29			6.31			6.32
Plus: Assets received from the MHC		—			—			—			—
Common stock acquired by employee stock ownership plan		(0.40	)		(0.40	)		(0.40	)		(0.40	)
Common stock acquired by stock-based benefit plan (3)		(0.27	)		(0.27	)		(0.27	)		(0.27	)
Pro forma stockholders’ equity per share (6) (7)	$	14.72		$	13.37		$	12.37		$	11.51
Intangible assets	$	(0.40	)	$	(0.34	)	$	(0.29	)	$	(0.26	)
Pro forma tangible stockholders’ equity per share (6) (7)	$	14.32		$	13.03		$	12.08		$	11.25

Offering price as percentage of pro forma stockholders’ equity per share		67.93	%		74.79	%		80.84	%		86.88	%
Offering price as percentage of pro forma tangible stockholders’ equity per share		69.83	%		76.75	%		82.78	%		88.89	%
Number of shares outstanding for pro forma book value per share calculations		10,199,002			11,998,826			13,798,650			15,868,448

(footnotes begin on following page)

(1)	As adjusted to give effect to an increase in the number of shares that could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the stock offering.

(2)

Assumes that 6% of shares of common stock sold in the offering will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from Kaiser Federal Financial Group, Inc. Kaiser Federal Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. Kaiser Federal Bank’s total annual payments on the employee stock ownership plan debt are based upon 12 equal annual installments of principal and interest. Financial Accounting Standards Board Accounting Standards Codification 718-40, “Employers’ Accounting for Employer Stock Ownership Plans” (“ASC 718-40”) requires that an employer record compensation expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that the employee stock ownership plan shares are allocated in equal annual installments based on the number of loan repayment installments assumed to be paid by Kaiser Federal Bank, the fair value of the common stock remains equal to the subscription price and the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 41.10%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders’ equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 25,500, 30,000, 34,500 and 39,675 shares were committed to be released during the nine months ended March 31, 2010 at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively, and in accordance with ASC 718-40, only the employee stock ownership plan shares committed to be released during the nine months ended March 31, 2010 were considered outstanding for purposes of net income per share calculations.

(3)

If approved by Kaiser Federal Financial Group, Inc.’s stockholders, one or more stock-based benefit plans may purchase an aggregate number of shares of common stock equal to 4% of the shares to be sold in the offering (or a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the plans, and purchases by the plans may not occur earlier than six months after the completion of the conversion. The shares may be acquired directly from Kaiser Federal Financial Group, Inc. or through open market purchases. Shares in the stock-based benefit plan are assumed to vest over a period of five years. The funds to be used to purchase the shares will be provided by Kaiser Federal Financial Group, Inc. The table assumes that (i) the stock-based benefit plan acquires the shares through open market purchases at $10.00 per share, (ii) 20% of the amount contributed to the plan is amortized as an expense during the nine months ended March 31, 2010, and (iii) the plan expense reflects an effective combined federal and state tax rate of 41.10%. Assuming stockholder approval of the stock-based benefit plans and that shares of common stock (equal to 4% of the shares sold in the offering) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 2.60% at the maximum of the offering range.

(4)

If approved by Kaiser Federal Financial Group, Inc.’s stockholders, one or more stock-based benefit plans may grant options to acquire an aggregate number of shares of common stock equal to 10% of the shares to be sold in the offering (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the plans may not occur earlier than six months after the completion of the conversion. In calculating the pro forma effect of the stock-based benefit plans, it is assumed that the exercise price of the stock options and the trading price of the common stock at the date of grant were $10.00 per share, the estimated grant-date fair value determined using the Black-Scholes option pricing model was $2.02 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period of the options, and that 25% of the amortization expense (or the assumed portion relating to options granted to directors) resulted in a tax benefit using an assumed tax rate of 41.10%. The actual expense will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted. Under the above assumptions, the adoption of the stock-based benefit plans will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. There can be no assurance that the actual exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise of options is obtained from the issuance of authorized but unissued shares, our net income per share and stockholders’ equity per share would decrease. The issuance of authorized but unissued shares of common stock pursuant to the exercise of options under such plan would dilute stockholders’ ownership and voting interests by approximately 6.25% at the maximum of the offering range.

(5)

Per share figures include publicly held shares of K-Fed Bancorp common stock that will be exchanged for shares of Kaiser Federal Financial Group, Inc. common stock in the conversion. See “The Conversion and Offering—Share Exchange Ratio for Current Stockholders.” Net income per share computations are determined by taking the number of shares assumed to be sold in the offering and the number of new shares assumed to be issued in exchange for publicly held shares and, in accordance with ASC 718-40, subtracting the employee stock ownership plan shares which have not been committed for release during the respective periods. See footnote 2 above. The number of shares of common stock actually sold and the corresponding number of exchange shares may be more or less than the assumed amounts. Pro forma net income per share has been annualized for purposes of calculating the offering price to pro forma net earnings per share.

(6)	The retained earnings of Kaiser Federal Bank will be substantially restricted after the conversion. See “Our Dividend Policy,” “The Conversion and Offering—Liquidation Rights” and “Supervision and Regulation—Federal Banking Regulation—Capital Distributions.”

(7)

Per share figures include publicly held shares of K-Fed Bancorp common stock that will be exchanged for shares of Kaiser Federal Financial Group, Inc. common stock in the conversion. Stockholders’ equity per share calculations are based upon the sum of (i) the number of subscription shares assumed to be sold in the offering and (ii) shares to be issued in exchange for publicly held shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively. The exchange shares reflect an exchange ratio of 0.7673, 0.9028, 1.0382 and 1.1939 at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively. The number of shares actually sold and the corresponding number of exchange shares may be more or less than the assumed amounts.

	At or for the Year Ended June 30, 2009 Based upon the Sale at $10.00 Per Share of
	6,800,000 Shares			8,000,000 Shares			9,200,000 Shares			10,580,000 Shares (1)
	(Dollars in thousands, except per share amounts)

Gross proceeds of offering	$	68,000		$	80,000		$	92,000		$	105,800
Market value of shares issued in the exchange		33,990			39,988			45,987			52,884
Pro forma market capitalization	$	101,990		$	119,988		$	137,987		$	158,684

Gross proceeds of offering	$	68,000		$	80,000		$	92,000		$	105,800
Expenses		(4,074	)		(4,511	)		(4,948	)		(5,450	)
Net liability from the MHC		(5	)		(5	)		(5	)		(5	)
Estimated net proceeds		63,921			75,484			87,047			100,345
Common stock purchased by employee stock ownership plan		(4,080	)		(4,800	)		(5,520	)		(6,348	)
Common stock purchased by stock-based benefit plan		(2,720	)		(3,200	)		(3,680	)		(4,232	)
Estimated net proceeds, as adjusted	$	57,121		$	67,484		$	77,847		$	89,765

For the Year Ended June 30, 2009
Consolidated net earnings:
Historical	$	4,749		$	4,749		$	4,749		$	4,749
Pro forma adjustments:
Income on adjusted net proceeds		1,060			1,252			1,444			1,666
Employee stock ownership plan (2)		(200	)		(236	)		(271	)		(312	)
Stock awards (3)		(320	)		(377	)		(434	)		(499	)
Stock options (4)		(246	)		(290	)		(333	)		(384	)
Pro forma net income	$	5,043		$	5,098		$	5,155		$	5,220

Earning per share (5):
Historical	$	0.48		$	0.41		$	0.37		$	0.31
Pro form adjustments:
Income on adjusted net proceeds		0.11			0.11			0.11			0.11
Employee stock ownership plan (2)		(0.02	)		(0.02	)		(0.02	)		(0.02	)
Stock awards (3)		(0.03	)		(0.03	)		(0.03	)		(0.03	)
Stock options (4)		(0.03	)		(0.03	)		(0.03	)		(0.03	)
Pro forma earnings per share (5) (6)	$	0.51		$	0.44		$	0.40		$	0.34

Offering price to pro forma net earnings per share		19.61	x		22.73	x		25.00	x		29.41	x
Number of shares used in earnings per share calculations		9,825,002			11,558,826			13,292,650			15,286,548

At June 30, 2009
Stockholders’ equity:
Historical	$	92,558		$	92,558		$	92,558		$	92,558
Estimated net proceeds		63,926			75,489			87,052			100,350
Equity decrease from MHC		(5	)		(5	)		(5	)		(5	)
Common stock purchased by employee stock ownership plan		(4,080	)		(4,800	)		(5,520	)		(6,348	)
Common stock purchased by stock-based benefit plan (3)		(2,720	)		(3,200	)		(3,680	)		(4,232	)
Pro forma stockholders equity	$	149,679		$	160,042		$	170,405		$	182,323
Intangible assets	$	(4,097	)	$	(4,097	)	$	(4,097	)	$	(4,097	)
Pro forma tangible stockholders equity	$	145,582		$	155,945		$	166,308		$	178,226

Stockholders’ equity per share: (7)
Historical	$	9.08		$	7.71		$	6.70		$	5.82
Estimated net proceeds		6.27			6.29			6.31			6.32
Plus: Assets received from the MHC		—			—			—			—
Common stock acquired by employee stock ownership plan		(0.40	)		(0.40	)		(0.40	)		(0.40	)
Common stock acquired by stock-based benefit plan (3)		(0.27	)		(0.27	)		(0.27	)		(0.27	)
Pro forma stockholders’ equity per share (6) (7)	$	14.68		$	13.33		$	12.34		$	11.47
Intangible assets	$	(0.40	)	$	(0.34	)	$	(0.30	)	$	(0.26	)
Pro forma tangible stockholders’ equity per share (6) (7)	$	14.28		$	12.99		$	12.04		$	11.21

Offering price as percentage of pro forma stockholders’ equity per share		68.12	%		75.02	%		81.04	%		87.18	%
Offering price as percentage of pro forma tangible stockholders’ equity per share		70.03	%		76.98	%		83.06	%		89.21	%
Number of shares outstanding for pro forma book value per share calculations		10,199,002			11,998,826			13,798,650			15,868,448

(footnotes begin on following page)

(1)	As adjusted to give effect to an increase in the number of shares that could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the stock offering.

(2)

Assumes that 6% of shares of common stock sold in the offering will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from Kaiser Federal Financial Group, Inc. Kaiser Federal Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. Kaiser Federal Bank’s total annual payments on the employee stock ownership plan debt are based upon 12 equal annual installments of principal and interest. Financial Accounting Standards Board Accounting Standards Codification 718-40, “Employers’ Accounting for Employer Stock Ownership Plans” (“ASC 718-40”) requires that an employer record compensation expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that the employee stock ownership plan shares are allocated in equal annual installments based on the number of loan repayment installments assumed to be paid by Kaiser Federal Bank, the fair value of the common stock remains equal to the subscription price and the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 41.10%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders’ equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 34,000, 40,000, 46,000 and 52,900 shares were committed to be released during the year ended June 30, 2009 at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively, and in accordance with ASC 718-40, only the employee stock ownership plan shares committed to be released during the year ended June 30, 2009 were considered outstanding for purposes of net income per share calculations.

(3)

If approved by Kaiser Federal Financial Group, Inc.’s stockholders, one or more stock-based benefit plans may purchase an aggregate number of shares of common stock equal to 4% of the shares to be sold in the offering (or a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the plans, and purchases by the plans may not occur earlier than six months after the completion of the conversion. The shares may be acquired directly from Kaiser Federal Financial Group, Inc. or through open market purchases. Shares in the stock-based benefit plan are assumed to vest over a period of five years. The funds to be used to purchase the shares will be provided by Kaiser Federal Financial Group, Inc. The table assumes that (i) the stock-based benefit plan acquires the shares through open market purchases at $10.00 per share, (ii) 20% of the amount contributed to the plan is amortized as an expense during the year ended June 30, 2009, and (iii) the plan expense reflects an effective combined federal and state tax rate of 41.10%. Assuming stockholder approval of the stock-based benefit plans and that shares of common stock (equal to 4% of the shares sold in the offering) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 2.60% at the maximum of the offering range.

(4)

(5)

(6)	The retained earnings of Kaiser Federal Bank will be substantially restricted after the conversion. See “Our Dividend Policy,” “The Conversion and Offering—Liquidation Rights” and “Supervision and Regulation—Federal Banking Regulation—Capital Distributions.”

(7)

Per share figures include publicly held shares of K-Fed Bancorp common stock that will be exchanged for shares of Kaiser Federal Financial Group, Inc. common stock in the conversion. Stockholders’ equity per share calculations are based upon the sum of (i) the number of subscription shares assumed to be sold in the offering and (ii) shares to be issued in exchange for publicly held shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively. The exchange shares reflect an exchange ratio of 0.7673, 0.9028, 1.0382 and 1.1939 at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively. The number of shares actually sold and the corresponding number of exchange shares may be more or less than the assumed amounts.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited consolidated financial statements, which appear beginning on page F-1 of this prospectus. You should read the information in this section in conjunction with the business and financial information regarding K-Fed Bancorp provided in this prospectus.

Overview and Business Strategy

Our results of operations depend primarily on our net interest income, which is the difference between interest income on interest-earning assets, which principally consist of loans and investment securities, and interest expense on interest-bearing liabilities, which principally consist of deposits and borrowings. Our results of operations also are affected by the level of our provisions for loan losses, noninterest income and noninterest expenses. Noninterest income consists primarily of service charges on deposit accounts and ATM fees and charges. Noninterest expense consists primarily of salaries and employee benefits, occupancy, equipment, ATM costs, federal deposit insurance premiums and other expenses. Our results of operations may also be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

Our strategy continues to focus on operating as an independent financial institution dedicated to serving the needs of customers in our market area, which extends from Southern California to the San Francisco Bay area as a result of our history as a credit union serving the employees of the Kaiser Permanente Medical Care Program. Our historical focus has allowed us to capitalize on convenient access to Kaiser Permanente employees and their family members and establish Kaiser Federal Bank as their primary financial institution by, for example, the direct deposit of their bi-weekly or monthly paychecks. Our three branch offices and six financial service centers are located in close proximity to Kaiser Permanente medical centers making Kaiser Federal Bank an attractive choice. Financial service centers provide all the services of a branch office but do not accept or dispense cash except through an on-site ATM. Most of our 57 ATMs are strategically located at or near Kaiser Permanente facilities. By utilizing a “cashless” branch we are able to reduce personnel costs at the branch and improve our efficiency in the delivery of financial services. At March 31, 2010, our ratio of noninterest expense as a percentage of net interest income plus noninterest income (commonly referred to as our “efficiency ratio”) was 54.95%. We intend to expand our deposit base by building upon the niche of Kaiser Permanente employees and our existing market locations.

●

continuing our emphasis on maintaining cost efficiencies by utilizing internet banking, and maintaining easily accessible financial service centers and ATMs;

●

reducing our non-performing assets by devoting additional personnel to collection efforts;

●

increasing our origination of multi-family residential lending while maintaining a moderate growth of one-to-four family residential real estate loans and consumer loans; and

●

Remote access methods, such as our 57 ATMs, audio response unit, call center, and internet banking / bill payer continue to process over 90% of our customer transactions. Branches and financial service centers strategically located for our markets provide touchstones to attract new account holders and facilitate transactions that cannot be completed electronically.

Historically, a majority of the deposits have been used to originate or purchase one-to-four family residential real estate, multi-family residential or commercial real estate loans. Prior to 2007, Kaiser Federal Bank purchased, using our own underwriting standards, a significant number of first mortgages on owner-occupied, one-to-four family residences secured by properties located throughout California. Kaiser Federal Bank also originated commercial real estate loans, but made the strategic decision to cease such lending in January 2009 in light of the downturn in economic conditions. We will continue to emphasize multi-family residential real estate loans, and to a lesser extent, one-to-four family residential real estate and consumer loans. Historically, we have not originated, or purchased, commercial business, commercial construction, or residential construction loans and have no current plans to do so.

We have a commitment to our customers, existing and new, to provide high quality service. Our goal is to grow Kaiser Federal Bank while providing cost effective services to our market area.

Expected Increase in Non-Interest Expense as a Result of the Conversion

Following the completion of the conversion, our non-interest expense is expected to increase because of the increased compensation expenses associated with the purchase of shares of common stock by our employee stock ownership plan and the possible implementation of one or more stock-based benefit plans, if approved by our stockholders no earlier than six months after the completion of the conversion.

Assuming that 10,580,000 shares are sold in the offering:

(i)

the employee stock ownership plan will acquire 634,800 shares of common stock with a $6.3 million loan that is expected to be repaid over 12 years, resulting in an annual pre-tax expense of approximately $529,000 (assuming that the shares of common stock maintain a value of $10.00 per share); and

(ii)

a new stock-based benefit plan would award a number of shares equal to 4% of the shares sold in the offering, or 423,200 shares, to eligible participants, and such awards would be expensed as the awards vest. Assuming all shares are awarded under the plan at a price of $10.00 per share, and that the awards vest over five years, the corresponding annual pre-tax expense associated with shares awarded under the plan would be approximately $846,400; and

(iii)

a new stock-based benefit plan would award options to purchase a number of shares equal to 10% of the shares sold in the offering, or 1,058,000 shares, to eligible participants, and such options would be expensed as the options vest. Assuming all options are awarded under the stock-based benefit plan at a price of $10.00 per share, and that the options vest over a minimum of five years, the corresponding annual pre-tax expense associated with options awarded under the stock-based benefit plan would be approximately $377,000 (assuming a grant-date fair value of $2.02 per option, using the Black-Scholes option valuation methodology).

The actual expense that will be recorded for the employee stock ownership plan will be determined by the market value of the shares of common stock as they are released to employees over the term of the loan, and whether the loan is repaid faster than its contractual term. Accordingly, increases in the stock price above $10.00 per share will increase the total employee stock ownership plan expense, and accelerated repayment of the loan will increase the employee stock ownership plan expense for those periods in which accelerated or larger loan repayments are made. Further, the actual expense of the shares awarded under the stock-based benefit plan will be determined by the fair market value of the stock on the grant date, which might be greater than $10.00 per share.

Critical Accounting Policies and Estimates

In reviewing and understanding our financial information, you are encouraged to read and understand the significant accounting policies used in preparing our consolidated financial statements.

These policies are described in Note 1 to the consolidated financial statements and are essential in understanding Management’s Discussion and Analysis of Financial Condition and Results of Operation. Our accounting and financial reporting policies conform to U.S. generally accepted accounting principles and to general practices within the banking industry. Accordingly, the consolidated financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. The following accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results.

Allowance for Loan Losses. The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged off against the allowance for loan losses when management believes that collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

The allowance is an amount that management believes will absorb probable incurred losses relating to specifically identified loans, as well as probable incurred losses inherent in the balance of the loan portfolio, based on an evaluation of the collectability of existing loans and prior loss experience. This evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrower’s ability to pay. This evaluation does not include the effects of expected losses on specific loans or groups of loans that are related to future events or changes in economic conditions. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses, and may require adjustments to the allowance based on their judgment about information available to them at the time of their examinations. See “-Business-Asset Quality-Allowance for Loan Losses.”

The allowance consists of specific and general components. The specific component relates to loans that are classified as doubtful and substandard. For such loans that are also classified as impaired, a specific valuation allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.

A loan is impaired when it is probable, based on current information and events, we will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Loans for which terms have been modified, and for which the borrower is experiencing financial difficulties, may be considered troubled debt restructurings and classified as impaired. Real estate loans are evaluated for impairment based on their past due status and are measured on an individual basis based on the present value of expected future cashflows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. The amount of impairment, if any, and any subsequent changes are included in the allowance for loan losses.

Large groups of smaller balance homogenous loans are collectively evaluated for impairment. Accordingly, we do not separately identify individual consumer loans or one-to-four family residential loans that are not 90 days or more past due for impairment disclosures.

Fair Value of Financial Instruments. Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 18 of our consolidated financial statements. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Comparison of Financial Condition at March 31, 2010 and June 30, 2009.

Assets. Total assets decreased $2.0 million, or 0.2% to $893.1 million at March 31, 2010 from $895.1 million at June 30, 2009 due primarily to a decrease in total cash and cash equivalents and to a lesser extent, a decrease in our investment securities portfolio, partially offset by an increase in our net loans. Total cash and cash equivalents decreased $7.6 million, or 10.3% to $66.1 million at March 31, 2010 from $73.7 million at June 30, 2009. The decrease was a result of the repayment of $60.0 million in FHLB advances that matured during the period. The repayment was funded with available liquidity and strong deposit growth.

Our investment securities portfolio decreased $2.9 million, or 29.9% to $6.8 million at March 31, 2010 from $9.8 million at June 30, 2009. The decrease was attributable to maturities and normal repayments of principal on our mortgage-backed securities and collateralized mortgage obligations.

Our net loan portfolio increased by $5.7 million, or 0.8% to $752.6 million at March 31, 2010 from $746.9 million at June 30, 2009 due primarily to an increase in multi-family residential loans partially offset by an increase in the allowance for loan losses. Multi-family residential loans increased $63.7 million, or 32.4% to $260.2 million at March 31, 2010 from $196.6 million at June 30, 2009. One-to-four family real estate loans decreased $33.9 million, or 9.0% to $343.4 million at March 31, 2010 from $377.2 million at June 30, 2009 due to loan repayments, charge-offs and transfers of property to real estate owned. Commercial real estate loans decreased $7.2 million, or 5.9% to $114.0 million at March 31, 2010 from $121.1 million at June 30, 2009. Other loans which are comprised primarily of automobile loans decreased $8.9 million, or 15.8% to $47.3 million at March 31, 2010 from $56.2 million at June 30, 2009. Real estate loans comprised 93.8% of the total loan portfolio at March 31, 2010, compared with 92.5% at June 30, 2009. The decrease in one-to-four family real estate loans and increase in multi-family residential loans was due in part to management’s decision to emphasize originations of multi-family residential loans as a means of diversifying the loan portfolio and increasing our loan yield.

The allowance for loan losses increased by $8.2 million to $12.8 million at March 31, 2010 from $4.6 million at June 30, 2009. The increase was primarily attributable to an increase in real estate loan delinquencies and troubled debt restructurings during the period. See “—Asset Quality-Allowance for Loan Losses.”

Other assets increased by $4.0 million to $8.2 million at March 31, 2010 from $4.2 million at June 30, 2009. The increase in other assets was primarily a result of the FDIC prepayment of insurance premiums of $3.6 million paid in December 2009. As of March 31, 2010 the FDIC prepayment balance was $3.3 million.

Deposits. Total deposits increased $82.5 million, or 14.6% to $648.7 million at March 31, 2010 from $566.2 million at June 30, 2009. The growth was comprised of increases of $50.8 million in certificates of deposit, $17.6 million in checking and savings accounts and $14.1 million in money market accounts. The increase in certificate of deposit accounts was a result of promotions for these types of accounts as well as an increase in non-promotional individual retirement account balances. The increase in checking and savings balances was primarily a result of a higher than normal payroll experienced by a significant number of our customers at the end of March. In addition, money market accounts have steadily increased throughout the year. In addition, the entire $25.0 million State of California time deposit was paid down at maturity.

Borrowings. Advances from the FHLB of San Francisco decreased $60.0 million, or 29.0% to $147.0 million at March 31, 2010 from $207.0 million at June 30, 2009. The decline was the result of scheduled maturities in August and September 2009 and was funded with available liquid assets as well as increased deposits.

Stockholders’ Equity. Stockholders’ equity increased $463,000 to $93.0 million at March 31, 2010 from $92.6 million at June 30, 2009 primarily as a result of $1.3 million in net income for the nine months ended March 31, 2010 and the allocation of Employee Stock Ownership Plan shares, stock awards, and stock options totaling $680,000. This increase was partially offset by the payment of dividends of $1.4 million for three quarterly periods ($0.33 per share) and stock repurchases of $115,000.

Comparison of Financial Condition at June 30, 2009 and June 30, 2008.

General. Our total assets increased by $45.8 million, or 5.4%, to $895.1 million at June 30, 2009 compared to $849.3 million at June 30, 2008. The increase primarily reflected growth in cash and cash equivalents and interest earning time deposits in other financial institutions. The increase in assets was funded by the increase in deposits.

Loans. Our net loan portfolio increased $4.7 million, or 0.6%, to $746.9 million at June 30, 2009 from $742.2 million at June 30, 2008. This increase was primarily attributable to increases in multi-family residential loans, which increased $64.3 million, or 48.6% to $196.6 million at June 30, 2009 from $132.3 million at June 30, 2008. Additional increases were experienced in commercial real estate loans, which increased $5.3 million, or 4.6% to $121.1 million at June 30, 2009 from $115.8 million at June 30, 2008. These increases were offset by an overall decrease in one-to-four family residential loans of $51.5 million, or 12.0% to $377.2 million at June 30, 2009 from $428.7 million at June 30, 2008. There were also decreases in automobile loans of $10.5 million or 20.1% to $41.8 million at June 30, 2009 from $52.3 million at June 30, 2008. Real estate loans comprised 92.5% of the total loan portfolio at June 30, 2009, compared with 90.8% at June 30, 2008. The decrease in one-to-four family and automobile loans and increase in multi-family residential loans was due to our focus on originating income producing property loans as a means of diversifying the loan portfolio. See “Business—Kaiser Federal Bank—Asset Quality.”

Investments. Our investment portfolio, consisting of available-for-sale and held-to-maturity securities (including mortgage-backed securities), decreased $6.2 million, or 39.1% to $9.8 million at June 30, 2009 from $16.0 million at June 30, 2008 due to maturity of existing securities.

Deposits. Total deposits increased $71.1 million, or 14.4%, to $566.2 million at June 30, 2009 from $495.1 million at June 30, 2008 as management believes depositors looked to the safety of banks with strong capital positions. The change was comprised of increases of $30.2 million in money market accounts, $27.2 million in certificates of deposit, $6.9 million in noninterest-bearing demand accounts, and $6.8 million in savings accounts. The increase in money market and certificate of deposit accounts was a result of promotions for these types of accounts as well as depositors looking for the safety of banks with strong capital positions.

Borrowings. Advances from the FHLB of San Francisco decreased $28.0 million, or 11.9% to $207.0 million at June 30, 2009 from $235.0 million at June 30, 2008. The decline was the result of scheduled advance repayments during the fiscal year and was funded with available liquid assets due to increased deposits.

Stockholders’ Equity. Total stockholders’ equity increased $2.3 million, or 2.5%, to $92.6 million at June 30, 2009, from $90.3 million at June 30, 2008 primarily as a result of $4.7 million in net income for the year and the allocation of Employee Stock Ownership Plan shares, stock awards, and stock options earned totaling $1.2 million. This increase was offset in part by cash payments of $1.8 million for the repurchase of shares of common stock and $1.9 million in dividends ($0.44 per share) paid to stockholders of record, excluding shares held by K-Fed Mutual Holding Company which waved receipt of its dividend payments. Our GAAP equity-to-assets ratio was 10.3% at June 30, 2009 compared to 10.6% at June 30, 2008.

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

The following table sets forth certain information at March 31, 2010 and for the nine months ended March 31, 2010 and 2009, respectively. The average yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are derived primarily from month-end balances. Management does not believe that the use of month-end balances rather than daily average balances has caused any material differences in the information presented.


	At March 31, 2010			For the nine months ended March 31,
	At March 31, 2010			2010 (1)								2009 (1)
	Average Yield/Cost			Average Balance			Interest		Average Yield/Cost			Average Balance			Interest		Average Yield/Cost
	(Dollars in thousands)

Interest-Earning Assets
Loans receivable (2)		5.86	%	$	755,941		$	33,101		5.84	%	$	743,877		$	32,678		5.86	%
Securities (3)		4.56			8,160			278		4.54			14,292			485		4.52
Federal funds sold		0.19			47,614			82		0.23			34,373			285		1.11
Federal Home Loan Bank stock		0.28			12,649			35		0.37			12,632			314		3.31
Interest-earning deposits in other financial institutions		1.54			27,717			292		1.40			11,707			140		1.59
Total interest-earning assets		5.27			852,081			33,788		5.29			816,881			33,902		5.53
Non-interest earning assets					40,825								36,671
Total assets				$	892,906							$	853,552

Interest-Bearing Liabilities
Money market		0.81	%	$	116,148		$	848		0.97	%	$	89,211		$	1,384		2.07	%
Savings		0.39			130,418			488		0.50			120,494			874		0.97
Certificates of deposit		2.84			307,369			6,893		2.99			257,318			7,840		4.06
Borrowings		4.69			182,001			5,697		4.17			241,213			7,556		4.18
Total interest-bearing liabilities		2.43			735,936			13,926		2.52			708,236			17,654		3.32
Non-interest bearing liabilities					63,764								54,059
Total liabilities					799,700								762,295
Equity					93,206								91,257
Total liabilities and equity				$	892,906							$	853,552

Net interest rate spread		2.84	%				$	19,862		2.77	%				$	16,248		2.21	%

Margin (4)										3.11	%							2.65	%

Ratio of interest-earning assets to interest-bearing liabilities					115.78	%							115.34	%

(1)	Yields earned and rates paid have been annualized.

(2)	Calculated net of deferred fees, loss reserves and includes non-accrual loans. Interest income includes loan fees of $186,000 and $281,000 for the nine months ended March 31, 2010 and 2009, respectively.

(3)	Calculated based on amortized cost.

(4)	Net interest income divided by interest-earning assets.

The following table sets forth certain information for the fiscal years ended June 30, 2009, 2008 and 2007, respectively. The average yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the years presented. Average balances are derived primarily from month-end balances. Management does not believe that the use of month-end balances rather than daily average balances has caused any material differences in the information presented.

	For the year ended June 30,
	2009								2008								2007
	Average Balance			Interest		Average Yield/Cost			Average Balance			Interest		Average Yield/Cost			Average Balance			Interest		Average Yield/Cost
	(Dollars in thousands)

Interest-Earning Assets
Loans receivable (1) (2)	$	745,870		$	43,706		5.86	%	$	723,953		$	42,582		5.88	%	$	659,186		$	37,379		5.67	%
Securities (3)		13,418			606		4.52			24,197			1,085		4.48			33,788			1,365		4.04
Federal funds sold		34,930			303		0.87			30,301			873		2.88			31,357			1,604		5.12
Federal Home Loan Bank stock		12,636			314		2.48			11,305			572		5.06			9,111			480		5.27
Interest-earning deposits in other financial institutions		16,513			244		1.48			3,669			126		3.43			7,996			338		4.23
Total interest-earning assets		823,367			45,173		5.49			793,425			45,238		5.70			741,438			41,166		5.55
Non-interest earning assets		39,018								34,400								28,439
Total assets	$	862,385							$	827,825							$	769,877

Interest-Bearing Liabilities
Money market	$	93,547		$	1,761		1.88	%	$	75,213		$	1,915		2.55	%	$	95,113		$	2,700		2.84	%
Savings		122,357			1,091		0.89			127,759			2,112		1.65			116,150			1,925		1.66
Certificates of deposit		260,916			10,123		3.88			236,062			10,918		4.63			228,717			10,254		4.48
Borrowings		239,088			9,908		4.14			245,024			10,824		4.42			189,217			8,261		4.37
Total interest-bearing liabilities		715,908			22,883		3.20			684,058			25,769		3.77			629,197			23,140		3.68
Non-interest bearing liabilities		54,947								51,261								48,645
Total liabilities		770,855								735,319								677,842
Equity		91,530								92,506								92,035
Total liabilities and equity	$	862,385							$	827,825							$	769,877

Net interest rate spread				$	22,290		2.29	%				$	19,469		1.93	%				$	18,026		1.87	%

Margin (4)							2.71	%							2.45	%							2.43	%

Ratio of interest-earning assets to interest-bearing liabilities		115.01	%							115.99	%							117.84	%

(1)	Calculated net of deferred fees, loan loss reserves and includes non-accrual loans.

(2)	Interest income includes loan fees of $323,000, $328,000, and $251,000 for the fiscal years ended June 30, 2009, 2008, and 2007, respectively.

(3)	Calculated based on amortized cost.

(4)	Net interest income divided by interest-earning assets.

Rate/Volume Analysis

The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in volume multiplied by the old rate; (2) changes in rate, which are changes in rate multiplied by the old volume; and (3) changes in rate/volume, which are the changes in rate times the changes in volume.

	For the Nine Months Ended March 31, 2010 vs. 2009
	Increase (Decrease) Due to
	Volume			Rate			Rate/ Volume			Net
	(In thousands)
Interest-Earning Assets
Loans receivable (1)	$	507		$	(83	)	$	(1	)	$	423
Securities		(208	)		2			(1	)		(207	)
Federal funds sold		110			(226	)		(87	)		(203	)
Federal Home Loan Bank stock		—			(279	)		—			(279	)
Interest-earning deposits in other financial institutions		192			(17	)		(23	)		152
Total interest-earning assets	$	601		$	(603	)	$	(112	)	$	(114	)

Interest-Bearing Liabilities
Money market	$	418		$	(733	)	$	(221	)	$	(536	)
Savings		72			(423	)		(35	)		(386	)
Certificates of deposit		1,527			(2,070	)		(404	)		(947	)
Borrowings		(1,850	)		(12	)		3			(1,859	)
Total interest-bearing liabilities		167			(3,238	)		(657	)		(3,728	)

Change in net interest income/spread	$	434		$	2,635		$	545		$	3,614

(footnotes begin on following page)

	For the Year Ended June 30, 2009 vs. 2008												For the Year Ended June 30, 2008 vs. 2007
	Increase (Decrease) Due to												Increase (Decrease) Due to
	Volume			Rate			Rate/ Volume			Net			Volume			Rate			Rate/ Volume			Net
	(In thousands)
Interest-Earning Assets
Loans receivable (1)	$	1,289		$	(160	)	$	(5	)	$	1,124		$	3,673		$	1,393		$	137		$	5,203
Securities		(483	)		8			(4	)		(479	)		(387	)		150			(43	)		(280	)
Federal funds sold		133			(610	)		(93	)		(570	)		(54	)		(701	)		24			(731	)
Federal Home Loan Bank stock		67			(291	)		(34	)		(258	)		116			(19	)		(5	)		92
Interest-earning deposits in other financial institutions		438			(71	)		(249	)		118			(183	)		(66	)		37			(212	)
Total interest-earning assets	$	1,444		$	(1,124	)	$	(385	)	$	(65	)	$	3,165		$	757		$	150		$	4,072

Interest-Bearing Liabilities
Money market	$	467		$	(499	)	$	(122	)	$	(154	)	$	(565	)	$	(278	)	$	58		$	(785	)
Savings		(89	)		(973	)		41			(1,021	)		192			(5	)		—			187
Certificates of deposit		1,150			(1,759	)		(186	)		(795	)		329			324			11			664
Borrowings		(262	)		(670	)		16			(916	)		2,436			98			29			2,563
Total interest-bearing liabilities		1,266			(3,901	)		(251	)		(2,886	)		2,392			139			98			2,629

Change in net interest income/spread	$	178		$	2,777		$	(134	)	$	2,821		$	773		$	618		$	52		$	1,443

(1)	Total loans are net of deferred fees and costs.

Comparison of Results of Operations for the Nine Months Ended March 31, 2010 and 2009.

General. Net income for the nine months ended March 31, 2010 was $1.3 million, a decrease of $2.2 million as compared to net income of $3.5 million for the nine months ended March 31, 2009. Earnings per basic and diluted common share were $0.10 for the nine months ended March 31, 2010 compared to $0.27 for the nine months ended March 31, 2009. The decrease in net income primarily resulted from an increase in the provision for loan losses partially offset by an increase in net interest income.

Interest Income. Interest income decreased by $114,000, or 0.3%, to $33.8 million for the nine months ended March 31, 2010 from $33.9 million for the nine months ended March 31, 2009. The primary reasons for the decline in interest income were decreases in interest on securities, dividends on FHLB stock and interest on federal funds sold. These decreases were partially offset by an increase in interest and fees on loans. Our interest income has benefited from our fixed rate single-family loans and multi-family residential loans, which supported our yield on loans receivable.

Interest and fees on loans increased $423,000, or 1.3%, to $33.1 million for the nine months ended March 31, 2010 from $32.7 million for the nine months ended March 31, 2009. The primary factor for the increase was an increase in the average loan receivable balance of $12.1 million, or 1.6% to $755.9 million for the nine months ended March 31, 2010 from $743.9 million for the nine months ended March 31, 2009 due to increased origination of multi-family residential loans during the period. In addition, 82.5% of our one-to-four family real estate loans are fixed rate loans that did not reprice in the low interest rate environment. These loans have a weighted average interest rate of 6.8%, which enabled us to maintain the average loan yield at 5.84% for the nine months ended March 31, 2010 as compared to 5.86% for the nine months ended March 31, 2009. The beneficial effect of our significant amount of fixed-rate loans, which help us maintain higher loan yields in periods when market interest rates decline significantly, will in turn constrain the increase in our average loan yield as market interest rates increase.

Interest income on securities decreased by $207,000, or 42.7%, to $278,000 for the nine months ended March 31, 2010 from $485,000 for the nine months ended March 31, 2009. The decrease was primarily attributable to a $6.1 million decrease in the average balance of investment securities from $14.3 million for the nine months ended March 31, 2009 to $8.2 million for the nine months ended March 31, 2010 as a result of maturities and normal repayments of principal on our mortgage-backed securities and collateralized mortgage obligations.

FHLB dividends decreased by $279,000, or 88.9%, to $35,000 for the nine months ended March 31, 2010 from $314,000 for the nine months ended March 31, 2009. The decrease was attributable to the FHLB paying only a nominal dividend as compared to the prior period. Based on announcements from the FHLB we are not expecting significant levels of dividend payments for the foreseeable future.

Other interest income decreased by $51,000, or 12.0% to $374,000 for the nine months ended March 31, 2010 from $425,000 for the nine months ended March 31, 2009. The decrease was a result of an 88 basis point decline in the average yield earned on federal funds sold from 1.11% for the nine months ended March 31, 2009 to 0.23% for the nine months ended March 31, 2010. The yield earned on federal funds sold was impacted by the low targeted federal funds rate.

Interest Expense. Interest expense decreased $3.8 million, or 21.1% to $13.9 million for the nine months ended March 31, 2010 from $17.7 million for the nine months ended March 31, 2009. The decrease was primarily attributable to an 80 basis point decline in the average cost of interest bearing liabilities from 3.32% for the nine months ended March 31, 2009 to 2.52% for the nine months ended March 31, 2010 as a result of low interest rates during the period. The decrease was partially offset by an increase in the average balance of interest-bearing liabilities of $27.7 million from $708.2 million for the nine months ended March 31, 2009 to $735.9 million for the nine months ended March 31, 2010 due primarily to an increase in the average balance of deposits during the period.

The decrease in interest expense was also the result of a decline in the average balance of borrowings which decreased $59.2 million, or 24.5%, to $182.0 million for the nine months ended March 31, 2010 from $241.2 million for the nine months ended March 31, 2009. The decline was the result of scheduled FHLB advance repayments and was funded with available liquid assets due to increased deposits.

Provision for Loan Losses. Our provision for loan losses increased to $8.8 million for the nine months ended March 31, 2010 compared to $2.0 million for the nine months ended March 31, 2009. The provision for loan losses for the nine months ended March 31, 2010 was comprised of $4.9 million in general valuation allowances and $3.9 million in specific valuation allowances. The increase in provision for loan losses was primarily attributable to an increase in real estate loan delinquencies and troubled debt restructurings during the period. The increase in delinquencies and troubled debt restructurings was experienced primarily in our one-to-four family residential mortgage loans as a result of the decline in the housing market and deteriorating general economic conditions. Also, impacting the provision for loan losses for the nine months ended March 31, 2010 were one commercial real estate and two multi-family residential property loans totaling $5.9 million that were added to non-accrual status.

Noninterest Income. Our noninterest income increased by $82,000, or 2.4% to $3.5 million for the nine months ended March 31, 2010 from $3.4 million for the nine months ended March 31, 2009. The increase in noninterest income was primarily a result of an increase in ATM fees and charges due to increased transaction volume.

Noninterest Expense. Our noninterest expense increased $723,000, or 6.0% to $12.8 million for the nine months ended March 31, 2010 compared to $12.1 million for the nine months ended March 31, 2009. The increase was primarily due to a $177,000 increase in salaries and benefits and a $398,000 increase in federal deposit insurance premiums.

Salaries and benefits represented 48.7% and 50.1% of total noninterest expense for the nine months ended March 31, 2010 and 2009, respectively. Total salaries and benefits increased $177,000, or 2.9%, to $6.3 million for the nine months ended March 31, 2010 from $6.1 million for the nine months ended March 31, 2009. The increase was primarily due to an increase in the number of full-time equivalent employees from 93 at March 31, 2009, to 99 at March 31, 2010. The increase in employees was primarily in the lending area to support increased multi-family residential loan originations as well as one-to-four family residential real estate loan servicing and collection efforts. See “—Asset Quality.”

Federal deposit insurance premiums increased $398,000, or 106.7% to $771,000 for the nine months ended March 31, 2010 from $373,000 for the nine months ended March 31, 2009. The increase was due to an increase in the general assessment rate due to ongoing bank failures.

Income Tax Expense. Income tax expense decreased to $427,000 for the nine months ended March 31, 2010 compared to $2.0 million for the nine months ended March 31, 2009. This decrease was primarily the result of lower pretax income for the nine months ended March 31, 2010 compared to the nine months ended March 31, 2009. The effective tax rate was 24.5% and 36.3% for the nine months ended March 31, 2010 and 2009, respectively. The change in the effective tax rate was a result of the impact of tax credits on lower projected taxable income.

Comparison of Results of Operations for the Fiscal Years Ended June 30, 2009 and 2008.

General. Net income for the year ended June 30, 2009 was $4.7 million, an increase of $881,000, or 22.8%, from net income of $3.9 million for the year ended June 30, 2008. Earnings per basic and diluted common share were $0.36 for the year ended June 30, 2009 compared to $0.29 for the year ended June 30, 2008. Net income for the year ended June 30, 2008 included $1.3 million in stock offering costs resulting from the cancellation of the stock offering in November 2007 due to unfavorable market conditions. The recognition of these expenses resulted in a decline of $0.06 in basic and diluted earnings per share for the year ended June 30, 2008. Excluding the effect of the stock offering costs, the increase in net income was primarily the result of increased net interest income resulting from a lower cost of funds offset by an increase in the provision for loan losses.

Interest Income. Interest income decreased $65,000, or 0.1%, to $45.2 million for the year ended June 30, 2009 from $45.2 million for the year ended June 30, 2008. The increase in interest and fees on loans was offset by a decrease in interest on securities, FHLB dividends and other interest income.

Interest and fees on loans increased by $1.1 million, or 2.6% to $43.7 million for the year ended June 30, 2009 from $42.6 million for the year ended June 30, 2008. The primary factor for the increase was an increase in the average loans receivable balance of $21.9 million, or 3.0%, to $745.9 million for the year ended June 30, 2009 from $724.0 million for the year ended June 30, 2008.

Interest income on securities decreased by $479,000, or 44.1%, to $606,000 for the year ended June 30, 2009 from $1.1 million for the year ended June 30, 2008. The decrease was attributable to a $10.8 million decrease in the average balance of investment securities from $24.2 million for the year ended June 30, 2008 to $13.4 million for the year ended June 30, 2009 as a result of maturities and normal repayments of principal on our mortgage-backed securities and collateralized mortgage obligations.

FHLB dividends decreased by $258,000, or 45.1%, to $314,000 for the year ended June 30, 2009 from $572,000 for the year ended June 30, 2008. The decrease was attributable to the FHLB not paying quarterly dividends for the last half of our fiscal 2009.

Other interest income decreased by $452,000 or 45.2% to $547,000 for the year ended June 30, 2009 from $999,000 for the year ended June 30, 2008. The decrease was a result of 201 basis points decrease in the average yield earned on federal funds sold to 0.87% for the year ended June 30, 2009 from 2.88% for the year ended June 30, 2008. The yield earned on federal funds sold was reduced by the actions taken by the Federal Reserve in lowering the targeted federal funds rate.

Interest Expense. Interest expense decreased $2.9 million, or 11.2%, to $22.9 million for the year ended June 30, 2009 from $25.8 million for the year ended June 30, 2008. The decrease was primarily attributable to a 57 basis point decline in the average cost of interest bearing liabilities from 3.77% for the year ended June 30, 2008 to 3.20% for the year ended June 30, 2009, partially offset by an increase in the average balance of interest bearing liabilities from $684.1 million at June 30, 2008 to $715.9 million at June 30, 2009. The decline in rates was a result of a general decline in the overall interest rate environment while the increase in balances was a result of depositors looking for the safety of banks with strong capital positions as well as money market and certificate of deposit promotions offered during the year.

The average balance of money market accounts increased by $18.3 million, or 24.4% to $93.5 million for the year ended June 30, 2009 from $75.2 million for the year ended June 30, 2008. The average cost of money market accounts decreased 67 basis points to 1.88% for the year ended June 30, 2009 from 2.55% for the year ended June 30, 2008. The average balance of savings accounts decreased by $5.4 million, or 4.2% to $122.4 million for the year ended June 30, 2009 from $127.8 million for the year ended June 30, 2008. The average cost of savings accounts decreased 76 basis points to 0.89% for the year ended June 30, 2009 from 1.65% for the year ended June 30, 2008. The average balance of certificates of deposit increased by $24.8 million, or 10.5%, to $260.9 million for the year ended June 30, 2009 from $236.1 million for the year ended June 30, 2008. The average cost of certificates of deposit decreased 75 basis points to 3.88% for the year ended June 30, 2009 from 4.63% for the year ended June 30, 2008.

The average balance of borrowings decreased $5.9 million, or 2.4%, to $239.1 million for the year ended June 30, 2009 from $245.0 million for the year ended June 30, 2008. The decline was the result of scheduled advance repayments and was funded with available liquid assets due to increased deposits. The average cost of borrowings decreased 28 basis points to 4.14% for the year ended June 30, 2009 from 4.42% for the year ended June 30, 2008.

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 ASC 310, “Receivables.” These accounting standards prescribe the measurement methods, income recognition and disclosures related to impaired loans. See “—Critical Accounting Policies and Estimates” and “– Asset Quality- Allowance for Loan Losses.”

Our provision for loan losses increased by $1.6 million to $2.6 million for the year ended June 30, 2009 as compared to $962,000 for the year ended June 30, 2008. The allowance for loan losses as a percent of total loans was 0.61% at June 30, 2009 as compared to 0.43% at June 30, 2008. The increase in provision for loan losses was primarily attributable to an increase in real estate loan delinquencies as well as an increase in loans that were reviewed for impairment. The increase in delinquencies was experienced primarily in our one-to-four family loans as a result of the continued deterioration in the housing market as well as the decline in general economic conditions and increased unemployment in our market area.

Noninterest Income. Noninterest income increased $229,000, or 5.3%, to $4.5 million for the year ended June 30, 2009 from $4.3 million for the year ended June 30, 2008. The increase was primarily the result of an increase in ATM fees and charges as a result of an increase in ATM surcharge fees for non-customers. In addition there were lower losses attributable to our investment in a California Affordable Housing Program Fund. See “Investment Activities—Equity Investment.”

Noninterest Expense. Our noninterest expense decreased $77,000 or 0.5% to $16.7 million for the year ended June 30, 2009 from $16.8 million for the year ended June 30, 2008. The decrease was primarily due to the recognition of $1.3 million in terminated stock offering costs for the year ended June 30, 2008 without a similar charge for the year ended June 30, 2009. Excluding the stock offering costs, noninterest expense increased $1.2 million due to increases in federal deposit insurance premiums due primarily to the special assessment, ATM expense and other operating expenses.

Salaries and benefits represented 48.8% and 48.1% of total noninterest expense for the years ended June 30, 2009 and 2008, respectively. Total salaries and benefits increased $67,000, or 0.8%, to $8.2 million for the year ended June 30, 2009 from $8.1 million for the year ended June 30, 2008. The increase was primarily due to annual salary increases and an increase in the number of full-time equivalent employees partially offset by a decrease in ESOP expense as a result of a decline in the market value of our stock during the year.

ATM expense increased $245,000, or 18.2% to $1.6 million for the year ended June 30, 2009 from $1.3 million for the year ended June 30, 2008. The increase was primarily due to ATM installations, one-time communication capacity expense, and an increase in ATM fraud losses.

Federal deposit insurance premiums increased $619,000, or 150.2% to $1.0 million for the year ended June 30, 2009 from $412,000 for the year ended June 30, 2008. The increase was primarily due to an increase in the general assessment rate and the FDIC imposing a special assessment of approximately $400,000 at June 30, 2009 due to ongoing bank failures.

Other operating expenses increased $203,000, or 15.3% to $1.5 million for the year ended June 30, 2009 from $1.3 million for the year ended June 30, 2008. The increase in other expense was due to real estate loan servicing repurchases and higher real estate owned and foreclosure expenses.

Income Tax Expense. Income tax expense for the year ended June 30, 2009 was $2.8 million as compared to $2.1 million for the year ended June 30, 2008. This increase was primarily the result of a higher pre-tax income of $1.5 million for the year ended June 30, 2009. The effective tax rate was 36.7% and 35.5% for the years ended June 30, 2009 and 2008, respectively. The increase in the effective tax rate was attributable to an increase in nondeductible expense related to stock options and stock awards.

Comparison of Results of Operations for the Fiscal Years Ended June 30, 2008 and 2007.

General. Net income for the year ended June 30, 2008 was $3.9 million, a decrease of $796,000, or 17.1%, from net income of $4.7 million for the year ended June 30, 2007. The decline in net income was primarily attributable to recognizing $1.3 million in stock offering costs 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.

Interest Income. Interest income increased $4.0 million, or 9.9%, to $45.2 million for the year ended June 30, 2008 from $41.2 million for the year ended June 30, 2007. The primary factor for the increase in interest income was an increase in the average loans receivable balance of $64.8 million, or 9.8%, to $724.0 million for the year ended June 30, 2008 from $659.2 million for the year ended June 30, 2007. The increase was primarily due to increases in multi-family residential and commercial real estate loans. The average yield on loans receivable increased 21 basis points to 5.88% for the year ended June 30, 2008 from 5.67% for the year ended June 30, 2007.

Interest Expense. Interest expense increased $2.6 million, or 11.4%, to $25.8 million for the year ended June 30, 2008 from $23.1 million for the year ended June 30, 2007. The average interest rates on interest-bearing liabilities increased 9 basis points to 3.77% for the year ended June 30, 2008 from 3.68% for the year ended June 30, 2007. This increase was primarily attributable to the increased volume and interest rate paid on average deposits, specifically certificates of deposit, and an increase in the average balance and interest rate on advances from the Federal Home Loan Bank of San Francisco.

The average balance of money market accounts decreased by $19.9 million, or 20.9% to $75.2 million for the year ended June 30, 2008 from $95.1 million for the year ended June 30, 2007. The average cost of money market accounts decreased 29 basis points to 2.55% for the year ended June 30, 2008 from 2.84% for the year ended June 30, 2007 as a result of a general decline in the interest rate environment. The average balance of savings accounts increased by $11.6 million, or 10.0% to $127.8 million for the year ended June 30, 2008 from $116.2 million for the year ended June 30, 2007. The average cost of savings accounts decreased 1 basis point to 1.65% for the year ended June 30, 2008 from 1.66% for the year ended June 30, 2007. The average balance of certificates of deposit increased by $7.4 million, or 3.2%, to $236.1 million for the year ended June 30, 2008 from $228.7 million for the year ended June 30, 2007. The average cost of certificates of deposit increased 15 basis points to 4.63% for the year ended June 30, 2008 from 4.48% for the year ended June 30, 2007, as a result of a general decline in the interest rate environment.

The average balance of borrowings increased $55.8 million, or 29.5%, to $245.0 million for the year ended June 30, 2008 from $189.2 million for the year ended June 30, 2007 due to new advances from the FHLB as well as participation in the State of California’s Time Deposit program and was used to fund loan growth. The average cost of borrowings increased 5 basis points to 4.42% for the year ended June 30, 2008 from 4.37% for the year ended June 30, 2007.

Provision for Loan Losses. Our provision for loan losses increased $433,000 to $962,000 for the year ended June 30, 2008 as compared to $529,000 for the year ended June 30, 2007. The allowance for loan losses as a percent of total loans was 0.43% at June 30, 2008 as compared to 0.40% at June 30, 2007. The increase in provision for loan losses was primarily attributable to an increase in real estate loan delinquencies as well as general increases in multi-family residential and commercial real estate lending, which generally have a higher risk than traditional one-to-four family real estate lending. The assumptions were 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. Noninterest income increased $61,000, or 1.4%, to $4.3 million for the year ended June 30, 2008 from $4.3 million for the year ended June 30, 2007. The increase was primarily the result of 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.

Noninterest Expense. Our noninterest expense increased $2.2 million, or 15.3% to $16.8 million for the year ended June 30, 2008 from $14.6 million for the year ended June 30, 2007. The increase was primarily due to the recognition of $1.3 million in terminated stock offering costs, a $410,000 increase in salaries and benefits, a $223,000 increase in occupancy and equipment, and a $272,000 increase in federal deposit insurance premiums.

Salaries and benefits represented 48.1% and 52.7% of total noninterest expense for the years ended June 30, 2008 and 2007, respectively. Total salaries and benefits increased $410,000, or 5.3%, to $8.1 million for the year ended June 30, 2008 from $7.7 million for the year ended June 30, 2007. The increase was primarily due to annual salary increases and an increase in the number of full-time equivalent employees.

Occupancy and equipment expenses increased $223,000, or 10.7% to $2.3 million for the year ended June 30, 2008 from $2.1 million for the year ended June 30, 2007. The increase was primarily due to additional data processing hardware and software costs.

Federal deposit insurance premiums increased $272,000, or 194.3% to $412,000 for the year ended June 30, 2008 from $140,000 for the year ended June 30, 2007. The increase in other expense was primarily due to the FDIC Deposit Insurance Fund Assessments which began in the 2008 fiscal year.

Income Tax Expense. Income tax expense for the year ended June 30, 2008 was $2.1 million as compared to $2.5 million for the year ended June 30, 2007. This decrease was primarily the result of a decline in pre-tax income of $1.2 million for the year ended June 30, 2008. The effective tax rate was 35.5% and 34.9% for the years ended June 30, 2008 and 2007, respectively.

Management of 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 fixed rate loans generally have longer maturities than our fixed rate 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 recommend and set 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 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 monthly.

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:

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maintaining an adequate level of adjustable rate loans;

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originating a reasonable volume of short- and intermediate-term consumer loans;

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managing our deposits to establish stable deposit relationships; and

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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.

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 Office of Thrift Supervision provides Kaiser Federal Bank with the information presented in the following tables, 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 March 31, 2010 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.


										NPV as a Percentage of Present
				Estimated Increase (Decrease) in						Value of Assets (3)
Change in Interest				NPV									Increase
Rates (basis		Estimated								NPV			(Decrease)
points) (1)		NPV (2)		Amount			Percent			Ratio (4)			(basis points)
		(Dollars in thousands)

	+300	$	78,330	$	(30,009	)		(28	)%		8.88	%		(273	)
	+200		89,909		(18,430	)		(17	)%		9.99	%		(162	)
	+100		100,581		(7,758	)		(7	)%		10.96	%		(65	)
	—		108,339		—			—			11.61	%		—
	-100		111,383		3,044			3	%		11.81	%		20

(1)	Assumes an instantaneous uniform change in interest rates at all maturities.

(2)	NPV is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

(3)	Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(4)	NPV Ratio represents NPV divided by the present value of assets.

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

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.

Liquidity, Capital Resources 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 previously 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.

Our liquidity, represented by cash and cash equivalents, interest bearing accounts and mortgage-backed and related securities, is a product of our 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 and previously used State of California time deposits, 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 as described in greater detail under “Business - Lending Activities.” We use our sources of funds primarily to meet ongoing commitments, to pay maturing certificates of deposit and savings withdrawals, to fund loan commitments and to maintain our portfolio of mortgage-backed and related securities. At March 31, 2010, total approved loan commitments amounted to $6.6 million, which includes the unadvanced portion of loans of $2.5 million. Certificates of deposit and advances from the Federal Home Loan Bank of San Francisco scheduled to mature in one year or less at March 31, 2010, were $174.7 million and $62.0 million, respectively. Based on historical experience, management believes that a significant portion of maturing deposits will remain with Kaiser Federal Bank and we anticipate that we will continue to have sufficient funds, through deposits and borrowings, to meet our current commitments.

At March 31, 2010, we had available additional advances from the Federal Home Loan Bank of San Francisco in the amount of $215.8 million. We also had an available line of credit with the Federal Reserve Bank of San Francisco of $80.9 million at March 31, 2010, which has not been drawn upon.

Contractual Obligations

In the normal course of business, we enter into contractual obligations that meet various business needs. These contractual obligations include certificates of deposit to customers, borrowings from the Federal Home Loan Bank, lease obligations for facilities, and commitments to purchase and/or originate loans. The following table summarizes our long-term contractual obligations at June 30, 2009.

Contractual Obligations	Total		Less than 1 Year		1 to 3 Years		More than 3 to 5 Years		More than 5 Years
	(In thousands)

FHLB advances	$	207,000	$	70,000	$	117,000	$	20,000	$	—
State of California time deposit		25,000		25,000		—		—		—
Operating lease obligations		2,239		843		703		532		161
Loan commitments to originate residential mortgage loans		4,641		4,641		—		—		—
Available home equity and unadvanced lines of credit		2,912		2,912		—		—		—
Certificates of deposit		277,784		126,290		114,276		37,218		—
Total commitments and contractual obligations	$	519,576	$	229,686	$	231,979	$	57,750	$	161

Off-Balance Sheet Arrangements

As a financial service provider, we routinely are a party to various financial instruments with off-balance sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. For additional information, see Note 17 of the Notes to our Consolidated Financial Statements.

Capital

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to continue as a “well capitalized” institution in accordance with regulatory standards. Total stockholders’ equity was $93.0 million at March 31, 2010 or 10.42%, of total assets on that date. As of March 31, 2010, we exceeded all regulatory capital requirements. Our regulatory capital ratios at March 31, 2010 were as follows: core capital 8.89%; Tier I risk-based capital 12.74%; and total risk-based capital 13.99%. The regulatory capital requirements to be considered well capitalized are 5%, 6% and 10%, respectively. See “Supervision and Regulation - Capital Requirements.”

For the nine months ended March 31, 2010, we repurchased 13,263 shares of our common stock at an average cost of $8.67. For the fiscal year ended June 30, 2009, we repurchased 180,718 shares of our common stock at an average cost of $10.21.

Recent Accounting Pronouncements

For discussion of Recent Accounting Pronouncements, please see Note 1-Nature of Business and Significant Accounting Policies in the Notes to the Consolidated Financial Statements beginning on Page F-1.

Impact of Inflation and Changing Prices

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 non-interest 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.

BUSINESS OF KAISER FEDERAL FINANCIAL GROUP, INC.

Kaiser Federal Financial Group, Inc. is a Maryland corporation, organized in September 2007. Upon completion of the conversion, Kaiser Federal Financial Group, Inc. will become the holding company of Kaiser Federal Bank and will succeed to all of the business and operations of K-Fed Bancorp and each of K-Fed Bancorp and K-Fed Mutual Holding Company will cease to exist.

Initially following the completion of the conversion, Kaiser Federal Financial Group, Inc. will have no significant assets other than owning 100% of the outstanding common stock of Kaiser Federal Bank, the net proceeds it retains from the offering, part of which will be used to make a loan to the Kaiser Federal Bank Employee Stock Ownership Plan, and will have no significant liabilities. See “How We Intend to Use the Proceeds From the Offering.” Kaiser Federal Financial Group, Inc. intends to use the support staff and offices of Kaiser Federal Bank and will pay Kaiser Federal Bank for these services. If Kaiser Federal Financial Group, Inc. expands or changes its business in the future, it may hire its own employees.

Kaiser Federal Financial Group, Inc. intends to invest the net proceeds of the offering as discussed under “How We Intend to Use the Proceeds From the Offering.” In the future, we may pursue other business activities, including mergers and acquisitions, investment alternatives and diversification of operations. There are, however, no current understandings or agreements for these activities.

BUSINESS OF K-FED BANCORP

K-Fed Bancorp is a federally-chartered stock holding company that was formed in July 2003 as a wholly-owned subsidiary of K-Fed Mutual Holding Company, a federally-chartered mutual holding company, in connection with the mutual holding company reorganization of Kaiser Federal Bank, a federally chartered stock savings bank. Upon completion of the mutual holding company reorganization in July 2003, K-Fed Bancorp acquired all of the capital stock of Kaiser Federal Bank. On March 30, 2004, K-Fed Bancorp completed a minority stock offering in which it sold 5,686,750 shares, or 39.09%, of its outstanding common stock to eligible depositors of Kaiser Federal Bank and the Kaiser Federal Bank employee stock ownership plan in a subscription offering. The remaining 8,861,750 outstanding shares of K-Fed Bancorp’s common stock are owned by K-Fed Mutual Holding Company. At March 31, 2010, K-Fed Mutual Holding Company owned 66.7% of the outstanding shares of common stock of K-Fed Bancorp, with the remaining 33.3%, or 4,429,575 shares held by public stockholders. K-Fed Bancorp owns 100% of Kaiser Federal Bank’s outstanding common stock.

At March 31, 2010, K-Fed Bancorp had consolidated assets of $893.1 million, deposits of $648.7 million and stockholders’ equity of $93.0 million. K-Fed Bancorp has not engaged in any significant business to date. Its primary activity is holding all of the outstanding shares of common stock of Kaiser Federal Bank. K-Fed Bancorp does not maintain offices separate from those of Kaiser Federal Bank or utilize persons other than certain of Kaiser Federal Bank’s officers. Our executive offices are located at 1359 North Grand Avenue, Covina, California 91724 and our telephone number is (626) 339-9663. Its website address is www.k-fed.com. Information on this website is not and should not be considered to be a part of this prospectus.

BUSINESS OF KAISER FEDERAL BANK

General

Kaiser Federal Bank is a community oriented financial institution offering a variety of financial services to meet the needs of the communities it serves. We are headquartered in Covina, California, with branches or financial service centers in Pasadena, Covina, Bellflower, Harbor City, Los Angeles and Panorama City to serve Los Angeles County, financial service centers in Fontana and Riverside to serve San Bernardino and Riverside Counties, and one financial service center in Santa Clara to serve Santa Clara County. Financial service centers provide all of the services as our full service branches except they do not disburse cash; however, there is an on-site ATM that dispenses cash.

We began operations as a credit union in 1953 initially serving the employees of the Kaiser Foundation Hospital in Los Angeles, California. As the Kaiser Permanente Medical Care Program evolved so did the credit union, and in 1972, it changed its name to Kaiser Permanente Federal Credit Union. The credit union grew to primarily serve Kaiser Permanente employees and physicians who worked or lived in California. The credit union serviced members with two branches, Pasadena and Santa Clara, and a network of ATMs primarily located in Kaiser Permanente medical centers. However, as a credit union, the credit union was legally restricted to serve only individuals who shared a “common bond” such as a common employer.

After receiving the necessary regulatory and membership approvals, on November 1, 1999, Kaiser Permanente Federal Credit Union converted to a federal mutual savings bank known as Kaiser Federal Bank which serves the general public as well as Kaiser Permanente employees. Kaiser Federal Bank reorganized into the mutual holding company structure in 2003 and became the wholly owned subsidiary of K-Fed Bancorp.

Kaiser Federal Bank’s principal business activity consists of attracting retail deposits from the general public and originating primarily loans secured by first mortgages on owner-occupied one-to-four family residences and multi-family residences located in its market area and, to a lesser extent, automobile and other consumer loans. Prior to 2007, Kaiser Federal Bank purchased, using our own underwriting standards, a significant number of first mortgages on owner-occupied, one-to-four family residences secured by properties located throughout California. Kaiser Federal Bank also originated commercial real estate loans, but made the strategic decision to cease such lending in January 2009 in light of the downturn in economic conditions. Historically, we have not originated, or purchased, commercial business, commercial construction, or residential construction loans and have no current plans to do so.

Our revenues are derived principally from interest on loans and mortgage-backed and related securities. We also generate revenue from service charges and other income.

We offer a variety of deposit accounts having a wide range of interest rates and terms, which generally include savings accounts, money market accounts, demand deposit accounts and certificate of deposit accounts with varied terms ranging from 90 days to five years. We solicit deposits in our primary market areas of Los Angeles, Orange, San Diego, San Bernardino, Riverside, and Santa Clara Counties, in California.

Market Area

The financial services sector of the United States economy continues to experience a declining economic environment. Economic conditions continued to weaken both nationally and in our market area of California. With the tightening of credit standards, there has been an imbalance between the number of homes available for sale and the demand from qualified borrowers, creating significant downward pressure on home prices. California, in particular, experienced significant declines in real estate values over the past several years and increasing unemployment rates as compared to the national average.

Future growth opportunities will be influenced by the stability of the regional economy and other trends within California, including housing market conditions. According to the U.S. Census Bureau, unemployment rates in California increased to 12.6% at March 31, 2010 from 11.6% at June 30, 2009 and 7.0% at June 2008. This compares to an increase in the national unemployment rate to 9.7% at March 31, 2010 from 9.5% at June 30, 2009 and 5.6% at June 2008. According to the U.S. Census Bureau, the unemployment rates (not seasonally adjusted) for the Los Angeles-Long Beach-Santa Ana metropolitan area, where most of our lending activity occurs increased to 11.7% at March 31, 2010 from 10.8% at June 30, 2009 and 6.8% at June 2008. The S&P/Case-Shiller Home Price Index for the Los Angeles Metropolitan Area declined by approximately 37% at December 2009 as compared to the high reported in 2006. This compares to the S&P/Case-Shiller U.S. National Home Price Index decline of approximately 28% as compared to the high reported in 2006. Despite the weakened employment conditions, reduced home sales prices supported a strong volume of existing home sales in California. The California Association of Realtors reported single-family home sales increased 2.5% in March 2010 as compared to March 2009. During fiscal 2009, the California Association of Realtors reported the number of existing homes sold in the state increased 65%. Foreclosures accounted for 50% of these existing home sales, up from 40% in 2008. Sales of new homes remained extremely weak during fiscal 2009.

In response to declining new home sales, builders have continued to reduce the pace of new construction, as measured by the number of building permits issued. According to the U.S. Census Bureau, one-to-four family and multi-family building permits have declined significantly in the past two years, both nationally and in California. On a national level, one-to-four family building permits declined 35% in 2008 and 36% in 2009. This compares to one-to-four family building permits in California declining 43% in 2008 and 44% in 2009. Multi-family building permits declined 23% in 2008 and 49% in 2009 on a national level. This compares to multi-family building permits in California declining 34% in 2008 and 56% in 2009. The California housing market and economy have been adversely impacted by the decline in building permits over the past several years.

Competition

We face strong competition in originating real estate and other loans and in attracting deposits. Competition in originating real estate loans comes primarily from other savings institutions, commercial banks, credit unions and mortgage bankers. Other savings institutions, commercial banks, credit unions and finance companies provide vigorous competition in consumer lending.

We attract all of our deposits through our branch and ATM network. Competition for those deposits is principally from other savings institutions, commercial banks and credit unions, as well as mutual funds and other alternative investments. We compete for these deposits by offering superior service and a variety of deposit accounts at competitive rates. We have less than a 1% market share of deposits in each of the markets in which we compete.

Lending Activities

General. Historically, we originated and purchased first lien one-to-four family real estate loans throughout our market area. However, we have not purchased any one-to-four family real estate loans since June 2007 as we have focused our efforts on originating multi-family residential loans. We also originate consumer loans, primarily automobile loans. Prior to January 2009, we also originated commercial real estate loans, but have ceased making such loans until economic conditions improve and the real estate market stabilizes.

Our loans carry either a fixed or an adjustable rate of interest. We do not offer adjustable rate loans where the initial rate is below the otherwise applicable index rate (i.e., teaser rates). Mortgage loans generally have a longer term amortization, with maturities up to 30 years, depending upon the type of property with principal and interest due each month. Consumer loans are generally short term and amortize monthly or have interest payable monthly. We also have loans in our portfolio that only require interest payments on a monthly basis. At March 31, 2010, our net loan portfolio totaled $752.6 million, which constituted 84.3% of our total assets. With respect to purchased loans, we underwrote each purchased loan in accordance with our underwriting standards. The majority of the loans that we purchased were acquired with servicing retained by the seller to allow for greater investments in real-estate lending without having to significantly increase our servicing and operations costs. We generally purchased these loans without recourse against the seller.

At March 31, 2010, the maximum amount which we could have loaned to any one borrower and the borrower’s related entities under applicable regulations was $13.0 million, or 15% of our unimpaired capital. At March 31, 2010, we had no loans or group of loans to related borrowers with outstanding balances in excess of this amount. Our five largest lending relationships at March 31, 2010 were as follows:

●

three loans to an individual totaling $7.6 million, secured by a multi-tenant medical office building and two multi-family dwellings;

●

seven loans to an individual for $7.5 million secured by seven multi-family dwellings ranging from eight to 50 units;

●

three loans to an individual for $6.8 million secured by a single tenant retail building, a single tenant supermarket building and a 15 tenant mixed use office building;

●

two loans to an individual for $6.5 million secured by a 16 tenant medical office building and a 54 unit multi-family dwelling; and

●

two loans to an individual for $5.8 million secured by a single tenant industrial building and a single tenant office building.

All of the loans noted in the above relationships were performing in accordance with their terms as of March 31, 2010.

The following table presents information concerning the composition of the loan portfolio in dollar amounts and in percentages as of the dates indicated. There were no loans held for sale on any of the dates indicated below.


	At March 31,						At June 30,
	2010						2009						2008						2007						2006						2005
	Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)
Real estate
One-to-four family	$	343,361			44.90	%	$	377,230			50.22	%	$	428,727			57.51	%	$	469,459			66.88	%	$	437,024			68.63	%	$	372,134			69.04	%
Multi-family residential		260,243			34.02			196,575			26.17			132,290			17.75			88,112			12.55			89,220			14.01			87,650			16.26
Commercial		113,989			14.90			121,143			16.13			115,831			15.54			77,821			11.09			58,845			9.24			32,383			6.01
Total real estate loans		717,593			93.82			694,948			92.52			676,848			90.80			635,392			90.52			585,089			91.88			492,167			91.31

Other loans
Consumer:
Automobile		32,371			4.23			41,798			5.56			52,299			7.01			53,100			7.56			41,572			6.53			38,613			7.16
Home equity		1,105			0.14			1,299			0.17			1,405			0.19			1,446			0.21			1,787			0.28			601			0.11
Other		13,830			1.81			13,119			1.75			14,883			2.00			12,024			1.71			8,374			1.31			7,644			1.42
Total other loans		47,306			6.18			56,216			7.48			68,587			9.20			66,570			9.48			51,733			8.12			46,858			8.69

Total loans	$	764,899			100.00	%	$	751,164			100.00	%	$	745,435			100.00	%	$	701,962			100.00	%	$	636,822			100.00	%	$	539,025			100.00	%

Less:
Net deferred loan originations costs (fees)		590						376						33						(134	)					(202	)					(32	)
Net (discount) premiums on purchased loans		(62	)					(79	)					(48	)					120						195						982
Allowance for loan losses		(12,820	)					(4,586	)					(3,229	)					(2,805	)					(2,722	)					(2,408	)
Total loans receivable, net	$	752,607					$	746,875					$	742,191					$	699,143					$	634,093					$	537,567

Loan Maturity. The following schedule illustrates certain information at June 30, 2009 regarding the dollar amount of loans maturing in the portfolio based on their contractual terms-to-maturity, but does not include scheduled payments or potential prepayments. Demand loans, loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less. Loan balances do not include undisbursed loan proceeds, unearned discounts, unearned income and allowance for loan losses.

	Real Estate						Consumer
	One-to-four family		Multi-family residential		Commercial		Automobile		Home Equity		Other		Total
	(In thousands)
At June 30, 2009

Within (1) year (1)	$	—	$	235	$	—	$	682	$	1,299	$	3,441	$	5,657

After 1 year:
After 1 year through 3 years		302		—		244		17,924		—		930		19,400
After 3 years through 5 years		836		35		9,247		23,033		—		1,488		34,639
After 5 years through 10 years		30,401		19,367		110,542		159		—		7,260		167,729
After 10 years through 15 years		23,882		155,512		1,110		—		—		—		180,504
After 15 years		321,809		21,426		—		—		—		—		343,235
Total due after 1 year		377,230		196,340		121,143		41,116		—		9,678		745,507

Total	$	377,230	$	196,575	$	121,143	$	41,798	$	1,299	$	13,119	$	751,164

(1)	Includes demand loans and loans that have no stated maturity.

The following table sets forth the dollar amount of all loans at June 30, 2009 that are due after June 30, 2010, which have fixed interest rates and adjustable interest rates.

	Due after June 30, 2010
	Fixed Rate		Adjustable Rate		Total
	(In thousands)
Real estate loans
One-to-four family	$	303,287	$	73,943	$	377,230
Multi-family residential		—		196,340		196,340
Commercial		—		121,143		121,143
Total real estate loans		303,287		286,557		694,713

Other Loans
Consumer:
Automobile		41,116		—		41,116
Home equity		—		—		—
Other loans		9,678		—		9,678
Total other loans		50,794		—		50,794
Total loans	$	354,081	$	391,426	$	745,507

One-to-four Family Residential Lending. At March 31, 2010, our first lien one-to-four family residential mortgage loans totaled $343.4 million, or 44.9%, of our gross loan portfolio. We generally underwrite our one-to-four family loans based on the applicant’s employment, credit history and the appraised value of the subject property. With respect to loans we have purchased, we underwrote each loan based upon our underwriting standards prior to making the purchase. Presently, we lend up to 80% of the lesser of the appraised value or purchase price of the subject property for one-to-four family residential loans. Properties securing our one-to-four family loans are appraised by independent state licensed fee appraisers approved by our board of directors. We require our borrowers to obtain title and hazard insurance, and flood insurance, if necessary, in an amount not less than the value of the property improvements.

We currently originate one-to-four family mortgage loans on a fixed rate and adjustable rate basis. Our pricing strategy for mortgage loans includes setting interest rates that are competitive with other local financial institutions and consistent with our internal needs. Adjustable rate loans are tied to indices based on the one year London Inter Bank Offering Rate and U.S. Treasury securities adjusted to a constant maturity of one year. A majority of our adjustable rate loans carry an initial fixed rate of interest for either three or five years which then converts to an interest rate that is adjusted annually based upon the applicable index. Our one-to-four family mortgage loans are structured with a thirty year maturity and with amortizations up to a 30-year period. All of our one-to-four family loans are secured by properties located in California. All our real estate loans contain a “due on sale” clause allowing us to declare the unpaid principal balance due and payable upon the sale of the security property.

Adjustable rate mortgage loans generally pose different credit risks than fixed rate loan mortgages, primarily because as interest rates rise, the borrower’s payment rises, increasing the potential for default. At March 31, 2010, our one-to-four family adjustable rate mortgage loan portfolio totaled $60.1 million, or 7.9% of our gross loan portfolio. At that date, the fixed rate one-to-four family mortgage loan portfolio totaled $283.3 million, or 37.0% of our gross loan portfolio. Included in non-accrual loans at March 31, 2010 were $2.9 million in adjustable rate one-to-four family mortgage loans and $19.8 million in fixed rate one-to-four family mortgage loans.

In addition, we previously purchased interest-only one-to-four family mortgage loans. One-to-four family interest-only mortgage loans have decreased by $12.9 million, or 21.7% to $46.8 million at March 31, 2010 from $59.7 million at June 30, 2009. We have also purchased loans underwritten based upon stated income. A stated income loan is a loan where the borrower’s income source is not subject to verification through the application process, but the reasonableness of the stated income is verified through review of other sources, such as compensation surveys. One-to-four family stated income mortgage loans have decreased by $13.7 million, or 14.5% to $80.6 million at March 31, 2010 from $94.3 million at June 30, 2009. As of March 31, 2010, $57.5 million of stated income mortgage loans were fixed rate loans and $23.1 million were adjustable rate loans. Included in non-accrual loans at March 31, 2010 are $12.2 million in one-to-four family loans that were interest-only or stated income loans. We have no plans to increase the number of interest-only or stated income loans held in our loan portfolio or originate such loans at this time and have not purchased any such loans since 2007.

In 2005, we began to purchase interest-only loans assuming a fully amortizing monthly payment and loan qualification was based upon the rate that would apply upon the first interest rate adjustment. We stopped purchasing such loans in 2007 and have no plans to originate or purchase such loans in the future. An interest-only loan typically provides for the payment of interest (rather than both principal and interest) for a fixed period of three, five or seven years, thereafter the loan payments adjust to include both principal and interest for the remaining term. By imposing these additional underwriting standards we believe these loans should not present greater risk than other loans in our one-to-four family loan portfolio.

The following table describes certain risk characteristics of our one-to-four family nonconforming mortgage loans held for investment as of March 31, 2010 and June 30, 2009:

Category	Outstanding Balance		Weighted-Average Credit Score(1)		Weighted Average LTV(2)			Weighted- Average Seasoning(3)
	(Dollars in thousands)

March 31, 2010
Interest-only(4)	$	46,799		736		71.73	%	3.94		years
Stated income(4)(5)		80,554		737		67.09			4.89
Credit score less than or equal to 660		25,638		640		70.40			4.66

June 30, 2009
Interest-only(4)	$	59,741		736		76.25	%	3.46		years
Stated income(4)(5)		94,263		738		71.84			4.34
Credit score less than or equal to 660		27,766		641		71.23			4.05

(1)	The credit score is one factor in determining the credit worthiness of a borrower based on the borrower’s credit history. The credit score is as of origination.

(2)	LTV (loan-to-value) is the ratio calculated by dividing the original loan balance by the appraised value of the real estate collateral.

(3)	Seasoning describes the number of years since the funding date of the loan.

(4)	At March 31, 2010 and June 30, 2009 there were $10.9 million and $16.8 million in loans that are both stated income and interest-only, respectively.

(5)	Stated income is defined as a borrower provided level of income which is not subject to verification during the loan origination process through the borrower’s application, but the reasonableness of the borrower’s income is verified through other sources.

Multi-Family Residential Real Estate Lending. We also offer multi-family residential real estate loans through our loan division at the Covina headquarters office. These loans are secured by real estate located in our primary market areas, within the state of California. We generally originate multi-family residential loans through our loan officers. Since multi-family residential lending has become the predominate source of our loan origination activity, we have hired additional seasoned loan officers, underwriters, and support staff in this area. We seek to originate multi-family residential loans with initial principal balances of $1.5 million or less. At March 31, 2010, multi-family residential loans totaled $260.2 million, or 34.0%, of our gross loan portfolio, and consisted of 349 loans outstanding with an average loan balance of approximately $750,000 although we originate loans with balances greater than this average.

Our multi-family residential loans are originated with adjustable interest rates. We use a number of indices to set the interest rate, including a rate based on the constant maturity of one year U.S. Treasury securities. Our adjustable rate loans carry an initial fixed rate of interest for one, three, five or seven years which then convert to an interest rate that is adjusted annually based upon the applicable index. Presently, our underwriting guidelines allow us to lend up to 70% of the lesser of the appraised value or purchase price of multi-family residential real estate. These loans require monthly payments, amortize over a period of up to thirty years and have maximum maturity of thirty years and carry prepayment penalties.

Loans secured by multi-family residential real estate are underwritten based on non-discriminatory underwriting standards and loan origination procedures established by Kaiser Federal Bank’s Credit Committee. Loan policies are reviewed annually, or more frequently if warranted, and approved by both the Credit Committee and Kaiser Federal Bank’s board of directors. The loan underwriting process is intended to assess the income producing potential of the property and the financial strength of the borrower. We review the borrower’s sources of income, cash flow, assets, and credit history. We evaluate the historical and projected income and expenses of the borrower and property. We also evaluate a guarantor when a guarantee is provided as part of the loan. The net operating income, which is the income derived from the operation of the property less all operating expenses, must be sufficient to cover the payments related to the outstanding debt. Appraisals and secondary review appraisals on properties securing multi-family residential loans are performed by independent state licensed fee appraisers approved by our board of directors.

Loans secured by multi-family residential properties are generally larger and involve a greater degree of credit risk than one-to-four family residential mortgage loans. Because payments on loans secured by multi-family residential properties are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. If the cash flow from the project is reduced, or if leases are not obtained or renewed, the borrower’s ability to repay the loan may be impaired. In order to monitor the adequacy of cash flows on income-producing properties, the borrowers are required to provide periodic financial information. To ensure adequate resources to request, follow-up, and analyze borrower financial updates, additional staff has been allocated to these functions, and staffing will be added in the future to support the size and complexity of the portfolios. Included in non-accrual loans at March 31, 2010 were four multi-family residential real estate loans totaling $3.5 million, two of which are classified as troubled debt restructurings and are current under the modified terms. See “—Asset Quality - Non-Performing Assets.”

Commercial Real Estate Lending. In January 2009, we suspended offering new commercial real estate loans due to the unstable economic outlook for this type of loan. We will revaluate whether to originate commercial real estate loans in the future as market conditions change. The existing portfolio is secured primarily by small retail establishments, small industrial warehouse buildings and small office buildings located in our primary market area, within the state of California, and are both owner and non-owner occupied. These loans were originated through our staff at our Covina headquarters office. Generally, we have not purchased commercial real estate loans. At March 31, 2010, commercial real estate loans totaled $114.0 million, or 14.9% of our gross loan portfolio, of which $24.2 million or 21.2% of this portfolio was to borrowers who occupy the property. The table below shows the number and balance by collateral type of our commercial real estate loans at March 31, 2010.

Type of Loan	Number of Loans		Balance
			(In thousands)

Office		37	$	40,915
Owner occupied		35		24,164
Manufacturing facilities		13		16,987
Retail		10		16,283
Medical office		4		5,365
Other		13		10,275
Total		112	$	113,989

We originated only adjustable rate commercial real estate loans. The interest rate on these loans is tied to a rate based on the constant maturity of one year U.S. Treasury securities. A majority of our adjustable rate loans carry an initial fixed rate of interest for either three or five years which then converts to an interest rate that is adjusted annually based upon the index. Presently, our underwriting guidelines allow us to lend up to 60% of the lesser of the appraised value or purchase price for the commercial real estate. These loans require monthly payments, amortize up to thirty years, have maturities of up to fifteen years and carry prepayment penalties.

Loans secured by commercial real estate were underwritten based on the income producing potential of the property, the financial strength of the borrower and any guarantors. The net operating income, which is the income derived from the operation of the property less all operating expenses, must be sufficient to cover the payments related to the outstanding debt. We may require an assignment of rents or leases in order to be assured that the cash flow from the project will be used to repay the debt. All loans required an appraisal and secondary review from two different independent state licensed fee appraisers on our approved appraiser list, which is approved by the board of directors.

Loans secured by commercial real estate properties are generally larger and involve a greater degree of credit risk than one-to-four family residential mortgage loans. Because payments on loans secured by commercial real estate properties are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. If the cash flow from the project is reduced, or if leases are not obtained or renewed, the borrower’s ability to repay the loan may be impaired. In order to monitor the adequacy of cash flows on income-producing properties, the borrowers are required to provide periodic financial information. Included in non-accrual loans as of March 31, 2010 is one contractually current commercial real estate loan with a balance of $2.7 million. See “—Asset Quality - Non-Performing Loans.”

Consumer Loans. We offer a variety of secured consumer loans, including home equity lines of credit, new and used automobile loans, and loans secured by savings deposits. We also offer a limited amount of unsecured loans. Consumer loans generally have shorter terms to maturity, which reduces our exposure to changes in interest rates, and carry higher rates of interest than do one-to-four family residential mortgage loans. At March 31, 2010, our consumer loan portfolio, exclusive of automobile loans, totaled $14.9 million, or 2.0%, of our gross loan portfolio.

The most significant component of our consumer lending is automobile loans. We originate automobile loans only on a direct basis with the borrower. Many of our automobile loans are made to employees of the Kaiser Permanente Health Care System. Loans secured by automobiles totaled $32.4 million, or 4.2%, of our gross loan portfolio at March 31, 2010. Automobile loans may be written for up to seven years for new automobiles and a maximum of five years for used automobiles and have fixed rates of interest. Loan-to-value ratios for automobile loans are up to 100% of the manufacturer’s suggested retail price for new automobiles and up to 100% of value on used cars, based on valuation from official used car guides.

Each automobile loan requires the borrower to keep the financed vehicle fully insured against loss or damage by fire, theft and collision. Nevertheless, there can be no assurance that each financed vehicle will continue to be covered by physical damage insurance provided by the borrower during the entire term which the related loan is outstanding. In addition, we have the right to force place insurance coverage in the event the required physical damage insurance on an automobile is not maintained by the borrower.

Our primary focus when originating automobile loans is on the ability of the borrower to repay the loan rather than the value of the underlying collateral. The amount financed by us is generally up to the manufacturer’s suggested retail price of the financed vehicle plus sales tax, dealer preparation fees, license fees and title fees, plus the cost of service and warranty contracts obtained through us in connection with the vehicle.

Consumer loans may entail greater risk than do one-to-four family residential mortgage loans, particularly in the case of consumer loans which are secured by rapidly depreciable assets, such as automobiles. In these cases, any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. As a result, consumer loan collections are dependent on the borrower’s continuing financial stability and, thus, are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

Loan Approval Procedures and Authority. All multi-family residential and commercial real estate loans require an appraisal and secondary review appraisal as part of the underwriting process. One-to-four family residential loans require an appraisal and may be subject to a secondary review appraisal. Secured consumer loans require evaluation of collateral. Additionally, any loan request that results in a total credit exposure to one borrower of over $500,000 and up to $1.5 million requires the additional approval of a second underwriter and/or the Chief Credit Officer. Any loan request that results in a total credit exposure to one borrower over $1.5 million and up to $5 million requires the approval of the Credit Committee, which is currently comprised of the Chairman of the Board, President/CEO, Chief Operating Officer, Chief Credit Officer, and other senior lending staff. Loan requests that result in a credit exposure to one borrower over $5.0 million require the Board of Director’s approval. All loan approvals granted by the Credit Committee are documented in the meeting minutes and reported to the board of directors. Although our regulatory loans-to-one borrower limit is substantially higher than the $5 million internal limit, and will increase with the successful completion of this offering, our intention is to keep our lending limits at their current levels.

Loan Originations, Purchases, Sales and Repayments. We originate loans through employees located at our offices. Walk-in customers and referrals from our current customer base, advertisements, real estate brokers and mortgage loan brokers are also important sources of loan originations.

While we originate adjustable rate and fixed rate loans, our ability to originate loans is dependent upon customer demand for loans in our market area. Demand is affected by local competition and the interest rate environment. In prior years, we have also purchased real estate whole loans as well as participation interests in real estate loans. However, we have not purchased any loans since June 2007. At March 31, 2010, our real estate loan portfolio totaled $717.6 million or 93.8% of the gross loan portfolio. Purchased real estate loans serviced by others at March 31, 2010 totaled $223.9 million, or 29.3% of the gross loan portfolio. At June 30, 2009, our real estate loan portfolio totaled $694.9 million or 92.5% of the gross loan portfolio. Purchased real estate loans serviced by others at June 30, 2009 totaled $291.1 million, or 38.8% of the gross loan portfolio.

The following table shows the loan originations, purchases, sales and repayment activities for the years indicated.

	For the Nine Months Ended March 31,						For the Year Ended June 30,
	2010			2009			2009			2008			2007
	(In thousands)
Originations by type:
Adjustable rate:
Real estate-one to four-family	$	—		$	—		$	—		$	4,491		$	2,399
-multi-family residential		70,761			56,063			76,495			59,548			13,740
-commercial		—			13,664			13,664			53,108			23,432
Non-real estate – other consumer		—			—			—			185			3,542
Total adjustable rate		70,761			69,727			90,159			117,332			43,113

Fixed rate:
Real estate-one to four-family	$	22,432		$	3,320		$	7,777		$	14,749		$	20,574
Non-real estate - consumer automobile		6,521			9,861			12,395			24,960			35,654
- other consumer		8,231			9,930			11,264			13,569			11,841
Total fixed rate		37,184			23,111			31,436			53,278			68,069
Total loans originated		107,945			92,838			121,595			170,610			111,182

Purchases:
Adjustable rate:
Real estate- one to four-family	$	—		$	—		$	—		$	—		$	—
-multi-family residential		—			—			—			—			—
-commercial		—			—			—			—			—
Total adjustable rate		—			—			—			—			—

Fixed rate:
Real estate- one to four-family	$	—		$	—		$	—		$	—		$	109,830
Total fixed rate		—			—			—			—			109,830
Total loans purchased		—			—			—			—			109,830

Sales and repayments:
Sales and loan participations sold		2,485			—			—			—			—
Principal repayments		91,725			82,134			115,866			127,137			155,872
Total reductions		94,210			82,134			115,866			127,137			155,872
Decrease in other items, net		(8,003	)		(839	)		(1,045	)		(425	)		(90	)
Net increase	$	5,732		$	9,865		$	4,684		$	43,048		$	65,050

Asset Quality

General. As a result of the prolonged distressed economic environment, elevated unemployment levels and a depressed real estate market, our loan portfolio continues to show increased delinquency. While delinquency ratios have increased we continue our disciplined lending practices including our strict adherence to a long standing disciplined credit culture that emphasizes the consistent application of underwriting standards to all loans. In this regard, we fully underwrite all loans based on an applicant’s employment history, credit history and an appraised value of the subject property. With respect to loans we purchased in the past, we underwrote each loan based upon our own underwriting standards prior to making the purchase. The following underwriting guidelines, among other things, have been used by us as underwriting tools to further limit our potential loss exposure:

●

All variable rate one-to-four family residential loans are underwritten using the fully indexed rate.

●

We only lend up to 80% of the lesser of the appraised value or purchase price for one-to-four family residential loans.

●

We only lend up to 70% of the appraised value or purchase price for multi-family residential loans.

Additionally, our portfolio has remained strongly anchored in traditional mortgage products. We do not originate or purchase construction and development loans, teaser option-ARM loans, negatively amortizing loans or high loan-to-value loans.

At March 31, 2010, one-to-four family residential mortgage loans totaled $343.4 million, or 44.9%, of our gross loan portfolio of which $283.3 million were fixed rate and $60.1 million were adjustable rate loans. Adjustable rate mortgages generally pose different credit risks than fixed rate mortgages, primarily because as interest rates rise, the borrower’s payment rises, increasing the potential for default. Included in non-accrual loans at March 31, 2010 were $2.9 million in adjustable rate one-to-four family loans and $19.8 million in fixed rate one-to-four family loans. Overall this represents 6.6% of the one-to-four family residential mortgage loan portfolio.

All of our real estate loans are secured by properties located in California. The following tables set forth our real estate loans and non-performing real estate loans by county:

Real Estate Loans by County as of March 31, 2010
County	One-to-four family		Multi-family residential		Commercial		Total		Percent
	(Dollars in thousands)

Los Angeles	$	127,743	$	194,058	$	65,944	$	387,745		54.04	%
Orange		57,111		22,052		28,577		107,740		15.01
San Diego		32,592		15,956		2,673		51,221		7.14
Riverside		16,903		6,200		9,423		32,526		4.53
San Bernardino		13,737		12,930		4,198		30,865		4.30
Santa Clara		26,577		582		—		27,159		3.79
Alameda		13,924		68		467		14,459		2.01
Other		54,774		8,397		2,707		65,878		9.18
Total	$	343,361	$	260,243	$	113,989	$	717,593		100.00	%

Non-performing Real Estate Loans by County as of March 31, 2010
County	One-to-four family		Multi-family residential		Commercial		Total		Percent of Non- performing to Loans in Each Category
	(Dollars in thousands)

Los Angeles	$	6,994	$	—	$	—	$	6,994		1.80	%
Orange		2,067		—		—		2,067		1.92
San Diego		2,074		—		2,673		4,747		9.27
Riverside		4,708		232		—		4,940		15.19
San Bernardino		2,556		2,214		—		4,770		15.45
Santa Clara		708		—		—		708		2.61
Alameda		990		—		—		990		6.85
Other		2,598		1,029		—		3,627		5.51
Total	$	22,695	$	3,475	$	2,673	$	28,843		4.02	%

Problem Assets. For one-to-four family residential, multi-family residential and commercial real estate loans serviced by us, a notice is sent to the borrower when the loan is eight days past due. When the loan is twenty days past due, we mail a subsequent delinquency notice to the borrower. Typically, before the loan becomes thirty days past due, contact with the borrower is made requesting payment of the delinquent amount in full, or the establishment of an acceptable repayment plan to bring the loan current. If an acceptable repayment plan has not been agreed upon, loan personnel will generally prepare a notice of intent to foreclose. The notice of intent to foreclose allows the borrower up to ten days to bring the account current. Once the loan becomes sixty days delinquent, and an acceptable repayment plan has not been agreed upon, the servicing officer will turn over the account to the deed of trust trustee with instructions to initiate foreclosure. Real estate loans serviced by a third party are subject to the servicing institution’s collection policies. However, we track each purchased loan individually to attempt to receive full payments as scheduled. Each month, third party servicers are required to provide delinquent loan status reports to our servicing officer, which are included in the month-end delinquent real estate report to management.

When a borrower fails to make a timely payment on a consumer loan, a delinquency notice is sent when the loan is ten days past due. When the loan is twenty days past due, we mail a subsequent delinquency notice to the borrower. Once a loan is thirty days past due, our staff contacts the borrower by telephone to determine the reason for delinquency and to request payment of the delinquent amount in full or to establish an acceptable repayment plan to bring the loan current. If the borrower is unable to make or keep payment arrangements, additional collection action is taken in the form of repossession of collateral for secured loans and legal action for unsecured loans.

At March 31, 2010, $218.6 million, or 63.7% of our one-to-four family residential mortgage portfolio was serviced by others. As a result of a higher level of delinquent loans nationwide, third party servicers have been unable to service and in certain circumstances foreclose on properties in a timely manner. Currently, we track the servicing of these loans on our core mortgage servicing system. We have hired additional experienced workout staff and reallocated existing staff to monitor the collection activity of the servicers and perform direct customer outreach when a loan falls 30 days past due. In many instances, our role has been to provide direction to the third party servicers regarding loan modification requests and to develop collection plans for individual loans, while maintaining contact with the borrower. We intend to continue these efforts while we aggressively pursue obtaining servicing on loans serviced by others. In anticipation of this effort, we have hired additional staff in the real estate loan servicing area.

The following table presents information concerning the composition of the one-to-four family residential loan portfolio by servicer at March 31, 2010:

	Amount		Percent			Non-performing		Percent of Non- performing to Loans in Each Category
	(Dollars in thousands)

Purchased and serviced by others	$	218,608		63.67	%	$	13,901		6.36	%
Purchased and servicing transferred to us		32,756		9.54			5,480		16.73
Originated and serviced by us		91,997		26.79			3,314		3.60
Total	$	343,361		100.00	%	$	22,695		6.61	%

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 Loans
	Number of Loans		Amount		Number of Loans		Amount		Number of Loans		Amount
	(Dollars in thousands)
At March 31, 2010
Real estate loans:
One-to-four family		7	$	2,595		31	$	13,182		38	$	15,777
Multi-family residential		—		—		2		2,786		2		2,786
Commercial		—		—		—		—		—		—
Other loans:
Automobile		2		29		2		27		4		56
Home equity		—		—		—		—		—		—
Other		4		7		1		1		5		8
Total loans		13	$	2,631		36	$	15,996		49	$	18,627

At June 30, 2009
Real estate loans:
One-to-four family		6	$	2,212		14	$	6,220		20	$	8,432
Multi-family residential		—		—		—		—		—		—
Commercial		—		—		—		—		—		—
Other loans:
Automobile		3		16		—		—		3		16
Home equity		—		—		—		—		—		—
Other		11		16		6		11		17		27
Total loans		20	$	2,244		20	$	6,231		40	$	8,475

At June 30, 2008
Real estate loans:
One-to-four family		—	$	—		4	$	1,583		4	$	1,583
Multi-family residential		—		—		—		—		—		—
Commercial		—		—		—		—		—		—
Other loans:
Automobile		10		159		8		132		18		291
Home equity		—		—		—		—		—		—
Other		22		34		9		15		31		49
Total loans		32	$	193		21	$	1,730		53	$	1,923

At June 30, 2007
Real estate loans:
One-to-four family		—	$	—		2	$	1,115		2	$	1,115
Multi-family residential		—		—		—		—		—		—
Commercial		—		—		—		—		—		—
Other loans:
Automobile		7		111		2		19		9		130
Home equity		—		—		—		—		—		—
Other		5		8		4		7		9		15
Total loans		12	$	119		8	$	1,141		20	$	1,260

At June 30, 2006
Real estate loans:
One-to-four family		2	$	383		—	$	—		2	$	383
Multi-family residential		—		—		—		—		—		—
Commercial		—		—		—		—		—		—
Other loans:
Automobile		8		108		7		57		15		165
Home equity		—		—		—		—		—		—
Other		3		3		6		10		9		13
Total loans		13	$	494		13	$	67		26	$	561

	Loans Delinquent:
	60-89 Days				90 Days or More				Total Delinquent Loans
	Number of Loans		Amount		Number of Loans		Amount		Number of Loans		Amount
	(Dollars in thousands)
At June 30, 2005
Real estate loans:
One-to-four family		—	$	—		2	$	757		2	$	757
Multi-family residential		—		—		—		—		—		—
Commercial		—		—		—		—		—		—
Other loans:
Automobile		6		50		2		28		8		78
Home equity		—		—		—		—		—		—
Other		10		10		1		2		11		12
Total loans		16	$	60		5	$	787		21	$	847

Delinquent loans 60 days or more past due increased to $18.6 million or 2.44% of total loans at March 31, 2010 from $8.5 million or 1.13% of total loans at June 30, 2009. Delinquent one-to-four family loans increased from $8.4 million at June 30, 2009 to $15.8 million at March 31, 2010. In addition, there were two multi-family residential loans totaling $2.8 million that were over 90 days delinquent at March 31, 2010 and are in the process of foreclosure.

Non-Performing Assets. 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. Non-accrual loans also include certain troubled debt restructurings.

At March 31, 2010, we had $10.1 million in troubled debt restructurings. Of the $10.1 million in troubled debt restructurings, $8.4 million are included in non-accrual loans in the following table. There were no further commitments to customers whose loans are troubled debt restructurings at March 31, 2010. There was one loan that was modified in fiscal 2010 and not accounted for as troubled debt restructurings in the amount of $1.9 million. The modification was made to reduce the margin on the loan to competitive terms in order to maintain the borrowing relationship. This borrower would qualify for the reduced rate in a new loan.

Any changes or modifications made to loans are carefully reviewed to determine whether they are troubled debt restructurings. Any loan modifications made due to financial difficulties of the borrower where a concession is made are reported as troubled debt restructurings. Any other changes or modifications made for borrowers who are not experiencing financial difficulties are done on an infrequent basis.

Real Estate Owned. Real estate owned and repossessed 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. The fair value of real estate owned is determined by a third party appraisal of the property.

The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.

	At March 31, 2010			At June 30,
	At March 31, 2010			2009			2008			2007			2006			2005
	(Dollars in thousands)
Non-accrual loans:
Real estate loans:
One-to-four family	$	14,997		$	6,766		$	1,583		$	1,115		$	—		$	757
Multi-family residential		2,786			—			—			—			—			—
Commercial		2,673			—			—			—			—			—
Other loans:
Automobile		27			—			132			19			57			28
Home equity		—			—			—			—			—			—
Other		1			11			15			7			10			2
Troubled debt restructurings:
One-to-four family		7,698			1,859			—			—			—			—
Multi-family residential		689			235			—			—			—			—
Commercial		—			—			—			—			—			—
Total non-accrual loans	$	28,871		$	8,871		$	1,730		$	1,141		$	67		$	787

Real estate owned and repossessed assets:
Real estate loans:
One-to-four family	$	976		$	496		$	1,045		$	238		$	—		$	—
Multi-family residential		—			—			—			—			—			—
Commercial		—			—			—			—			—			—
Other loans:
Automobile		27			3			161			74			69			35
Home equity		—			—			—			—			—			—
Other		—			—			—			—			—			—
Total real estate owned and repossessed assets	$	1,003		$	499		$	1,206		$	312		$	69		$	35

Total non-performing assets	$	29,874		$	9,370		$	2,936		$	1,453		$	136		$	822
Ratios:
Non-performing loans to total loans (1)		3.77	%		1.18	%		0.23	%		0.16	%		0.01	%		0.15	%
Non-performing assets to total assets		3.34	%		1.05	%		0.35	%		0.18	%		0.02	%		0.13	%
Non-accrued interest (2)	$	409		$	170		$	49		$	17		$	1		$	25

(1)	Total loans are net of deferred fees and costs.

(2)	If interest on the loans classified as non-accrual had been accrued, interest income in these amounts would have been recorded.

The increase in non-accrual loans was a result of the increased delinquency in real estate loans as a result of the continued deterioration in the housing market as well as deteriorating general economic conditions and increased and prolonged unemployment in our market area. We continue to work with responsible borrowers to keep their properties and as a result we have restructured $10.1 million in mortgage loans of which $8.5 million were paying performing in accordance with their revised contractual terms at March 31, 2010. This compares to $2.1 million in restructured loans at June 30, 2009. Of the $10.1 million in restructured loans, $8.4 million were reported as non-accrual at March 31, 2010. At March 31, 2010 there were $6.1 million of multi-family residential and commercial real estate loans on non-accrual for which specific valuation allowances of $1.0 million have been applied. Included in the $6.1 million of income property loans on non-accrual at March 31, 2010 were four multi-family residential loans totaling $3.4 million and a commercial real estate loan totaling $2.7 million.

At March 31, 2010, there were four multi-family residential loans on non-accrual. The first multi-family residential loan was made to one borrower with a principal balance of $1.8 million located in Adelanto, California at March 31, 2010. The loan was over 90 days delinquent and had a court appointed receiver in place to manage the property and collect the rents during the judicial foreclosure process. The second multi-family residential loan located in Tehachapi, California was made in the amount of $1.0 million and was over 90 days delinquent and in the process of foreclosure at March 31, 2010. The remaining two multi-family residential loans on non-accrual were in the amount of $689,000 in the aggregate and were troubled debt restructurings at March 31, 2010. At March 31, 2010, we had one non-accruing commercial real estate loan with a balance of $2.7 million. secured by a strip mall in San Diego, California, which was current at March 31, 2010, but had previously experienced cash flow problems.

Classified Assets. Regulations provide for the classification of loans and other assets, such as debt and equity securities considered by regulators to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Loans are classified as special mention when it is determined a loan relationship should be monitored more closely. Loans are classified as special mention for a variety of reasons including changes in recent borrower financial condition, changes in borrower operations, changes in value of available collateral, concerns regarding changes in economic conditions in a borrower’s industry, and other matters. A loan classified as special mention in many instances may be performing in accordance with the loan terms.

When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances for loan losses in an amount deemed prudent by management and approved by the board of directors. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation, which may order the establishment of additional general or specific loss allowances.

In connection with the filing of our periodic reports with the Office of Thrift Supervision and in accordance with our classification of assets policy, we regularly review the problem assets in our portfolio to determine whether any assets require classification in accordance with applicable regulations. The total amount of classified assets represented 51.84% of our equity capital and 5.40% of our total assets at March 31, 2010, as compared to 23.15% of our equity capital and 2.39% of our total assets at June 30, 2009.

The aggregate amount of our classified and special mention assets at the dates indicated were as follows:

	At March 31, 2010		At June 30,
	At March 31, 2010		2009		2008		2007
	(In thousands)
Classified and Special Mention Assets:
Loss	$	4	$	20	$	84	$	58
Doubtful		58		126		460		670
Substandard		36,750		13,964		3,519		2,010
Special Mention		11,412		7,316		5,335		3,495
Total	$	48,224	$	21,426	$	9,398	$	6,233

Allowance 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 among other things, which include loss ratio analyses by type of loan and specific allowances for identified problem loans, including the results of measuring impaired loans as provided in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310, “Receivables.” The accounting standard prescribes the measurement methods, income recognition and disclosures related to impaired loans.

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 non-performing loans affect the amount of the allowance. Loss factors are based both on our historical loss experience as well as on significant factors that, in management’s judgment, affect the collectability 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 non-performing 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 collectability of the loan. Significant factors reviewed in determining the allowance for loan losses included loss ratio trends by loan product and concentrations in geographic regions, interest-only loans, stated income loans and loans with credit scores less than a specified amount. We also reviewed the debt service coverage ratios and seasoning for income property loans. 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 homogeneous loans that are collectively evaluated for impairment and are excluded from specific impairment evaluation; 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 collectability 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 Federal Deposit Insurance Corporation, 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 increased to $8.8 million for the nine months ended March 31, 2010 compared to $2.0 million for the nine months ended March 31, 2009. The provision for loan losses for the nine months ended March 31, 2010 was comprised of $4.9 million in general valuation allowances and $3.9 million in specific valuation allowances. The increase in provision for loan losses was primarily attributable to an increase in real estate loan delinquencies and troubled debt restructurings during the period. Also impacting the provision for loan losses for the nine months ended March 31, 2010 were multi-family residential and commercial real estate loans totaling $5.9 million that were added to non-accrual. The allowance for loan losses as a percentage of total loans was 1.68% at March 31, 2010 as compared to 0.61% at June 30, 2009. The allowance for loan losses as a percentage of non-accrual loans was 44.4% at March 31, 2010 as compared to 51.7% at June 30, 2009. The general valuation allowance has increased from $3.4 million at June 30, 2009 to $8.1 million at March 31, 2010. The general valuation allowance as a percentage of total loans was 1.08% at March 31, 2010 as compared to 0.46% at June 30, 2009. The specific valuation allowance increased from $1.2 million at June 30, 2009 to $4.7 million at March 31, 2010. The following sets forth an analysis of our allowance for loan losses.

	At or For the Nine Months Ended March 31,						At or For the Year Ended June 30,
	2010			2009			2009			2008			2007			2006			2005
	(Dollars in thousands)

Balance at beginning of period	$	4,586		$	3,229		$	3,229		$	2,805		$	2,722		$	2,408		$	2,328

Charge-offs:
One-to-four family		375			580			860			70			—			—			—
Multi-family residential		—			—			—			—			—			—			—
Commercial		—			—			—			110			—			—			—
Consumer – automobile		173			426			487			646			676			547			500
Consumer – other		67			116			141			80			92			33			48
Total charge-offs		615			1,122			1,488			906			768			580			548
Recoveries:
One-to-four family		—			—			—			—			—			—			—
Multi-family residential		—			—			—			27			—			—			—
Commercial		—			—			—			—			—			—			—
Consumer – automobile		47			162			227			304			312			234			203
Consumer – other		15			27			32			37			10			8			19
Total recoveries		62			189			259			368			322			242			222

Net charge-offs		553			933			1,229			538			446			338			326
Provision for losses		8,787			2,007			2,586			962			529			652			406
Balance at end of year	$	12,820		$	4,303		$	4,586		$	3,229		$	2,805		$	2,722		$	2,408
Ratios:
Net charge-offs to average loans during the period (1) (2)		0.10	%		0.17	%		0.16	%		0.07	%		0.07	%		0.06	%		0.06	%
Net charge-offs to average non-performing loans during the period (end of period) (2)		3.85	%		31.29	%		23.91	%		35.35	%		47.90	%		73.04	%		112.37	%
Allowance for loan losses to non-performing loans		44.40	%		70.98	%		51.69	%		186.66	%		245.84	%		4,062.69	%		305.97	%
Allowance as a percent of total loans (end of period) (1)		1.68	%		0.57	%		0.61	%		0.43	%		0.40	%		0.43	%		0.45	%

(1)	Loans are net of deferred fees and costs

(2)	Annualized.

Allocation of Allowance for Loan Losses. The distribution of the allowance for losses on loans at the dates indicated is summarized as follows.


	At March 31, 2010					At June 30,
	At March 31, 2010					2009					2008					2007
	Amount		Percent of Loans in Each Category to Total Loans			Amount		Percent of Loans in Each Category to Total Loans			Amount		Percent of Loans in Each Category to Total Loans			Amount		Percent of Loans in Each Category to Total Loans

	(Dollars in thousands)
Real estate loans:
One-to-four family	$	7,664		44.90	%	$	3,326		50.22	%	$	1,744		57.51	%	$	1,626		66.88	%
Multi-family residential		3,715		34.02			515		26.17			407		17.75			114		12.55
Commercial		1,191		14.90			286		16.13			245		15.54			73		11.09
Other loans:
Automobile		168		4.23			342		5.56			716		7.01			922		7.56
Home equity		9		0.14			6		0.17			1		0.19			1		0.21
Other		73		1.81			111		1.75			116		2.00			69		1.71
Total allowance for loan losses	$	12,820		100.00	%	$	4,586		100.00	%	$	3,229		100.00	%	$	2,805		100.00	%

	At June 30,
	2006					2005
	Amount		Percent of Loans in Each Category to Total Loans			Amount		Percent of Loans in Each Category to Total Loans

	(Dollars in thousands)
Real estate loans:
One-to-four family	$	1,322		68.63	%	$	1,037		69.04	%
Multi-family residential		123		14.01			155		16.26
Commercial		54		9.24			40		6.01
Other loans:
Automobile		1,184		6.53			1,143		7.16
Home equity		2		0.28			1		0.11
Other		37		1.31			32		1.42
Total allowance for loan losses	$	2,722		100.00	%	$	2,408		100.00	%

Investment Activities

General. We are required by federal regulations to maintain an amount of liquid assets in order to meet our liquidity needs. These assets consist of certain specified securities. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is provided.

We are authorized to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies, certain certificates of deposit of insured banks and savings institutions, certain bankers’ acceptances, repurchase agreements and federal funds. Subject to various restrictions, federal savings banks may also invest their assets in investment grade commercial paper and corporate debt securities and mutual funds whose assets conform to the investments that a federally chartered savings bank is otherwise authorized to make directly. See “Supervision and Regulation - Kaiser Federal Bank” for a discussion of additional restrictions on our investment activities.

Under the direction and guidance of the Asset and Liability Management Committee and board policy, our president has the basic responsibility for the management of our investment portfolio. Various factors are considered when making decisions, including the marketability, maturity and tax consequences of the proposed investment. The maturity structure of investments will be affected by various market conditions, including the current and anticipated short and long term interest rates, the level of interest rates, the trend of new deposit inflows, and the anticipated demand for funds via deposit withdrawals and loan originations and purchases.

The current structure of our investment portfolio provides liquidity when loan demand is high, assists in maintaining earnings when loan demand is low and maximizes earnings while satisfactorily managing risk, including credit risk, reinvestment risk, liquidity risk and interest rate risk. See “Quantitative and Qualitative Disclosures about Market Risk – Asset and Liability Management and Market Risk.”

At March 31, 2010, our investment portfolio totaled $6.8 million and consisted principally of investment grade collateralized mortgage obligations and mortgage-backed securities. From time to time, investment levels may increase or decrease depending upon yields available on investment alternatives and management’s projected demand for funds for loan originations, deposits, and other activities. At March 31, 2010 we held no trust preferred securities and have never invested in trust preferred securities.

The following table sets forth the composition of our investment portfolio at the dates indicated.

	At March 31, 2010					At June 30,
	At March 31, 2010					2009					2008					2007
	Carrying Value		Percent of Total			Carrying Value		Percent of Total			Carrying Value		Percent of Total			Carrying Value		Percent of Total
	(Dollars in thousands)
Securities available-for-sale:
U.S. government and government sponsored entity bonds	$	—		—	%	$	—		—	%	$	—		—	%	$	2,994		8.63	%
Mortgage-backed securities:
Freddie Mac		390		5.69			524		5.37			3,557		22.17			4,827		13.92
Collateralized mortgage obligations:
Freddie Mac		2,358		34.43			3,712		38.01			4,982		31.06			5,758		16.61
Total securities available-for-sale	$	2,748		40.12	%	$	4,236		43.38	%	$	8,539		53.23	%	$	13,579		39.16	%

Securities held-to-maturity:
U.S. government and government sponsored entity bonds	$	—		—	%	$	—		—	%	$	—		—	%	$	12,000		34.61	%
Mortgage-backed securities:
Fannie Mae		167		2.44			191		1.96			235		1.47			303		0.87
Freddie Mac		138		2.02			156		1.60			178		1.11			217		0.63
Ginnie Mae		100		1.46			111		1.14			123		0.77			146		0.42
Collateralized mortgage obligations:
Fannie Mae		1,487		21.71			1,819		18.63			2,274		14.17			2,747		7.92
Freddie Mac		2,209		32.25			3,251		33.29			4,350		27.11			4,926		14.21
Ginnie Mae		—		—			—		—			344		2.14			757		2.18
Total securities held-to-maturity	$	4,101		59.88	%	$	5,528		56.62	%	$	7,504		46.77	%	$	21,096		60.84	%

Total securities	$	6,849		100.00	%	$	9,764		100.00	%	$	16,043		100.00	%	$	34,675		100.00	%

Other earning assets:
Interest-earning deposits in other financial institutions	$	24,146		25.62	%	$	25,508		32.22	%	$	6,925		13.28	%	$	2,970		10.39	%
Federal funds sold		57,440		60.96			41,020		51.81			32,660		62.66			15,750		55.09
Federal Home Loan Bank stock		12,649		13.42			12,649		15.97			12,540		24.06			9,870		34.52
Total other earning assets	$	94,235		100.00	%	$	79,177		100.00	%	$	52,125		100.00	%	$	28,590		100.00	%

Total securities and other earning assets	$	101,084				$	88,941				$	68,168				$	63,265

Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at March 31, 2010 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur.

	One year or less				More than One Year through Five Years					More than Five Years through Ten Years					More than Ten Years					Total Securities
	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in thousands)
Securities available-for-sale:
Mortgage-backed securities:
Freddie Mac	$	—	$	—	$	378		3.87	%	$	—		—	%	$	—		—	%	$	378	$	390		3.87	%
Collateralized mortgage obligations
Freddie Mac		—		—		—		—			—		—			2,278		5.36			2,278		2,358		5.36
Total securities available-for-sale	$	—		—	$	378		3.87	%	$	—		—	%	$	2,278		5.36	%	$	2,656	$	2,748		5.15	%

Securities held-to-maturity:
Mortgage-backed securities:
Fannie Mae		—		—		—		—			—		—			167		2.51			167		168		2.51
Freddie Mac		—		—		—		—			—		—			138		4.31			138		144		4.31
Ginnie Mae		—		—		—		—			63		3.89			37		4.38			100		103		4.07
Collateralized mortgage obligations
Fannie Mae		—		—		—		—			—		—			1,487		3.65			1,487		1,523		3.65
Freddie Mac		—		—		—		—			1,617		5.00			592		5.00			2,209		2,277		5.00
Total securities held-to-maturity	$	—	$	—	$	—		—		$	1,680		4.96	%	$	2,421		3.95	%	$	4,101	$	4,215		4.36	%

Total securities	$	—	$	—	$	378		3.87	%	$	1,680		4.96	%	$	4,699		4.63	%	$	6,757	$	6,963		4.67	%

Mortgage-Backed Securities. We invest in mortgage-backed securities insured or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. We invest in mortgage-backed securities to achieve positive interest rate spreads with minimal administrative expense, and to lower our credit risk as a result of the guarantees provided by Freddie Mac, Fannie Mae or Ginnie Mae.

Mortgage-backed securities are created by pooling mortgages and issuing a security with an interest rate that is less than the interest rate on the underlying mortgages. Mortgage-backed securities typically represent a participation interest in a pool of single-family or multi-family residential mortgages, although we invest primarily in mortgage-backed securities backed by one- to four-family mortgages. The issuers of such securities pool and resell the participation interests in the form of securities to investors such as Kaiser Federal Bank. Some securities pools are guaranteed as to payment of principal and interest to investors. Mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements. However, mortgage-backed securities are more liquid than individual mortgage loans since there is an active trading market for such securities. In addition, mortgage-backed securities may be used to collateralize our specific liabilities and obligations. Finally, mortgage-backed securities are assigned lower risk weightings for purposes of calculating our risk-based capital level.

Investments in mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or acceleration of any discount relating to such interests, thereby affecting the net yield on our securities. We periodically review current prepayment speeds to determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.

Collateralized mortgage obligations are debt securities issued by a special-purpose entity that aggregates pools of mortgages and mortgage-backed securities and creates different classes of securities with varying maturities and amortization schedules, as well as a residual interest, with each class possessing different risk characteristics. The cash flows from the underlying collateral are generally divided into “tranches” or classes that have descending priorities with respect to the distribution of principal and interest cash flows, while cash flows on pass-through mortgage-backed securities are distributed pro rata to all security holders.

Interest Earning Deposits in Other Financial Institutions. Interest earning time deposits in other financial institutions consists of certificates of deposit placed with federally insured financial institutions in amounts that do not exceed the insurable limit of $250,000. These deposits are used to invest our excess liquidity as part of our overall asset/liability management. These deposits had a weighted-average yield of 1.49% and a weighted average maturity of 5.5 months at March 31, 2010.

Federal Home Loan Bank Stock. As a member of the Federal Home Loan Bank of San Francisco, we are required to own capital stock in the Federal Home Loan Bank. The amount of stock we hold is based on percentages specified by the Federal Home Loan Bank of San Francisco on our outstanding advances and the requirements of their Mortgage Purchase Program. The redemption of any excess stock we hold is at the discretion of the Federal Home Loan Bank of San Francisco. The carrying value of Federal Home Loan Bank of San Francisco stock totaled $12.6 million and had a weighted-average-yield of 0.37% for the nine months ended March 31, 2010. The yield on the Federal Home Loan Bank of San Francisco stock is produced by stock dividends that are subject to the discretion of the board of directors of the Federal Home Loan Bank of San Francisco. On January 8, 2009 and April 10, 2009, the Federal Home Loan Bank of San Francisco announced that it would not pay a quarterly dividend and would not repurchase excess capital stock on the next regularly scheduled repurchase dates.

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Equity Investment. At March 31, 2010, we also had an investment in an affordable housing fund totaling $1.2 million for the purposes of obtaining tax credits and for Community Reinvestment Act purposes. The investment is being accounted for using the equity method of accounting. The investment is evaluated regularly for impairment based on the remaining allocable tax credits and tax benefits.

Bank-Owned Life Insurance. In April 2005, we purchased $10.0 million in bank-owned life insurance, which covers certain key employees, to provide tax-exempt income to assist in offsetting costs associated with employee benefit plans offered by Kaiser Federal Bank. The bank-owned life insurance is recorded at its cash surrender value, or the amount that can be realized. At March 31, 2010, the cash surrender value was $12.2 million.

Sources of Funds

General. Our sources of funds are deposits, payment of principal and interest on loans, interest earned on or maturation of other investment securities, borrowings, and funds provided from operations.

Deposits. We offer a variety of deposit accounts to consumers with a wide range of interest rates and terms. Our deposits consist of time deposit accounts, savings, money market and demand deposit accounts. We have historically paid competitive rates on our deposit accounts. We primarily rely on competitive pricing policies, marketing and customer service to attract and retain these deposits. At March 31, 2010, approximately 30.0% of the dollar amount of our deposits were from customers who are employed by the Kaiser Permanente Medical Care Program, one of the largest employers in Southern California. Our ATMs are located in our branches and near Kaiser Permanente Medical Centers. We currently do not accept brokered deposits and had none at March 31, 2010.

The flow of deposits is influenced significantly by general economic conditions, changes in money market and prevailing interest rates and bi-weekly direct deposits from Kaiser Permanente Medical Care Program payrolls. The variety of deposit accounts we offer has allowed us to be competitive in obtaining funds and to respond with flexibility to changes in consumer demand. We have become more susceptible to short-term fluctuations in deposit flows, as customers have become less interest rate conscious. We try to manage the pricing of our deposits in keeping with our asset/liability management, liquidity and profitability objectives, subject to competitive factors. Based on our experience, we believe that our deposits are a relatively stable source of funds. Despite this stability, our ability to attract and maintain these deposits and the rates paid on them has been and will continue to be significantly affected by market conditions.

The following table sets forth our deposit flows during the periods indicated.

	For the Nine Months Ended March 31,						Year Ended June 30,
	2010			2009			2009			2008			2007
	(Dollars in thousands)

Opening balance	$	566,193		$	495,058		$	495,058		$	494,128		$	463,454
Deposits, net of withdrawals		74,205			48,966			58,013			(14,269	)		15,752
Interest credited		8,340			10,225			13,122			15,199			14,922
Ending balance	$	648,738		$	554,249		$	566,193		$	495,058		$	494,128

Net increase	$	82,545		$	59,191		$	71,135		$	930		$	30,674

Percent increase		14.58	%		11.96	%		14.37	%		0.02	%		6.60	%

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The following table shows the distribution of, and certain other information relating to, deposits by type of deposit, as of the dates indicated.

	At March 31, 2010					At June 30,
	At March 31, 2010					2009					2008					2007
	Amount		Percent of Total			Amount		Percent of Total			Amount		Percent of Total			Amount		Percent of Total
	(Dollars in thousands)

Non-interest-bearing demand	$	65,032		10.02	%	$	50,161		8.86	%	$	43,267		8.74	%	$	43,169		8.74	%

Savings		132,156		20.37			129,390		22.85			122,622		24.77			136,643		27.65

Money market		122,935		18.95			108,858		19.23			78,598		15.88			75,599		15.30

Certificates of deposit:
0.01% - 1.99%		70,029		10.79			16,603		2.93			—		—			13		0.01
2.00% - 2.99%		131,212		20.23			99,222		17.52			67		0.01			939		0.19
3.00% - 3.99%		82,505		12.72			102,933		18.18			97,608		19.72			21,256		4.30
4.00% - 4.99%		38,147		5.88			52,035		9.19			126,783		25.61			119,952		24.27
5.00% - 5.99%		6,722		1.04			6,991		1.24			26,113		5.27			96,557		19.54
Total certificates of deposit	$	328,615		50.66		$	277,784		49.06	%	$	250,571		50.61	%	$	238,717		48.31	%
Total	$	648,738		100.00	%	$	566,193		100.00	%	$	495,058		100.00	%	$	494,128		100.00	%

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The following table indicates the amount of certificates of deposit by time remaining until maturity as of March 31, 2010.

	Less than or equal to one year		More than one to two years		More than two to three years		More than three to four years		More than four years		Total
	(Dollars in thousands)

0.01% - 1.99%	$	64,273	$	5,730	$	26	$	—	$	—	$	70,029
2.00% - 2.99%		43,999		37,594		12,572		162		36,885		131,212
3.00% - 3.99%		51,078		10,831		536		11,348		8,712		82,505
4.00% - 4.99%		15,014		4,372		2,892		15,869		—		38,147
5.00% - 5.99%		300		4,407		1,993		22		—		6,722
Total	$	174,664	$	62,934	$	18,019	$	27,401	$	45,597	$	328,615

As of March 31, 2010, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was $158.0 million as compared to $116.2 million at June 30, 2009. The following table sets forth the maturity of those certificates as of March 31, 2010.

Maturity Period	Certificates of Deposit
	(In thousands)

Three months or less	$	15,948
Over three through six months		15,877
Over six through twelve months		34,161
Over twelve months		91,974
Total	$	157,960

Borrowings. Although deposits are our primary source of funds, we may utilize borrowings when they are a less costly source of funds, and can be invested at a positive interest rate spread, when we desire additional capacity to fund loan demand or when they meet our asset/liability management goals. Our borrowings historically have consisted of advances from the Federal Home Loan Bank of San Francisco. See Note 10 of the Notes to our Consolidated Financial Statements.

We may obtain advances from the Federal Home Loan Bank of San Francisco upon the security of our mortgage loans and mortgage-backed securities. These advances may be made pursuant to several different credit programs, each of which has its own interest rate, range of maturities and call features. At March 31, 2010, we had $147.0 million in Federal Home Loan Bank advances outstanding. At March 31, 2010, we had available additional advances from the FHLB of San Francisco in the amount of $215.8 million. We interchange the use of deposits and borrowings to fund assets, such as the origination of loans, depending on various factors including liquidity and asset/liability management strategies. In fiscal 2009 we established a line of credit with the Federal Reserve Bank of San Francisco. As of March 31, 2010 we pledged $111.7 million commercial real estate and $32.6 million automobile loans to secure any future borrowings. At March 31, 2010 the available line of credit was $80.9 million. We have never drawn on this line of credit.

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The following table sets forth information as to our Federal Home Loan Bank advances for the periods indicated.

	At or For the Nine Months Ended March 31,						At or For the Year Ended June 30,
	2010			2009			2009			2008			2007
	(Dollars in thousands)

Balance at end of period	$	147,000		$	207,008		$	207,004		$	235,019		$	210,016
Average balance outstanding	$	164,001		$	216,213		$	214,088		$	226,173		$	189,217
Maximum month-end balance	$	207,002		$	235,018		$	235,018		$	245,021		$	210,016
Weighted average interest rate during the period		3.45	%		3.38	%		4.50	%		4.50	%		4.37	%
Weighted average interest rate at end of period		4.57	%		4.51	%		4.51	%		4.46	%		4.44	%

Employees

At March 31, 2010, we had a total of 93 full-time employees and 11 part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good relations with our employees.

Legal Proceedings

As of March 31, 2010, we were not involved in any other pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which, in the aggregate, involve amounts that we believe are immaterial to our consolidated financial condition, results of operations and cash flows.

Subsidiary Activities

At March 31, 2010, K-Fed Bancorp had no subsidiaries other than Kaiser Federal Bank.

Properties

At March 31, 2010, we had three full service offices and six financial service centers. Our financial service centers provide all the same services as a full service office except they do not dispense cash; however cash is available from an ATM located on site. The net book value of our investment in premises, equipment and fixtures, excluding computer equipment, was $1.8 million at March 31, 2010.

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The following table provides a list of our offices.

Location	Owned or Leased	Lease Expiration Date	Deposits at March 31, 2010 (In thousands)

HOME AND EXECUTIVE OFFICE
1359 North Grand Avenue (1) Covina, CA 91724	Leased	April 2020	$	90,335

LOCATIONS:
252 South Lake Avenue (1) Pasadena, CA 91101	Leased	May 2015		65,539

3375 Scott Boulevard, Suite 312 (2) Santa Clara, CA 95054	Leased	May 2014		71,335

9714 Sierra Avenue, Suite 101 (2) Fontana, CA 92335	Leased	December 2014		50,687

8501 Van Nuys Boulevard (1) Panorama City, CA 91402	Leased	March 2011		138,625

10105 Rosecrans Avenue (2) Bellflower, CA 90706	Leased	March 2011		63,753

26640 Western Avenue, Suite N (2) Harbor City, CA 90170	Leased	February 2011		35,809

1110 N. Virgil Avenue (2) Los Angeles, CA 90029	Leased	March 2011		89,665

11810 Pierce Street, Suite 150 (2) Riverside, CA 92505	Owned	n/a		42,990

(1)	Full service office.

(2)	Financial service center.

We believe that our current facilities are adequate to meet the present and immediately foreseeable needs of Kaiser Federal Bank and K-Fed Bancorp. We currently expect to review our leases that expire in 2011.

We use an in-house system with support provided by a third-party vendor to maintain our data base of depositor and borrower customer information. The net book value of our data processing and computer equipment at March 31, 2010 was $362,000.

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SUPERVISION AND REGULATION

General

Kaiser Federal Bank is examined and supervised by the Office of Thrift Supervision and is subject to examination by the Federal Deposit Insurance Corporation. This regulation and supervision establishes a comprehensive framework of activities in which an institution may engage and is intended primarily for the protection of the Federal Deposit Insurance Corporation’s deposit insurance fund and depositors. Under this system of federal regulation, financial institutions are periodically examined to ensure that they satisfy applicable standards with respect to their capital adequacy, assets, management, earnings, liquidity and sensitivity to market interest rates. Following completion of its examination, the federal agency critiques the institution’s operations and assigns its rating (known as an institution’s CAMELS rating). Under federal law, an institution may not disclose its CAMELS rating to the public. Kaiser Federal Bank also is a member of and owns stock in the Federal Home Loan Bank of San Francisco, which is one of the twelve regional banks in the Federal Home Loan Bank System. Kaiser Federal Bank is also regulated to a lesser extent by the Board of Governors of the Federal Reserve System, governing reserves to be maintained against deposits and other matters. The Office of Thrift Supervision examines Kaiser Federal Bank and prepares reports for the consideration of its board of directors on any operating deficiencies. Kaiser Federal Bank’s relationship with its depositors and borrowers is also regulated to a great extent by federal law and, to a much lesser extent, state law, especially in matters concerning the ownership of deposit accounts and the form and content of Kaiser Federal Bank’s mortgage documents.

Any change in these laws or regulations, whether by the Federal Deposit Insurance Corporation, the Office of Thrift Supervision or Congress, could have a material adverse impact on Kaiser Federal Financial Group, Inc. and Kaiser Federal Bank and their operations.

As a savings and loan holding company following the conversion, Kaiser Federal Financial Group, Inc. will be required to comply with the rules and regulations of the Office of Thrift Supervision, and will be required to file certain reports with and will be subject to examination by the Office of Thrift Supervision. Kaiser Federal Financial Group, Inc. will also be subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Set forth below is a brief description of certain regulatory requirements that are or will be applicable to Kaiser Federal Financial Group, Inc. and Kaiser Federal Bank. The description below is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on Kaiser Federal Financial Group, Inc. and Kaiser Federal Bank.

Proposed Federal Legislation

Legislation has been introduced in the United States Senate and House of Representatives that would implement sweeping changes to the current bank regulatory structure. A bill passed by the House of Representatives would eliminate our current primary federal regulator, the Office of Thrift Supervision, by merging the Office of Thrift Supervision into the Comptroller of the Currency (the primary federal regulator for national banks). The House legislation would grant the Board of Governors of the Federal Reserve System exclusive authority to regulate all bank and thrift holding companies. If the House bill is enacted, Kaiser Federal Financial Group, Inc. would become a holding company subject to supervision by the Federal Reserve Board as opposed to the Office of Thrift Supervision, and would become subject to the Federal Reserve’s regulations, including holding company capital requirements, that Kaiser Federal Financial Group, Inc. would not be subject to as a savings and loan holding company regulated by the Office of Thrift Supervision.

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Federal Banking Regulation

Business Activities. A federal savings bank derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and the regulations of the Office of Thrift Supervision. Under these laws and regulations, Kaiser Federal Bank may invest in mortgage loans secured by residential and nonresidential real estate, commercial business loans and consumer loans, certain types of debt securities and certain other assets, subject to applicable limits. Kaiser Federal Bank also may establish subsidiaries that may engage in activities not otherwise permissible for Kaiser Federal Bank, including real estate investment and securities and insurance brokerage.

Capital Requirements. Office of Thrift Supervision regulations require federal savings banks to meet three minimum capital standards: a 1.5% tangible capital ratio, a 4% leverage ratio (3% for federal savings banks receiving the highest rating on the CAMELS rating system) and an 8% risk-based capital ratio.

The risk-based capital standard for federal savings banks requires the maintenance of Tier 1 (core) and total capital (which is defined as core capital and supplementary capital) to risk-weighted assets of at least 4% and 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100%, assigned by the Office of Thrift Supervision, based on the risks believed inherent in the type of asset. Core capital is defined as common stockholders’ equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships. The components of supplementary capital currently include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the general valuation allowance for loan losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair values. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital. Additionally, a savings bank that retains credit risk in connection with an asset sale may be required to maintain additional regulatory capital because of the purchaser’s recourse to the savings bank. Kaiser Federal Bank does not typically engage in asset sales.

At March 31, 2010, Kaiser Federal Bank’s capital exceeded all applicable requirements.

Loans-to-One Borrower. Generally, a federal savings bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of March 31, 2010, Kaiser Federal Bank was in compliance with the loans-to-one borrower limitations.

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Qualified Thrift Lender Test. As a federal savings bank, Kaiser Federal Bank must satisfy the qualified thrift lender, or “QTL,” test. Under the QTL test, Kaiser Federal Bank must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” in at least nine months of the most recent 12 months. “Portfolio assets” generally means total assets of a savings institution, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets, and the value of property used in the conduct of the savings bank’s business.

“Qualified thrift investments” include various types of loans made for residential and housing purposes, investments related to such purposes, including certain mortgage-backed and related securities, and loans for personal, family, household and certain other purposes up to a limit of 20% of portfolio assets. “Qualified thrift investments” also include 100% of an institution’s credit card loans, education loans and small business loans. Kaiser Federal Bank also may satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code.

A savings bank that fails the qualified thrift lender test must either convert to a bank charter or operate under specified restrictions. At March 31, 2010, Kaiser Federal Bank held 84.4% of its “portfolio assets” in “qualified thrift investments,” and satisfied this test.

Capital Distributions. Office of Thrift Supervision regulations govern capital distributions by a federal savings bank, which include cash dividends, stock repurchases and other transactions charged to the capital account. A savings bank must file an application for approval of a capital distribution if:

●

the total capital distributions for the applicable calendar year exceed the sum of the savings bank’s net income for that year to date plus the savings bank’s retained net income for the preceding two years;

●

the savings bank would not be at least adequately capitalized following the distribution;

●

the distribution would violate any applicable statute, regulation, agreement or Office of Thrift Supervision-imposed condition; or

●

the savings bank is not eligible for expedited treatment of its filings.

Even if an application is not otherwise required, every savings bank that is a subsidiary of a holding company must still file a notice with the Office of Thrift Supervision at least 30 days before the board of directors declares a dividend or approves a capital distribution.

The Office of Thrift Supervision may disapprove a notice or application if:

●

the savings bank would be undercapitalized following the distribution;

●

the proposed capital distribution raises safety and soundness concerns; or

●

the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

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In addition, the Federal Deposit Insurance Act provides that an insured depository institution may not make any capital distribution, if after making such distribution the institution would be undercapitalized.

Liquidity. A federal savings bank is required to maintain a sufficient amount of liquid assets to ensure its safe and sound operation.

Community Reinvestment Act and Fair Lending Laws. All federal savings banks have a responsibility under the Community Reinvestment Act and related regulations of the Office of Thrift Supervision to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In connection with its examination of a federal savings bank, the Office of Thrift Supervision is required to assess the bank’s record of compliance with the Community Reinvestment Act. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. A bank’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the Office of Thrift Supervision, as well as other federal regulatory agencies and the Department of Justice. Kaiser Federal Bank received a “satisfactory” Community Reinvestment Act rating in its most recent federal examination.

Transactions with Related Parties. A federal savings bank’s authority to engage in transactions with its affiliates is limited by Office of Thrift Supervision regulations and by Sections 23A and 23B of the Federal Reserve Act and its implementing Regulation W. An affiliate is a company that controls, is controlled by, or is under common control with an insured depository institution such as Kaiser Federal Bank. Kaiser Federal Financial Group, Inc. will be an affiliate of Kaiser Federal Bank. In general, loan transactions between an insured depository institution and its affiliate are subject to certain quantitative and collateral requirements. In this regard, transactions between an insured depository institution and its affiliate are limited to 10% of the institution’s unimpaired capital and unimpaired surplus for transactions with any one affiliate and 20% of unimpaired capital and unimpaired surplus for transactions in the aggregate with all affiliates. Collateral in specified amounts ranging from 100% to 130% of the amount of the transaction must usually be provided by affiliates in order to receive loans from the bank. In addition, Office of Thrift Supervision regulations prohibit a savings bank from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates. The Office of Thrift Supervision requires federal savings banks to maintain detailed records of all transactions with affiliates.

Kaiser Federal Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other things, these provisions require that extensions of credit to insiders (i) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features, and (ii) not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Kaiser Federal Bank’s capital. In addition, extensions of credit in excess of certain limits must be approved by Kaiser Federal Bank’s board of directors.

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Enforcement. The Office of Thrift Supervision has primary enforcement responsibility over federal savings institutions and has the authority to bring enforcement action against all “institution-affiliated parties,” including stockholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action by the Office of Thrift Supervision may range from the issuance of a capital directive or cease and desist order, to removal of officers and/or directors of the institution and the appointment of a receiver or conservator. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1 million per day. The Federal Deposit Insurance Corporation also has the authority to terminate deposit insurance or to recommend to the Director of the Office of Thrift Supervision that enforcement action be taken with respect to a particular savings institution. If action is not taken by the Director, the Federal Deposit Insurance Corporation has authority to take action under specified circumstances.

Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation, and other operational and managerial standards as the agency deems appropriate. The federal banking agencies adopted Interagency Guidelines Prescribing Standards for Safety and Soundness to implement the safety and soundness standards required under federal law. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. The guidelines address internal controls and information systems, internal audit systems, credit underwriting, loan documentation, interest rate risk exposure, asset growth, compensation, fees and benefits. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to submit a compliance plan.

Prompt Corrective Action Regulations. Under the prompt corrective action regulations, the Office of Thrift Supervision is required and authorized to take supervisory actions against undercapitalized federal savings banks. For this purpose, a savings bank is placed in one of the following five categories based on the savings bank’s capital:

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well-capitalized (at least 5% leverage capital, 6% Tier 1 risk-based capital and 10% total risk-based capital);

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adequately capitalized (at least 4% leverage capital (3% for federal savings banks with a composite examination rating of 1), 4% Tier 1 risk-based capital and 8% total risk-based capital);

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undercapitalized (less than 4% leverage capital (3% for federal savings banks with a composite examination rating of 1), 4% Tier 1 risk-based capital or 3% leverage capital);

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significantly undercapitalized (less than 6% total risk-based capital, 3% Tier 1 risk-based capital or 3% leverage capital); or

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critically undercapitalized (less than 2% tangible capital).

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Generally, the Office of Thrift Supervision is required to appoint a receiver or conservator for a savings bank that is “critically undercapitalized” within specific time frames. The regulations also provide that a capital restoration plan must be filed with the Office of Thrift Supervision within 45 days of the date a savings bank receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” The criteria for an acceptable capital restoration plan include, among other things, the establishment of the methodology and assumptions for attaining adequately capitalized status on an annual basis, procedures for ensuring compliance with restrictions imposed by applicable federal regulations, the identification of the types and levels of activities the savings bank will engage in while the capital restoration plan is in effect, and assurances that the capital restoration plan will not appreciably increase the current risk profile of the savings bank. Any holding company for the savings bank required to submit a capital restoration plan must guarantee the lesser of: an amount equal to 5% of a savings bank’s assets at the time it was notified or deemed to be undercapitalized by the Office of Thrift Supervision, or the amount necessary to restore the savings bank to adequately capitalized status. This guarantee remains in place until the Office of Thrift Supervision notifies the savings bank that it has maintained adequately capitalized status for each of four consecutive calendar quarters, and the Office of Thrift Supervision has the authority to require payment and collect payment under the guarantee. Failure by a holding company to provide the required guarantee will result in certain operating restrictions on the savings bank, such as restrictions on the ability to declare and pay dividends, pay executive compensation and management fees, and increase assets or expand operations. The Office of Thrift Supervision may also take any one of a number of discretionary supervisory actions against undercapitalized federal savings banks, including the issuance of a capital directive and the replacement of senior executive officers and directors.

At March 31, 2010, Kaiser Federal Bank met the criteria for being considered “well-capitalized.”

Insurance of Deposit Accounts. In October 2008, deposit insurance by the Federal Deposit Insurance Corporation was increased to a maximum of $250,000 per depositor. On January 1, 2014, the maximum insurance amount will return to $100,000 per depositor for all deposit accounts except certain retirement accounts, which will remain at $250,000 per depositor. In addition, under the Federal Deposit Insurance Corporation’s Transaction Account Guarantee Program, most of our non-interest-bearing transaction accounts are guaranteed regardless of amount until June 30, 2010.

Pursuant to the Federal Deposit Insurance Reform Act of 2005 (the “Reform Act”), the Federal Deposit Insurance Corporation is authorized to set the reserve ratio for the Deposit Insurance Fund annually at between 1.15% and 1.5% of estimated insured deposits. As of June 30, 2008, the reserve ratio had decreased to 1.01% as a result of bank failures. As part of a plan to restore the reserve ratio to 1.15%, the Federal Deposit Insurance Corporation imposed a special assessment equal to five basis points of assets less Tier 1 capital as of June 30, 2009, which was payable on September 30, 2009. In addition, the Federal Deposit Insurance Corporation has increased its quarterly deposit insurance assessment rates and amended the method by which rates are calculated. Beginning in the second quarter of 2009, institutions are assigned an initial base assessment rate ranging from 12 to 45 basis points of deposits depending on risk category. The initial base assessment is then adjusted based upon the level of unsecured debt, secured liabilities, and brokered deposits to establish a total base assessment rate ranging from seven to 77.5 basis points.

On November 12, 2009, the Federal Deposit Insurance Corporation approved a final rule requiring insured depository institutions to prepay on December 30, 2009, their estimated quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012. Estimated assessments for the fourth quarter of 2009 and for all of 2010 are based upon the assessment rate in effect on September 30, 2009, with three basis points added for the 2011 and 2012 assessment rates. In addition, a 5% annual growth in the assessment base is assumed. Prepaid assessments are to be applied against the actual quarterly assessments until exhausted, and may not be applied to any special assessments that may occur in the future. Any unused prepayments will be returned to the institution on June 30, 2013. On December 30, 2009, we prepaid $3.6 million in estimated assessment fees for the fourth quarter of 2009 through 2012. Because the prepaid assessments represent the prepayment of future expense, they do not affect our regulatory capital (the prepaid asset will have a risk-weighting of 0%) or tax obligations.

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Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the Federal Deposit Insurance Corporation. We do not currently know of any practice, condition or violation that may lead to termination of our deposit insurance.

In addition to the Federal Deposit Insurance Corporation assessments, the Financing Corporation (“FICO”) is authorized to impose and collect, with the approval of the Federal Deposit Insurance Corporation, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended March 31, 2010, the annualized FICO assessment was equal to 1.04 basis points for each $100 in domestic deposits maintained at an institution.

Temporary Liquidity Guarantee Program. The Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program guarantees newly issued senior unsecured debt of a participating organization, up to certain limits established for each institution, issued between October 14, 2008 and June 30, 2009. The Federal Deposit Insurance Corporation extended this component of the program to cover debt issued through October 31, 2009. The Federal Deposit Insurance Corporation will pay the unpaid principal and interest on Federal Deposit Insurance Corporation-guaranteed debt instruments upon the uncured failure of the participating entity to make timely payments of principal or interest in accordance with the terms of the instrument. The guarantee will remain in effect until December 31, 2012. In return for the Federal Deposit Insurance Corporation’s guarantee, participating institutions are required to pay the Federal Deposit Insurance Corporation a fee based on the amount and maturity of the debt. We opted not to participate in this part of the Temporary Liquidity Guarantee Program.

The other component of the Temporary Liquidity Guarantee Program provides full federal deposit insurance coverage for non-interest bearing transaction deposit accounts, regardless of dollar amount, until June 30, 2010. Through December 31, 2009, an annualized 10 basis point assessment on balances in noninterest-bearing transaction accounts that exceed $250,000 was assessed to insured depository institutions that have not opted out of this component of the Temporary Liquidity Guarantee Program. Beginning January 1, 2010, the fees will be based on the institution’s risk category rating assigned with respect to regular Federal Deposit Insurance Corporation assessments. Institutions in Risk Category I (generally well-capitalized institutions with composite CAMELS 1 or 2 ratings) will pay an annualized assessment rate of 15 basis points. Institutions in Risk Category II (generally adequately capitalized institutions with composite CAMELS 3 or better) will pay an annualized assessment rate of 20 basis points. Institutions in Risk Category III or IV (generally under capitalized or composite CAMELS 4 or 5) will pay an annualized assessment rate of 25 basis points. We opted to participate in this component of the Temporary Liquidity Guarantee Program. On April 13, 2010, the Federal Deposit Insurance Corporation announced its intention to extend the program again until December 31, 2010 and retaining the discretion to further extend the program until December 31, 2011. Institutions must elect to opt out of the extension before it takes effect on July 1, 2010. The assessment rate remains the same from the prior extension. We anticipate opting into the extension.

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U.S. Treasury’s Troubled Asset Relief Program Capital Purchase Program. The Emergency Economic Stabilization Act of 2008 provides the Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to U.S. financial markets. One of the programs resulting from the legislation is the Troubled Asset Relief Program—Capital Purchase Program, which provides direct equity investment by the U.S. Treasury Department in perpetual preferred stock or similar securities of qualified financial institutions. This program is voluntary (subject to regulatory approval) and requires an institution to comply with a number of restrictions and provisions, including limits on executive compensation, stock redemptions and declaration of dividends. We opted not to participate in this program.

Prohibitions Against Tying Arrangements. Federal savings banks are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

Federal Home Loan Bank System. Kaiser Federal Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the Federal Home Loan Bank of San Francisco, Kaiser Federal Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of March 31, 2010, Kaiser Federal Bank was in compliance with this requirement.

Federal Reserve System

Federal Reserve Board regulations require federal savings banks to maintain noninterest-earning reserves against their transaction accounts, such as negotiable order of withdrawal and regular checking accounts. At March 31, 2010, Kaiser Federal Bank was in compliance with these reserve requirements.

Other Regulations

Interest and other charges collected or contracted for by Kaiser Federal Bank are subject to state usury laws and federal laws concerning interest rates. Kaiser Federal Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:

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Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

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Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

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Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

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Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

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Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

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Truth in Savings Act; and

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Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

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The operations of Kaiser Federal Bank also are subject to the:

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Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

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Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

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Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

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The USA PATRIOT Act, which requires federal savings banks to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

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The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

Holding Company Regulation

Upon completion of the conversion, Kaiser Federal Financial Group, Inc. will be a unitary savings and loan holding company, subject to regulation and supervision by the Office of Thrift Supervision. The Office of Thrift Supervision will have enforcement authority over Kaiser Federal Financial Group, Inc. and its non-savings institution subsidiaries. Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a risk to Kaiser Federal Bank.

Kaiser Federal Financial Group, Inc.’s activities are limited to those activities permissible for financial holding companies or for multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance, incidental to financial activities or complementary to a financial activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the prior approval of the Office of Thrift Supervision, and certain additional activities authorized by Office of Thrift Supervision regulations.

Federal law prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring control of another savings institution or holding company thereof, without prior written approval of the Office of Thrift Supervision. It also prohibits the acquisition or retention of, with specified exceptions, more than 5% of the equity securities of a company engaged in activities that are not closely related to banking or financial in nature or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the Office of Thrift Supervision must consider the financial and managerial resources and future prospects of the savings institution involved, the effect of the acquisition on the risk to the insurance fund, the convenience and needs of the community and competitive factors.

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Federal Securities Laws

Kaiser Federal Financial Group, Inc. common stock will be registered with the Securities and Exchange Commission after the conversion and stock offering. Kaiser Federal Financial Group, Inc. will be subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

The registration under the Securities Act of 1933 of shares of common stock issued in Kaiser Federal Financial Group, Inc.’s public offering does not cover the resale of those shares. Shares of common stock purchased by persons who are not affiliates of Kaiser Federal Financial Group, Inc. may be resold without registration. Shares purchased by an affiliate of Kaiser Federal Financial Group, Inc. will be subject to the resale restrictions of Rule 144 under the Securities Act of 1933. If Kaiser Federal Financial Group, Inc. meets the current public information requirements of Rule 144 under the Securities Act of 1933, each affiliate of Kaiser Federal Financial Group, Inc. that complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of the outstanding shares of Kaiser Federal Financial Group, Inc., or the average weekly volume of trading in the shares during the preceding four calendar weeks. In the future, Kaiser Federal Financial Group, Inc. may permit affiliates to have their shares registered for sale under the Securities Act of 1933.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act, our Chief Executive Officer and Chief Financial Officer will be required to certify that our quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain disclosures to our auditors and the audit committee of the board of directors about our internal control over financial reporting; and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting. We have existing policies, procedures and systems designed to comply with these regulations, and we are further enhancing and documenting such policies, procedures and systems to ensure continued compliance with these regulations.

TAXATION

Federal Taxation

General. K-Fed Mutual Holding Company, K-Fed Bancorp and Kaiser Federal Bank are, and Kaiser Federal Financial Group, Inc. will be, subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to K-Fed Bancorp, Kaiser Federal Financial Group, Inc. or Kaiser Federal Bank.

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K-Fed Mutual Holding Company, K-Fed Bancorp and Kaiser Federal Bank are not currently under audit with respect to their federal income tax returns and their federal income tax returns have not been audited for the past five years.

Method of Accounting. For federal income tax purposes, K-Fed Bancorp currently reports its income and expenses on the accrual method of accounting and uses a tax year ending June 30 for filing its federal and state income tax returns.

Alternative Minimum Tax. The Internal Revenue Code of 1986, as amended, imposes an alternative minimum tax (“AMT”) at a rate of 20% on a base of regular taxable income plus certain tax preferences (“alternative minimum taxable income” or “AMTI”). The AMT is payable to the extent such AMTI is in excess of an exemption amount and the AMT exceeds the regular income tax. Net operating losses can offset no more than 90% of AMTI. Certain payments of AMT may be used as credits against regular tax liabilities in future years. K-Fed Bancorp and Kaiser Federal Bank have been subject to the AMT but currently have no such amounts available as credits for carryover.

Net Operating Loss Carryovers. Generally, a financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. However, as a result of recent legislation, subject to certain limitations, the carryback period for net operating losses incurred in 2008 or 2009 (but not both years) has been expanded to five years. At March 31, 2010, Kaiser Federal Bank had no net operating loss carryforwards for federal income tax purposes.

Corporate Dividends-Received Deduction. K-Fed Bancorp (and Kaiser Federal Financial Group, Inc.) may exclude from its federal taxable income 100% of dividends received from Kaiser Federal Bank as a wholly owned subsidiary.

Capital Loss Carryovers. Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years. At March 31, 2010, K-Fed Bancorp and its subsidiaries have no capital loss carryforwards.

State Taxation

K-Fed Bancorp and Kaiser Federal Bank are subject to the California Corporate (Franchise) tax which is assessed at the rate of 10.84%. For this purpose, taxable income generally means federal taxable income subject to certain modifications provided for in California law.

K-Fed Mutual Holding Company, K-Fed Bancorp and Kaiser Federal Bank are not currently under audit with respect to their state income tax returns and their state income tax returns have not been audited for the past five years.

As a Maryland business corporation, Kaiser Federal Financial Group, Inc. is required to file annual returns and pay annual fees to the State of Maryland.

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MANAGEMENT

Management of Kaiser Federal Financial Group, Inc.

The board of directors of Kaiser Federal Financial Group, Inc. will consist of eight individuals who currently serve as directors of K-Fed Bancorp and Kaiser Federal Bank. The board of directors of Kaiser Federal Financial Group, Inc. will be divided into three classes, as nearly equal as possible, with approximately one-third of the directors elected each year. The directors will be elected by the stockholders of Kaiser Federal Financial Group, Inc. for three year terms, and until their successors are elected and have qualified. The terms of the directors of each of Kaiser Federal Financial Group, Inc. and Kaiser Federal Bank are identical. The executive officers of Kaiser Federal Financial Group, Inc. are also executive officers of K-Fed Bancorp. We expect that Kaiser Federal Financial Group, Inc. and Kaiser Federal Bank will continue to have common directors until there is a business reason to establish separate management structures.

The following individuals will serve as the executive officers of Kaiser Federal Financial Group, Inc. and hold the offices set forth below opposite their name.

	Executive			Position Held
	Kay M. Hoveland			President and Chief Executive Officer
	Dustin Luton			Senior Vice President and Chief Financial Officer

Executive officers of Kaiser Federal Financial Group, Inc. are elected annually and hold office until their respective successors have been elected or until death, resignation or removal by the board of directors.

Directors of Kaiser Federal Financial Group, Inc. initially will not be compensated by Kaiser Federal Financial Group, Inc. but will serve for and be compensated by Kaiser Federal Bank. It is not anticipated that separate compensation will be paid to directors of Kaiser Federal Financial Group, Inc. until such time as these persons devote significant time to the separate management of Kaiser Federal Financial Group, Inc. affairs, which is not expected to occur until Kaiser Federal Financial Group, Inc. becomes actively engaged in additional businesses other than holding the stock of Kaiser Federal Bank. Kaiser Federal Financial Group, Inc. may determine that such compensation is appropriate in the future.

Board Independence

The board of directors consists of a majority of “independent directors” within the meaning of the Nasdaq corporate governance listing standards. The board of directors has determined that directors Breeden, Sacher, Steinbach, Weisshar, Zwern, Dacumos and Peterson-More are each “independent” within the meaning of the Nasdaq corporate governance listing standards. There were no transactions between the members of the board of directors and K-Fed Bancorp that we considered in determining the independence of a director, except those stated in “Transactions with Certain Related Persons.” The board of directors has adopted a policy that the independent directors of the board shall meet in executive sessions periodically, which meetings may be held in conjunction with regularly scheduled board meetings.

The Business Background of Our Directors and Executive Officers

The board believes that the many years of service that our directors have at K-Fed Bancorp and Kaiser Federal Bank is one of their most important qualifications for service on our board. This service has given them extensive knowledge of the banking business and of K-Fed Bancorp. Furthermore, their service on our board committees, especially in the areas of audit, compensation and human resources, is critical to their ability to oversee the management of Kaiser Federal Bank by our executive officers. Service on the board by at least one of our senior executive officers is critical in aiding the outside directors’ understanding of the critical and complicated issues that are common in the banking business. Each outside director brings special skills, experience and expertise to the board as a result of his or her other business activities and associations. The business experience of each of our directors for at least the past five years and the experience, qualifications, attributes, skills and areas of expertise of each director that further supports his or her service as a director are set forth below. Unless otherwise indicated, each director has held his or her current position for the past five years.

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Directors

Michael J. Sacher. Mr. Sacher was appointed to the board of directors on October 25, 2008. He has spent the past 30 years in public accounting, specializing in the financial institutions sector. From August 2001 through July 2008, he served as a partner in the Credit Union Division with McGladrey & Pullen, LLP which served as the former registered public accounting firm of K-Fed Bancorp until 2004. Mr. Sacher resigned his partnership with McGladrey & Pullen to start a consulting firm providing services to the financial institutions sector. He is licensed as a certified public accountant in the State of California. He brings specific business, financial, risk management, audit and accounting skills related to financial institutions, which are important to his service on our board and the Audit Committee.

Robert C. Steinbach. Mr. Steinbach has served as a manager for the Department of Building and Safety of the City of Los Angeles since 2002 and has been with the Department since 1985. He brings general business, financial and risk management skills, including knowledge of compensation matters, to his service on our board and the Human Resources Committee.

James L. Breeden. Mr. Breeden has served as Chairman of the board of directors since November 2000. He is a retired hospital administrator for the Kaiser Foundation Hospitals where he worked for 27 years. His management and business experience in hospital administration bring unique knowledge and skills directly related to our Kaiser Permanente affiliated customers that are beneficial to his service on the board and Audit Committee.

Laura G. Weisshar. Ms. Weisshar has been employed by the Kaiser Foundation Health Plan since 1992, serving in a number of management positions until her appointment in 2002 as the Vice President and Controller of the Kaiser Permanente Southern California Region. Ms. Weisshar is licensed as a certified public accountant in the State of California. Her experience brings unique knowledge and skills related to the Kaiser Permanente affiliated customers and as well as general business, financial, audit and accounting skills, which are important to her service on our board and the Audit Committee.

Kay M. Hoveland. Ms. Hoveland has served as President and Chief Executive Officer of Kaiser Federal Bank, including service with Kaiser Permanente Federal Credit Union, since 1987. Ms. Hoveland has served as President and Chief Executive Officer of K-Fed Bancorp since its formation in July 2003. Ms. Hoveland’s many years of service in all areas of our operations and her duties as President and Chief Executive Officer bring a special knowledge of the financial, economic and regulatory challenges we face, to the board’s consideration of these matters.

Rita H. Zwern. Ms. Zwern has been employed by Kaiser Foundation Health Plan since 1984 and currently is the manager of State Programs, located in Burbank, California. Ms. Zwern has served as secretary of K-Fed Bancorp since its formation in July 2003. Her management and business experience in the administration of Kaiser Foundation Health Plan’s state programs bring unique knowledge and skills to her service on the board and Human Resources Committee.

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Giovani O. Dacumos. Mr. Dacumos was appointed to the board of directors in April 2010. Mr. Dacumos has served as Director of Systems for the Department of Building and Safety of the City of Los Angeles since 2009 and has been with the Department since 1999. He brings general business and financial skills, including a deep understanding of information technology, which are valuable to his service on our board.

Diana L. Peterson-More. Ms. Peterson-More joined the board of directors in May 2010. Ms. Peterson-More is the president of the Organizational Effectiveness Group, a human resources company she started in 1996. Previously she served in a number of executive positions both at Southern California Edison (where she was elected and served as Corporate Secretary at SCE Corp and its chief subsidiary Southern California Edison Company) and The Times Mirror Company. Ms. Peterson-More is licensed to practice law in the State of California. She brings general business, financial and risk management skills, including knowledge of compensation matters, which is important to her service on our Human Resources Committee.

Executive Officers Who are Not Directors

Dustin Luton. Mr. Luton served as the Chief Financial Officer for Kaiser Federal Bank from November 2006 until his appointment as the Chief Operating Officer in July 2009. He has served as the Chief Financial Officer of K-Fed Bancorp since November 2006. Previously, he was the Partner-in-Charge of the Southern California office of the National Credit Union Division of the accounting firm, McGladrey & Pullen, LLP. He was employed by McGladrey & Pullen, LLP since 2000 and was responsible for supervising the professional staff and professional services provided to clients in the Southern California region.

Jean M. Carandang. Ms. Carandang was appointed Chief Financial Officer of Kaiser Federal Bank in July 2009. Ms. Carandang served as Vice President of Finance since December 2008 and was formerly Senior Vice President, Controller of PFF Bank & Trust from 2005 until 2008. She also served as Corporate Controller and Risk Officer at Quaker City Bank from 1993 until 2005.

Nancy J. Huber. Ms. Huber has served as Chief Credit Officer of Kaiser Federal Bank since 1999 and Community Reinvestment Act Officer since 2002. From 1995 until 1999, she served as vice president of credit.

Jeanne R. Thompson. Ms. Thompson served as Chief Operating Officer of Kaiser Federal Bank from 2001 until her appointment as Chief Administrative Officer in July 2009. She served as senior vice president for branch operations of Indy Mac Bank, located in Pasadena, California, from 1983 until 2001.

Code of Ethics

The board of directors has adopted a Code of Business Conduct and Ethics that applies to all of our officers, directors and employees, and a Code of Ethics for the Chief Executive Officer and Chief Financial Officer. The codes are intended to promote honest and ethical conduct, full and accurate reporting and compliance with laws. The codes are available on K-Fed Bancorp’s website at www.k-fed.com. Amendments to and waivers from the Code of Ethics will also be disclosed on K-Fed Bancorp’s website.

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Compensation Committee Interlocks and Insider Participation

The compensation committee is composed of independent directors within the meaning of the Nasdaq corporate governance listing standards. The compensation committee consists of directors Breeden, who serves as Chairman, Sacher, Weisshar and Zwern. Under the board’s policies, Ms. Hoveland, and any other director who is also an executive officer of K-Fed Bancorp and Kaiser Federal Bank, will not participate in the board of director’s determination of compensation for their respective offices.

Compensation Discussion and Analysis

We believe the most effective executive compensation program is one that is aligned with achievement of our long-term strategic goals and we intend for our compensation program to align executives’ interests with those of the stockholders by rewarding performance for implementing our various strategies with the ultimate objective of improving stockholder value. We evaluate both performance and compensation to ensure that we maintain our ability to attract and retain employees in key positions and to ensure that compensation provided to key employees keeps these employees focused on value creation.

In this regard, we provide what we consider to be a competitive compensation package for the named executive officers, comprised of a base salary, an annual incentive plan, a stock option plan, a recognition and retention plan for restricted stock awards, an employee stock ownership plan, a 401(k) Plan, and a deferred compensation program, as well as health and welfare benefits. See “Executive Compensation—Benefit Plans” and “Executive Compensation—Tax Qualified Benefit Plans” for further details.

The compensation committee is responsible for all compensation and benefit matters relating to the executive officers, including the evaluation and compensation of our President and Chief Executive Officer. The President and Chief Executive Officer evaluates the performance of the other named executive officers and recommends to the compensation committee the named executive officers’ compensation levels for approval. The compensation committee regularly evaluates and approves all compensation practices applicable to the named executive officers, including our President and Chief Executive Officer.

Base Salary. It is our philosophy to maintain base salaries at levels comparable to the salaries paid by similar organizations. In establishing base salaries, we take into account each named executive officer’s ability and experience as well as past and potential performance. On an annual basis, each named executive officer is evaluated and his or her base salary may be adjusted, based on market data and the above factors.

Annual Incentive Plan. The Annual Incentive Plan is an integral part of a named executive officer’s total compensation package that recognizes the executive’s annual contribution to our success. The Plan is designed to: (1) support a business change to community-based banking; (2) support a culture change to pay-for-performance; (3) focus the executive team on annual goals to meet long-term goals; (4) reward executives for their effort; and (5) align compensation with the goals of the organization and marketplace practices. The award is achieved only if Kaiser Federal Bank achieves a minimum return on average assets (ROA) which is set at the beginning of each plan year. For the 2009 plan year, the minimum ROA goal was 0.55%, which was achieved by Kaiser Federal Bank. If our ROA goal is achieved, each individual executive must also achieve certain personal performance objectives set by the President and Chief Executive Officer or the board of directors. One of these goals must address expense management. The President and Chief Executive Officer is eligible to receive an amount up to 30% of her annual base salary and the remaining named executive officers are eligible to receive amounts up to 20% of their annual base salaries under this plan. In addition, the dollar amount of an award may be further increased over such maximums up to an additional 20% of the award to recognize achievement significantly in excess of performance objectives.

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Equity Compensation. The compensation committee uses the award of stock options and restricted stock under the K-Fed Bancorp 2004 Stock Option Plan and the K-Fed Bancorp 2004 Recognition and Retention Plan to align the interests of the named executive officers with those of our stockholders. At the annual meeting of stockholders in 2004, stockholders approved the 2004 Stock Option Plan and 2004 Recognition and Retention Plan. Ms. Hoveland, Ms. Huber, and Ms. Thompson received both stock options and restricted stock awards from the compensation committee under each of those equity compensation plans during 2004. Mr. Luton received stock options and restricted stock awards when he became Chief Financial Officer in November 2006. Ms. Carandang received restricted stock awards when she became Chief Financial Officer of Kaiser Federal Bank in July 2009. In January 2009, all of the named executive officers were granted stock options. Both the stock option and the restricted stock awards vest at a rate of 20% per year, over five years, commencing on the first anniversary of the grant date. The compensation committee believes that the five-year vesting of stock options and restricted stock awards will focus senior management on long-term performance and stock appreciation.

Information regarding the outstanding stock option grants and unvested recognition and retention plan awards is included in the section titled “Executive Compensation - Outstanding Equity Awards at Year End.”

Benefit Plans. The compensation committee annually reviews the expense and appropriateness of all benefit plans for the named executive officers and all other employees. The benefit plans include a tax-qualified 401(k) plan and employee stock ownership plan, a non-qualified deferred compensation plan and other benefit plans such as medical, dental, life and disability insurance.

The named executive officers are eligible to participate in a 401(k) Plan, which includes the right to receive a matching contribution from Kaiser Federal Bank up to 50% of the participant’s eligible contributions, not to exceed 10% of the participant’s salary. The matching contribution and the investment stock options are identical to those available to all other participants. Under the terms of our employee stock ownership plan, all employees, including our named executive officers, receive an annual allocation of our common stock based upon their eligible compensation, up to $245,000.

Our named executive officers are eligible to participate in the Amended and Restated Kaiser Federal Bank 2005 Executive Nonqualified Retirement Plan, which is a non-qualified deferred compensation plan that allows them to defer a portion of their compensation earned during the plan year. At our discretion, we have the ability to match the elective deferrals of the participants. However, we have not made any matching contributions to this plan since the plan’s inception.

Risk Management. The compensation committee believes that any risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on K-Fed Bancorp and Kaiser Federal Bank. In addition, the compensation committee believes that the mix and design of the elements of our executive compensation does not encourage management to assume excessive risks. In its review, the compensation committee concluded that significant weighting towards long-term incentive compensation discourages short-term risk taking. In addition, the significant number of shares of common stock of K-Fed Bancorp owned by the named executive officers, some of which was received as stock awards under our 2004 Stock Option Plan and 2004 Recognition and Retention Plan, discourages excessive risk taking.

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Executive Compensation

Summary Compensation Table. The following table sets forth, for the fiscal year ended June 30, 2009 and 2008, certain information as to the total compensation paid to Ms. Hoveland, who serves as President and Chief Executive Officer of K-Fed Bancorp and Kaiser Federal Bank, Mr. Luton, who serves as Chief Financial Officer of K-Fed Bancorp and Chief Operating Officer of Kaiser Federal Bank, and to the three other most highly compensated executive officers of K-Fed Bancorp and its subsidiaries. Each of the individuals listed in the table below is referred to as a “named executive officer. ”

Summary Compensation Table
Name and Principal Position	Year		Salary ($)		Bonus		Option awards ($)(1)		Non-equity incentive plan compensation ($)(2)		All other compensation ($)(3)		Total ($)

Kay M. Hoveland, President and Chief Executive Officer		2009 2008 2007		363,408 347,308 280,851		— — —		33,250 — —		109,200 115,500 100,800		59,091 73,607 105,734		564,949 536,415 487,385

Dustin Luton (4), Chief Financial Officer of K-Fed Bancorp and Chief Operating Officer of Kaiser Federal Bank		2009 2008 2007		235,316 226,346 130,308		— — —		26,600 — —		56,559 45,320 30,250		37,638 29,694 6,000		356,113 301,360 166,558

Jean M. Carandang (5), Chief Financial Officer of Kaiser Federal Bank		2009 2008 2007		77,114 — —		— — —		9,975 — —		8,417 — —		— — —		95,506 — —

Nancy J. Huber, Chief Credit Officer of Kaiser Federal Bank		2009 2008 2007		169,770 161,408 159,835		— — —		19,950 — —		38,563 37,440 28,122		25,073 34,325 62,182		253,356 233,173 250,139

Jeanne R. Thompson, Chief Administrative Officer of Kaiser Federal Bank		2009 2008 2007		148,839 144,502 145,830		— — —		19,950 — —		14,960 11,573 5,000		24,224 31,323 55,949		207,973 187,398 206,779

(1)

Represents the grant date fair value of stock options received by the named executive officers under the 2004 Stock Option Plan. The grant date fair value of the stock options has been computed in accordance with the stock-based compensation accounting rules (FASB ASC Topic 718, formerly SFAS 123R) for 2009. A discussion of the assumptions used in calculating the award values may be found at footnote 13 to our audited financial statements.

(2)	All cash incentive plan awards are reported for the fiscal year for which they were earned pursuant to the Annual Incentive Plan. These awards are traditionally paid during the first quarter of the following fiscal year.

(3)	The amounts in this column reflect the various benefits and payments received by the applicable named executive officer . A break-down of the various elements of compensation in this column is set forth in the table provided below.

(4)	Mr. Luton joined K-Fed Bancorp and Kaiser Federal Bank effective November 16, 2006.

(5)	Ms. Carandang joined Kaiser Federal Bank effective December 8, 2008.

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All Other Compensation
Name	Year	Perquisites ($)(1)		Employer Contributions to 401(k) Plan ($)		RRP Dividends ($)(2)		ESOP Allocation ($)		Directors Fees ($)(3)		Total ($)

Kay M. Hoveland	2009		—		8,250		4,400		23,941		22,500		59,091
Dustin Luton	2009		—		7,977		5,720		23,941		—		37,638
Jean M. Carandang	2009		—		—		—		—		—		—
Nancy J. Huber	2009		—		2,400		1,100		21,573		—		25,073
Jeanne R. Thonpson	2009		—		6,416		1,100		16,708		—		24,224

(1)	For the fiscal year ended June 30, 2009, no named executive officer received perquisites or personal benefits which exceeded $10,000.

(2)	Represents dividends on unearned restricted stock awards granted pursuant to the 2004 Recognition and Retention Plan.

(3)	Ms. Hoveland, our President and Chief Executive Officer, is also a director.

Grants of Plan-Based Awards. The following table provides information for the year ended June 30, 2009 as to grants of plan-based awards for our named executive officers.

Grants of Plan-Based Awards For the Fiscal Year Ended June 30, 2009
		Estimated future payouts under Non- equity incentive plan awards						All other option awards: number of securities underlying options (#) (2)		Exercise or base price of option awards ($/Sh)		Grant Date Fair Value of Option Awards ($)
Name	Grant date	Threshold ($)(1)		Target ($)(1)		Maximum ($)(1)				Exercise or base price of option awards ($/Sh)		Grant Date Fair Value of Option Awards ($)
Kay M. Hoveland	7/1/2008 1/30/2009		—		109,200		131,040		25,000		7.80		33,250

Dustin Luton	7/1/2008 1/30/2009		—		47,000		56,400		20,000		7.80		26,600

Jean M. Carandang	12/8/2008 1/30/2009		—		8,400		10,080		7,500		7.80		9,975

Nancy J. Huber	7/1/2008 1/30/2009		—		32,136		38,564		15,000		7.80		19,950

Jeanne R. Thompson	7/1/2008 1/30/2009		—		29,800		35,760		15,000		7.80		19,950

(1)	Represents threshold, target, and maximum payments achievable under the Annual Incentive Plan, based upon the financial targets to be achieved during the year ended on June 30, 2009.

(2)	Represents options that were granted under the 2004 Stock Option Plan.

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Benefit Plans

Annual Incentive Plan. Kaiser Federal Bank sponsors the Annual Incentive Plan (“AIP”) in order to provide financial incentives to a select group of executive officers. The board of directors and the chief executive officer have the authority to select the employees who will participate in the AIP, determine the terms and conditions of the awards, and interpret the AIP.

Under the AIP, the participants are only eligible to receive an award if Kaiser Federal Bank achieves a minimum return on average assets (ROA), which is set at the beginning of each plan year. For the 2009 fiscal year, the ROA target was 0.55%. If the ROA target is achieved, a participant is eligible to receive an annual target bonus amount based on the satisfaction of his or her individual performance objectives set by the chief executive officer and the board of directors. Each participant has one to five performance objectives. One or more of the performance objectives is required to address expense management. A participant may also be assigned other personal performance objectives addressing non-routine job goals, such as a new initiative or a substantial enhancement to an existing performance standard. Each performance objective is assigned a percentage weight to reflect its relative importance and/or difficulty, and the sum of the weights must equal 100% of the annual target bonus, such that if the participant fully achieves all of his or her performance objectives, the participant will receive 100% of the annual target bonus. Ms. Hoveland, as President and Chief Executive Officer, is eligible to receive an annual target bonus up to 30% of her annual base salary. The other named executive officers are eligible to receive an annual target bonus up to 20% of their annual base salary. The participant’s annual target bonus may be further increased by an additional 20% if the outcome of the participant’s performance objective significantly exceeded all expectations and made a contribution to Kaiser Federal Bank well beyond what was originally envisioned by the chief executive officer and the board of directors.

Stock Benefit Plans. Outside directors and key employees of Kaiser Federal Bank, K-Fed Bancorp or their affiliates are eligible to participate in and receive awards under the K-Fed Bancorp 2004 Stock Option Plan (“2004 Stock Option Plan”) and the K-Fed Bancorp 2004 Recognition and Retention Plan (“2004 Recognition and Retention Plan”).

Under the 2004 Stock Option Plan, K-Fed Bancorp reserved 568,675 shares of common stock to be issued pursuant to grants of stock option awards. A stock option gives the recipient the right to purchase shares of common stock of K-Fed Bancorp at a specified price during a specified period of time. Awards may be granted as either incentive or non-statutory stock options. Incentive stock options have certain tax advantages and must comply with the requirements of Section 422 of the Internal Revenue Code. Only employees are eligible to receive incentive stock options. Shares of common stock purchased upon the exercise of a stock option must be paid for in full at the time of exercise either in cash or with common stock that was owned by the recipient.

Under the 2004 Recognition and Retention Plan, K-Fed Bancorp reserved 227,470 shares of common to be issued pursuant to grants of restricted stock awards.

All stock options vest at a rate determined by the board of directors at the time the awards are granted to the recipient. All restricted stock awards must vest at least 20% per year, beginning one year following the date of grant. However, stock options will fully vest and become immediately exercisable and restricted stock awards will fully vest upon the recipient’s termination of service due to death or disability, or following a change in control of K-Fed Bancorp.

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Outstanding Equity Awards at Fiscal Year End. The following table sets forth information with respect to the outstanding equity awards as of June 30, 2009 for the named executive officers.

Outstanding Equity Awards at Fiscal Year Ended June 30, 2009
	Grant Date	Number of securities underlying unexercised options (#) exercisable		Number of securities underlying unexercised options (#) unexercisable			Option exercise price ($)		Option expiration date( 4)	Number of shares or units of stock that have not vested (#)			Market value of shares or units of stock that have not vested ($)(5)

Kay M. Hoveland	11/14/2004		80,000		20,000	(1)		14.50	11/14/2014		8,000	(1)		73,440
Kay M. Hoveland	01/30/2009				25,000	(3)		7.80	01/30/2019

Dustin Luton	11/15/2006		16,000		24,000	(2)		17.40	11/15/2016		12,000	(2)		110,160
Dustin Luton	01/30/2009				20,000	(3)		7.80	01/30/2019

Jean M. Carandang	01/30/2009				7,500	(3)		7.80	01/30/2019		10,000	(6)		91,800
Jean M. Carandang

Nancy J. Huber	11/14/2004		17,600		4,400	(1)		14.50	11/14/2014		2,000	(1)		18,360
Nancy J. Huber	01/30/2009				15,000	(3)		7.80	01/30/2019

Jeanne R. Thompson	11/14/2004		17,600		4,400	(1)		14.50	11/14/2014		2,000	(1)		18,360
Jeanne R. Thompson	01/30/2009				15,000	(3)		7.80	01/30/2019

(1)	Awards vested on November 14, 2009.

(2)

Stock option awards will vest as follows: 8,000 options vested on November 15, 2009, 8,000 options will vest on November 15, 2010, and 8,000 options will vest on November 15, 2011. The restricted stock awards will vest as follows: 4,000 shares vested on November 15, 2009, 4,000 shares will vest on November 15, 2010, and 4,000 shares will vest on November 15, 2011.

(3)	Stock option awards vest at a rate of 20% per year, commencing January 30, 2010, such that the stock options will become fully vested on January 30, 2014.

(4)	Stock options expire 10 years after the grant date.

(5)	This amount is based on the fair market value of K-Fed Bancorp common stock of $9.18 on June 30, 2009.

(6)	The stock options will vest at a rate of 20% per year beginning on June 23, 2010.

Options Exercised and Stock Vested. The following table sets forth information with respect to option exercises and restricted stock awards that have vested during the fiscal year ended June 30, 2009.

	Option Exercises and Stock Vested for the Fiscal Year
	Option awards				Stock awards
Name	Number of shares acquired on exercise (#)		Value realized on exercise ($)		Number of shares acquired on vesting (#)		Value realized on vesting ($)(1)

Kay M. Hoveland		—		—		8,000		67,440

Dustin Luton		—		—		4,000		33,720

Jean M. Carandang		—		—		—		—

Nancy J. Huber		—		—		2,000		16,860

Jeanne R. Thompson		—		—		2,000		16,860

(1)	The value realized on vesting represents the fair market value of K-Fed Bancorp common stock on the day the restricted stock award vested.

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Nonqualified Deferred Compensation. The following table sets forth information with respect to the Amended and Restated Kaiser Federal Bank 2005 Executive Nonqualified Retirement Plan for the fiscal year ended June 30, 2009 for the named executive officers.

Nonqualified Deferred Compensation

Name

Executive

Contributions in

Last FY ($)

Registrant

Contributions in

Last FY ($)

Aggregate

Earnings in Last

FY ($)(1)

Aggregate

Withdrawals/

Distributions ($)

Aggregate Balance

at Last FYE ($)(2)

Kay M. Hoveland,

—

44,957

—

1,105,352

(1)	The amount reported in this column was not reported as compensation for the 2009 fiscal year in the Summary Compensation Table. Only the above-market earnings on nonqualified deferred compensation is required to be included, if applicable.

(2)

The amount reported in this column is not previously reported as compensation to the named executive officer in the Summary Compensation Table for previous years because (i) there was no executive or registrant contribution made to the Amended and Restated Kaiser Federal Bank 2005 Executive Nonqualified Retirement Plan during the 2009, 2008 and 2007 fiscal years, and (ii) there was no above-market earnings on nonqualified deferred compensation during such period.

Amended and Restated Kaiser Federal Bank 2005 Executive Non-Qualified Retirement Plan. Effective January 1, 2005, Kaiser Federal Bank adopted the Amended and Restated Kaiser Federal Bank 2005 Executive Nonqualified Retirement Plan for a select group of management and highly compensated employees. Ms. Hoveland is currently the only participant in the plan. The plan allows for a participant to elect to defer a portion of his or her base compensation into the plan. In addition, Kaiser Federal Bank, in its sole discretion, may choose to make a matching contribution on behalf of the participant for the plan year. All employer discretionary contributions vest at a rate of 20% per year, beginning with the participant’s completion of his or her second year of service, and will be fully vested upon completion of six years of service. However, the participant’s employer discretionary contributions will fully vest in event of the participant’s separation from service following the participant’s attainment of age 60, or due to disability or death. All amounts contributed to the plan are credited to a bookkeeping account established on behalf of each participant. The participant’s account balance will be credited with earnings based on the participant’s crediting rate. The crediting rate will be determined based on the participant’s choice among the investment alternatives made available by Kaiser Federal Bank. Upon the earlier of the participant’s separation from service, death or disability, the participant will be entitled to receive his or her vested account balance payable in a lump sum or annual installments over a period not to exceed 15 years. In the event of a change in control of Kaiser Federal Bank, the participant’s vested account balance will be payable in a lump sum on the effective date of the change in control.

Tax-Qualified Benefit Plans

401(k) Plan. Kaiser Federal Bank maintains the Kaiser Federal Bank Employees’ Savings & Profit Sharing Plan and Trust, a tax-qualified defined contribution retirement plan, for all employees who have satisfied the 401(k) plan’s eligibility requirements. All employees begin participation in the 401(k) plan in the first calendar quarter on or after the employee attains age 21. However, a participant will not be eligible to receive any contributions from Kaiser Federal Bank until he or she has completed one year of service.

A participant may contribute up to 15% of his or her compensation to the 401(k) Plan on a pre-tax basis, subject to the limitations imposed by the Internal Revenue Code. For 2010 calendar year, the maximum salary deferral contribution that can be made by a participant is $16,500, provided however that a participant over age 50 may contribute an additional $5,500 to the 401(k) plan. In addition to salary deferral contributions, Kaiser Federal Bank will make a matching contribution equal to 50% of the first 10% of the compensation that is deferred by the participant during the plan year. A participant is always 100% vested in his or her salary deferral contributions. All employer contributions vest at a rate of 20% per year, beginning after the participant’s completion of his or her second year of service, such that the participant will be fully vested upon completion of six years of credited service. However, a participant will immediately become 100% vested in the employer contributions upon his or her death, disability, or attainment of age 65 while employed with Kaiser Federal Bank. Generally, a participant (or participant’s beneficiary) may receive a distribution from his or her vested account at retirement (age 65), early retirement (age 55 and ten years of vesting service), age 59½ (while employed with Kaiser Federal Bank), death, disability, or termination of employment.

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Each participant has an individual account under the 401(k) plan and may direct the investment of his or her account among a variety of investment options available, including the purchase of K-Fed Bancorp common stock through the K-Fed Bancorp Stock Fund. Upon consummation of the conversion, all shares of K-Fed Bancorp common stock currently held by the K-Fed Bancorp Stock Fund will automatically be converted into shares of Kaiser Federal Financial Group, Inc. common stock pursuant to the exchange ratio.

Employee Stock Ownership Plan. Kaiser Federal Bank maintains the Kaiser Federal Bank Employee Stock Ownership Plan. Employees of K-Fed Bancorp and Kaiser Federal Bank who have been credited with at least 1,000 hours of service during a twelve-month period are eligible to participate in the employee stock ownership plan. The plan borrowed funds from K-Fed Bancorp and used those funds to purchase common stock for the plan in connection with K-Fed Bancorp’s initial public offering. As part of the initial public offering, the employee stock ownership plan borrowed funds from K-Fed Bancorp and used those funds to purchase 454,940 shares of common stock, which served as collateral for the loan. The loan is being repaid by Kaiser Federal Bank through discretionary contributions to the employee stock ownership plan over a period of ten years. The loan currently has a remaining term of approximately four years. Shares purchased by the employee stock ownership plan are held in a suspense account for allocation among the participants’ accounts as the loan is repaid.

Contributions to the employee stock ownership plan and shares released from the unallocated suspense account in an amount proportional to the repayment of the employee stock ownership plan loan will be allocated to each eligible participant’s plan account, based on the ratio of each participant’s compensation to the total compensation of all eligible participants. Vested benefits will be payable generally upon the participants’ termination of employment, and will be paid in the form of common stock, or to the extent participants’ accounts contain cash, benefits will be paid in cash. However, participants have the right to elect to receive their benefits entirely in the form of cash or common stock, or a combination of both. Pursuant to FASB ASC Topic 718-40, we are required to record a compensation expense each year in an amount equal to the fair market value of the shares released from the suspense account.

In connection with the conversion, the employee stock ownership plan is expected to purchase 6% of the total number of shares of Kaiser Federal Financial Group, Inc. common stock issued in the offering. When combined with the common stock that was purchased by the employee stock ownership plan in connection with the initial public offering, the total shares purchased by the plan will be less than 8% of the shares of Kaiser Federal Financial Group, Inc. that will be outstanding following the conversion, as required by the Office of Thrift Supervision regulations. We anticipate that the employee stock ownership plan will fund its stock purchase with a loan from Kaiser Federal Financial Group, Inc. equal to the aggregate purchase price of the common stock. This loan will be repaid principally through Kaiser Federal Bank’s contribution to the employee stock ownership plan and dividends payable on the common stock held by the employee stock ownership plan over the anticipated 12-year term of the loan. The interest rate for the employee stock ownership plan loan is expected to be an adjustable-rate equal to the prime rate, as published in The Wall Street Journal, on the closing date of the offering. Thereafter, the interest rate will adjust annually. It is expected that the original loan from K-Fed Bancorp to the employee stock ownership plan in connection with the initial public offering will be refinanced and rolled into the loan to be received by the employee stock ownership plan from Kaiser Federal Financial Group, Inc. in connection with the conversion.

127

The trustee will hold the shares purchased by the employee stock ownership plan in an unallocated suspense account, and shares will be released to the participants’ accounts as the loan is repaid, on a pro-rata basis. The trustee will allocate the shares released among the participants’ accounts on the basis of each participant’s proportional share of eligible plan compensation relative to all participants’ proportional share of eligible plan compensation. Following the consummation of the conversion, all shares of K-Fed Bancorp common stock currently held by the employee stock ownership plan will automatically be converted to shares of Kaiser Federal Financial Group, Inc. common stock pursuant to the exchange ratio.

We reserve the right to purchase shares of common stock in the open market following the offering in order to fund all, or a portion of, the employee stock ownership plan. We also reserve the right to have the employee stock ownership plan purchase more than 6% of the shares of the common stock sold in the offering, if necessary, to complete the offering at the minimum of the offering range.

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Potential Payments Upon Termination or Change in Control. The following table sets forth estimates of the amounts that would be payable to the named executive officers upon the executive’s voluntary resignation, early retirement, normal retirement, involuntary termination or resignation for “good reason,” termination of employment for “cause,” termination following a change in control, death or disability, if such termination was effective as of June 30, 2009. The table does not include vested or accrued benefits under tax-qualified benefit plans that are disclosed elsewhere in the prospectus. The actual amounts to be paid upon any future termination can only be determined at the time of such actual separation.

	Voluntary Resignation		Early Retirement		Normal Retirement		Involuntary Termination or Resignation for “Good Reason”		Involuntary Termination for Cause		Termination after Change in Control		Disability		Death
Kay M. Hoveland
2004 Stock Option Plan (1)	$	―	$	―	$	―	$	―	$	―	$	34,500	$	34,500	$	34,500
2004 Recognition and Retention Plan (2)	$	―	$	―	$	―	$	―	$	―	$	73,440	$	73,440	$	73,440
Executive Nonqualified Retirement Plan (3)	$	1,105,352	$	1,105,352	$	1,105,352	$	1,105,352	$	1,105,352	$	1,105,352	$	1,105,352	$	1,105,352

Dustin Luton
2004 Stock Option Plan (4)	$	―	$	―	$	―	$	―	$	―	$	27,600	$	27,600	$	27,600
2004 Recognition and Retention Plan (5)	$	―	$	―	$	―	$	―	$	―	$	110,160	$	110,160	$	110,160

Jean M. Carandang
2004 Stock Option Plan (6)	$	―	$	―	$	―	$	―	$	―	$	10,350	$	10,350	$	10,350
2004 Recognition and Retention Plan (7)	$	―	$	―	$	―	$	―	$	―	$	91,800	$	91,800	$	91,800

Nancy J. Huber
2004 Stock Option Plan (8)	$	―	$	―	$	―	$	―	$	―	$	20,700	$	20,700	$	20,700
2004 Recognition and Retention Plan (9)	$	―	$	―	$	―	$	―	$	―	$	18,360	$	18,360	$	18,360

Jeanne R. Thompson
2004 Stock Option Plan (10)	$	―	$	―	$	―	$	―	$	―	$	20,700	$	20,700	$	20,700
2004 Recognition and Retention Plan (11)	$	―	$	―	$	―	$	―	$	―	$	18,360	$	18,360	$	18,360

(Footnotes begin on following page)

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(1)

This amount represents the difference between the fair market value and the exercise price of 25,000 stock option awards that become vested and exercisable as a result of Ms. Hoveland’s termination of employment following a change in control, death, or disability. The fair market value of a share of K-Fed Bancorp common stock was $9.18 on June 30, 2009 and the exercise price of each option was $7.80.

(2)

This amount represents the fair market value of 8,000 shares of restricted stock that become vested as a result of Ms. Hoveland’s termination of employment following a change in control, death, or disability. The fair market value of each share of K-Fed Bancorp common stock was $9.18 on June 30, 2009.

(3)	This amount represents the total balance of Ms. Hoveland’s account under the Amended and Restated Kaiser Federal Bank 2005 Executive Nonqualified Retirement Plan as of June 30, 2009.

(4)

This amount represents the difference between the fair market value and the exercise price of 20,000 stock option awards that become vested and exercisable as a result of Mr. Luton’s termination of employment following a change in control, death, or disability. The fair market value of a share of K-Fed Bancorp common stock was $9.18 on June 30, 2009 and the exercise price of each option was $7.80.

(5)

This amount represents the fair market value of 12,000 shares of restricted stock that become vested as a result of Mr. Luton’s termination of employment following a change in control, death, or disability. The fair market value of each share of K-Fed Bancorp common stock was $9.18 on June 30, 2009.

(6)

This amount represents the difference between the fair market value and the exercise price of 7,500 stock option awards that become vested and exercisable as a result of Ms. Carandang’s termination of employment following a change in control, death, or disability. The fair market value of a share of K-Fed Bancorp common stock was $9.18 on June 30, 2009 and the exercise price of each option was $7.80.

(7)

This amount represents the fair market value of 10,000 shares of restricted stock that become vested as a result of Ms. Carandang’s termination of employment following a change in control, death, or disability. The fair market value of each share of K-Fed Bancorp common stock was $9.18 on June 30, 2009.

(8)

This amount represents the difference between the fair market value and the exercise price of 15,000 stock option awards that become vested and exercisable as a result of Ms. Huber’s termination of employment following a change in control, death, or disability. The fair market value of a share of K-Fed Bancorp common stock was $9.18 on June 30, 2009 and the exercise price of each option was $7.80.

(9)	This amount represents the fair market value of 2,000 shares of restricted stock that become vested as a result of Ms. Huber’s termination of employment following a change in control, death, or disability. The fair market value of each share of K-Fed Bancorp common stock was $9.18 on June 30, 2009.

(10)

This amount represents the difference between the fair market value and the exercise price of 15,000 stock option awards that become vested and exercisable as a result of Ms. Thompson’s termination of employment following a change in control, death, or disability. The fair market value of a share of K-Fed Bancorp common stock was $9.18 on June 30, 2009 and the exercise price of each option was $7.80.

(11)

This amount represents the fair market value of 2,000 shares of restricted stock that become vested as a result of Ms. Thompson’s termination of employment following a change in control, death, or disability. The fair market value of each share of K-Fed Bancorp common stock was $9.18 on June 30, 2009.

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Director Compensation

Set forth below is a summary of the compensation for each of our non-employee directors for the fiscal year ended June 30, 2009. Director compensation paid to directors who also are named executive officers is reflected above in “Executive Compensation – Summary Compensation Table.”

Director Compensation (4)
Name	Fees earned or paid in cash ($)		Stock awards ($)		Option awards ($)(1)		All other compensation ($)(2)		Total
Michael J. Sacher (3)		20,750		—		13,300		1,650		35,700

Robert C. Steinbach		25,000		—		13,300		792		39,092

James L. Breeden		84,000		—		13,300		1,243		98,543

Laura G. Weisshar		25,833		—		13,300		1,870		39,133

Rita H. Zwern		25,500		—		13,300		792		35,592

(1)

Represents the grant date fair value of 10,000 stock options granted to each director on January 30, 2009 under the 2004 Stock Option Plan. The grant date fair value of the stock options has been computed in accordance with the stock-based compensation accounting rules (FASB ASC Topic 718, formerly SFAS 123R) for 2009. A discussion of the assumptions used in calculating the award values may be found at footnote 13 to our audited financial statements. The grant date fair value of each stock option award is $1.34.

(2)	This amount represents dividends received on unvested stock awards granted in 2009 pursuant to the 2004 Recognition and Retention Plan. For the fiscal year ended June 30, 2009, no director received perquisites or personal benefits, which exceeded $10,000.

(3)	Mr. Sacher joined the board of directors effective October 2008.

(4)

As of June 30, 2009, the directors have the following outstanding equity awards: Mr. Sacher has 5,000 restricted stock awards and 10,000 stock option awards. Mr. Steinbach has 1,440 restricted stock awards and 10,000 stock option awards. Mr. Breeden has 2,260 restricted stock awards and 20,000 stock option awards. Ms. Weisshar has 4,000 restricted stock awards and 10,000 stock option awards. Ms. Zwem has 1,440 restricted stock awards and 10,000 stock option awards.

Members of the board of directors and the committees of K-Fed Bancorp do not receive separate compensation for their service on the board of directors or the committees of K-Fed Bancorp.

For the fiscal year ended June 30, 2009, members of the board of directors of Kaiser Federal Bank received an annual stipend of $22,500. The Chairman of the board of directors and the Audit Committee Chair received an annual stipend of $25,000. Each member of Kaiser Federal Bank’s committees received $500 per committee meeting. The Board Chairman also received $500 per meeting for attending weekly credit committee and asset/liability management committee meetings.

In addition, members of the board of directors are eligible to participate in the 2004 Stock Option Plan and the 2004 Recognition and Retention Plan. Please see the descriptions of each plan set forth under “Executive Compensation – Benefit Plans” for further details.

Transactions With Certain Related Persons

In the ordinary course of business, Kaiser Federal Bank makes loans available to its directors, officers and employees. These loans are made in the ordinary course of business on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable loans with persons not related to Kaiser Federal Bank. Management believes that these loans neither involve more than the normal risk of collectability nor present other unfavorable features.

Section 402 of the Sarbanes-Oxley Act of 2002 generally prohibits an issuer from: (1) extending or maintaining credit; (2) arranging for the extension of credit; or (3) renewing an extension of credit in the form of a personal loan for an officer or director. There are several exceptions to this general prohibition, one of which is applicable to K-Fed Bancorp. Sarbanes-Oxley does not apply to loans made by a depository institution that is insured by the Federal Deposit Insurance Corporation and is subject to the insider lending restrictions of the Federal Reserve Act. All loans to K-Fed Bancorp’s directors and officers are made in conformity with the Federal Reserve Act and applicable regulations.

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In accordance with the listing standards of the NASDAQ Stock Market, any transactions that would be required to be reported under this section of this prospectus must be approved by our audit committee or another independent body of the board of directors. In addition, any transaction with a director is reviewed by and subject to approval of the members of the board of directors who are not directly involved in the proposed transaction to confirm that the transaction is on terms that are no less favorable than those that would be available to us from an unrelated party through an arms-length transaction.

Indemnification of Directors and Officers

The officers, directors, agents and employees of Kaiser Federal Financial Group, Inc. are indemnified with respect to certain actions pursuant to Kaiser Federal Financial Group, Inc.’s articles of incorporation and Maryland law. Maryland law allows Kaiser Federal Financial Group, Inc. to indemnify any person for expenses, liabilities, settlements, judgments and fines in suits in which such person has been made a party by reason of the fact that he or she is or was a director, officer or employee of Kaiser Federal Financial Group, Inc. No such indemnification may be given (i) to the extent that it is proved that the person actually received an improper benefit or profit in money, property or services for the amount of the benefit or profit in money, property or services actually received, (ii) to the extent that a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding that the person’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated, or (iii) to the extent otherwise provided by Maryland law. The right to indemnification includes the right to be paid the expenses incurred in advance of final disposition of a proceeding.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons by our bylaws or otherwise, we have been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

Benefits to be Considered Following Completion of the Conversion

Employment Agreements. Kaiser Federal Bank plans to enter into employment agreements with Ms. Hoveland, Mr. Luton, Ms. Carandang, Ms. Huber and Ms. Thompson (referred to below as the “executives” or “executive”) upon completion of the conversion. At least 60 days prior to the anniversary date of each agreement, the disinterested members of the board of directors of Kaiser Federal Bank must conduct a comprehensive performance evaluation and affirmatively approve any extension of each agreement for an additional year or determine not to extend the term of the agreement. If the board of directors determines not to extend the term, it must notify the executive at least 30 days, but not more than 60 days, prior to such date. Each agreement will provide for a payment of base salary of $364,000, $275,000, $170,000, $160,680, and $149,000, for Ms. Hoveland, Mr. Luton, Ms. Carandang, Ms. Huber and Ms. Thompson, respectively. Each executive’s base salary will be reviewed at least annually, and may be increased, but not decreased. In addition to base salary, each agreement provides for, among other things, participation in bonus programs and other employee pension benefit and fringe benefit plans applicable to executive employees.

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In the event of the executive’s involuntary termination of employment for reasons other than cause, disability or death, or in the event the executive resigns during the term of his or her agreement for “good reason,” including such a termination or resignation following a change in control of Kaiser Federal Financial Group, Inc. or Kaiser Federal Bank, the executive would be entitled to a severance payment equal to two times (or three times for Ms. Hoveland) the sum of: (i) the executive’s highest annual rate of base salary at any time during the term of the agreement and (ii) the executive’s highest annual bonus received during the latest two calendar years (or three calendar years for Ms. Hoveland) prior to the termination, payable in a single cash lump sum distribution. In addition, the executive would be entitled, at no expense, to the continuation of substantially comparable life, medical and disability coverage that cease upon the earlier of: (i) the last day of the 24-month period (or the 36-month period for Ms. Hoveland) following the executive’s date of termination; or (ii) the date the executive becomes eligible for Medicare coverage. Finally, the executive would be entitled to receive a lump-sum payment equal to the present value of Kaiser Federal Bank’s contributions that would have been made on his or her behalf to the 401(k) plan and the employee stock ownership plan as if the executive had continued working for Kaiser Federal Bank for a 24-month period (or 36-month period for Ms. Hoveland) following the executive’s date of termination, earning his or her base salary in effect as of the date of termination and as if the executive had made the maximum amount of employee contributions permitted under the 401(k) plan. For purposes of this agreements, “good reason” is defined as follows: (i) a material reduction in base compensation; (ii) a material reduction in the executive’s duties or responsibilities; (iii) a requirement that the executive reports to a corporate officer other than the President and Chief Executive Officer, (iv) a material reduction in the budget over which the executive has authority (v) a relocation of the executive’s principal place of employment by more than 25 miles from the location, as of the date of the agreement, or (vi) a material breach of the agreement by Federal Kaiser Bank. For Ms. Hoveland, “good reason” is defined as the requirement that she reports to a corporate officer instead of the board of directors.

In addition, should the executive become disabled, the executive will be entitled to receive his or her base salary for the remaining term of the agreement, or one year, whichever is the longer period of time. In the event of the executive’s death while employed, the executive’s beneficiaries will be paid his or her base salary for one year following death, and Kaiser Federal Bank will continue to provide non-taxable medical and dental benefits to the executive’s family for one year thereafter.

Upon termination of employment due to retirement, the executive would only be entitled to his or her benefits under any retirement plan of Kaiser Federal Bank to which the executive is a party. In the event the executive is terminated for cause, the executive would have no right to receive compensation or other benefits for any period after her termination.

Each agreement provides that for one year following the executive’s termination (other than termination of employment following a change in control), the executive agrees not to compete with Kaiser Federal Financial Group, Inc. or Kaiser Federal Bank within 25 miles of the locations in which Kaiser Federal Financial Group, Inc. or Kaiser Federal Bank has business operations or has filed an application for regulatory approval to establish an office.

Stock-Based Benefit Plans. In addition, following the stock offering, we intend to adopt a new stock-based benefit plan that will provide for grants of stock options and restricted common stock awards. The number of options granted or shares awarded under the plan may not exceed 10% and 4%, respectively, of the shares sold in the stock offering if the stock-based benefit plan is adopted within one year after the stock offering, in accordance with regulations and policy of the Office of Thrift Supervision.

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The stock-based benefit plan will not be established sooner than six months after the stock offering and, if adopted within one year after the stock offering, would require the approval by stockholders by a majority of the votes eligible to be cast. If the stock-based benefit plan is established after one year after the stock offering, it would require the approval of our stockholders by a majority of votes cast. The following additional restrictions would apply to our stock-based benefit plan only if the plan is adopted within one year after the stock offering:

●

non-employee directors, in the aggregate, may not receive more than 30% of the options and restricted stock awards authorized under the plan;

●

any non-employee director may not receive more than 5% of the options and restricted stock awards authorized under the plan;

●

any officer or employee may not receive more than 25% of the options and restricted stock awards authorized under the plan;

●

any tax-qualified employee stock benefit plans and management stock benefit plans, in the aggregate, may not hold more than 10% of the shares sold in the offering, unless Kaiser Federal Bank has tangible capital of 10% or more, in which case any tax-qualified employee stock benefit plans and management stock benefit plans may hold up to 12% of the shares sold in the offering;

●

the options and restricted stock awards may not vest more rapidly than 20% per year, beginning on the first anniversary of stockholder approval of the plan;

●

accelerated vesting is not permitted, except for death, disability or upon a change in control of Kaiser Federal Bank or Kaiser Federal Financial Group, Inc.; and

●

our executive officers or directors must exercise or forfeit their options in the event that Kaiser Federal Bank becomes critically undercapitalized, is subject to enforcement action or receives a capital directive.

Our current intention is to present the stock-based benefit plan for stockholder approval more than 12 months after the completion of the conversion. In the event either federal or state regulators change their regulations or policies regarding stock-based benefit plans, including any regulations or policies restricting the size of awards and vesting of benefits as described above, the restrictions described above may not be applicable.

We may obtain the shares needed for our stock-based benefit plans by issuing additional shares of common stock from authorized but unissued shares or through stock repurchases.

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The actual value of the shares awarded under the stock-based benefit plan will be based in part on the price of Kaiser Federal Financial Group, Inc.’s common stock at the time the shares are awarded. The stock-based benefit plan is subject to stockholder approval, and cannot be implemented until at least six months after the offering. The following table presents the total value of all shares that would be available for award and issuance under the stock-based benefit plan, assuming the shares are awarded when the market price of our common stock ranges from $8.00 per share to $14.00 per share.

Share Price		272,000 Shares Awarded at Minimum of Offering Range		320,000 Shares Awarded at Midpoint of Offering Range		368,000 Shares Awarded at Maximum of Offering Range		423,200 Shares Awarded at Maximum of Offering Range, As Adjusted
(In thousands, except share price information)

$	8.00	$	2,176	$	2,560	$	2,944	$	3,386
	10.00		2,720		3,200		3,680		4,232
	12.00		3,264		3,840		4,416		5,078
	14.00		3,808		4,480		5,152		5,925

The grant-date fair value of the options granted under the stock-based benefit plan will be based in part on the price of shares of common stock of Kaiser Federal Financial Group, Inc. at the time the options are granted. The value also will depend on the various assumptions utilized in the option pricing model ultimately adopted. The following table presents the total estimated value of the options to be available for grant under the stock-based benefit plan, assuming the market price and exercise price for the stock options are equal and the range of market prices for the shares is $8.00 per share to $14.00 per share. The Black-Scholes option pricing model provides an estimate only of the fair value of the options, and the actual value of the options may differ significantly from the value set forth in this table.


Exercise Price		Grant-Date Fair Value Per Option		680,000 Options at Minimum of Range		800,000 Options at Midpoint of Range		920,000 Options at Maximum of Range		1,058,000 Options at Maximum of Range, As Adjusted
(In thousands, except exercise price and fair value information)

$	8.00	$	1.62	$	1,102	$	1,296	$	1,490	$	1,714
	10.00		2.02		1,374		1,616		1,858		2,137
	12.00		2.42		1,646		1,936		2,226		2,560
	14.00		2.83		1,924		2,264		2,604		2,994

The tables presented above are provided for informational purposes only. There can be no assurance that our stock price will not trade below $10.00 per share. Before you make an investment decision, we urge you to read this prospectus carefully, including, but not limited to, the section entitled “Risk Factors” beginning on page 20.

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BENEFICIAL OWNERSHIP OF COMMON STOCK

The following table provides the positions, ages and terms of office as applicable to our directors and executive officers along with the beneficial ownership of our common stock held by our directors and executive officers, individually and as a group, and all individuals known to management to own more than 5% of our common stock as of _________, 2010.


Name (1)	Age(2)	Positions Held with K-Fed Bancorp	Director Since (3)	Current Term to Expire		Shares of Common Stock Beneficially Owned (4)(5)			Percent of Class

DIRECTORS

James L. Breeden	66	Chairman of the Board	1987		2010		48,437	(6)		*
Laura G. Weisshar	59	Director	2007		2010		23,300	(7)		*
Kay M. Hoveland	62	Director, President and Chief Executive Officer	2000		2011		238,298	(8)		1.8	%
Rita H. Zwern	62	Director and Secretary	1987		2011		38,200	(9)		*
Michael J. Sacher	57	Director	2008		2012		9,800	(10)		*
Robert C. Steinbach	56	Director	2000		2012		56,600	(11)		*
Giovani O. Dacumos	40	Director	2010		2010		500	(12)		*
Diane L. Peterson-More	59	Director	2010		2010		100			*

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

Dustin Luton	40	Chief Financial Officer***	N/A		N/A		55,913	(13)		*
Jean M. Carandang**	45	Chief Financial Officer***	N/A		N/A		11,658	(14)
Nancy J. Huber**	47	Chief Credit Officer	N/A		N/A		64,058	(15)		*
Jeanne R. Thompson**	63	Chief Administrative Officer	N/A		N/A		63,789	(16)		*

All directors and executive officers as a group (12 persons)							610,653			4.6	%

*	Less than 1%.

**	Ms. Carandang, Ms. Huber and Ms. Thompson are officers of Kaiser Federal Bank only.

***	Mr. Luton serves as Chief Financial Officer of K-Fed Bancorp and Ms. Carandang serves as Chief Financial Officer of Kaiser Federal Bank.

(1)	The mailing address for each person listed is 1359 North Grand Avenue, Covina, California 91724.

(2)	As of ______, 2010.

(3)

Reflects initial appointment to the board of directors of Kaiser Permanente Federal Credit Union, the predecessor to Kaiser Federal Bank, with the exception of Directors Weisshar, Steinbach, Sacher, Hoveland, Dacumos and Peterson-More. Each director of K-Fed Bancorp is also a director of Kaiser Federal Bank and K-Fed Mutual Holding Company, which owns the majority of the issued and outstanding shares of common stock of K-Fed Bancorp.

(4)

In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, a person is deemed to be the beneficial owner for purposes of this table, of any shares of common stock if he has shared voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days from the dates as of which beneficial ownership is being determining. As used herein, “voting power” is the power to vote or direct the voting of shares and “investment power” is the power to dispose or direct the disposition of shares, and includes all shares held directly as well as by spouses and minor children, in trust and other indirect ownership, over which shares the named individuals effectively exercise sole or shared voting or investment power.

(5)

Includes 4,000 unvested shares of restricted stock for each of directors Steinbach and Zwern, 3,000 unvested shares of restricted stock for director Weisshar, and 8,000 and 10,000 unvested shares of restricted stock for Mr. Luton and Ms. Carandang, respectively, granted under the K-Fed Bancorp 2004 Recognition and Retention Plan.

(6)	Includes 2,637 shares of common stock held by Mr. Breeden’s spouse and 15,500 shares of common stock held in an IRA for Mr. Breeden. Includes 4,000 stock options that have vested or will vest within 60 days after __________, 2010.

(7)	Includes 13,000 shares of common stock held in a living trust. Includes 6,000 stock options that have vested or will vest within 60 days after ______, 2010.

(8)

Includes 82,000 shares of common stock held in a trust for Ms. Hoveland, 11,000 shares of common stock held in a Keogh plan for Ms. Hoveland’s spouse, 16,474 shares of common stock held in the K-Fed Bancorp employee stock ownership plan and 23,824 shares of common stock held in the Kaiser Federal Bank 401(k) Plan. Includes 105,000 stock options that have vested or will vest within 60 days after ______, 2010.

(9)	Includes 16,000 stock options that have vested or will vest within 60 days after ______, 2010. Ms. Zwern has pledged 20,760 shares of our common stock as security for a loan.

(10)	Includes 800 shares of common stock held in a living trust. Includes 4,000 stock options that have vested or will vest within 60 days after __________, 2010.

(11)	Includes 15,000 shares of common stock held by Mr. Steinbach’s spouse. Includes 16,000 stock options that have vested or will vest within 60 days after ______, 2010.

(Footnotes continue on following page)

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(Continued from previous page)

(12)	Shares are held in an IRA for Ms. Peterson-More.

(13)

Includes 4,247 shares of common stock held in K-Fed Bancorp employee stock ownership plan, 1,666 shares of common stock held in the Kaiser Federal Bank 401(k) Plan and 2,000 shares held in an IRA for Mr. Luton. Includes 28,000 stock options that have vested or will vest within 60 days after ______, 2010.

(14)	Includes 158 shares of common stock held in the Kaiser Federal Bank 401(k) Plan. Includes 1,500 stock options that have vested or will vest within 60 days after __________, 2010.

(15)	Includes 14,058 shares of common stock held in K-Fed Bancorp employee stock ownership plan. Includes 25,000 stock options that have vested or will vest within 60 days after ______, 2010. Ms. Huber has pledged 23,000 shares of our common stock as security for a loan.

(16)

Includes 1,172 shares of common stock held by Ms. Thompson’s spouse, 1,400 shares of common stock held in a trust for Ms. Thompson, 12,347 shares of common stock held in K-Fed Bancorp employee stock ownership plan and 9,476 shares of common stock held in the Kaiser Federal Bank 401(k) Plan. Includes 25,000 stock options that have vested or will vest within 60 days after ______, 2010. Ms. Thompson has pledged 10,566 shares of our common stock as security for a loan.

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SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS

The table below sets forth, for each of Kaiser Federal Financial Group, Inc.’s directors, executive officers, and for all of these individuals as a group, the following information:

●

the number of exchange shares to be held upon completion of the conversion, based upon their beneficial ownership of K-Fed Bancorp common stock as of [Stockholder Record Date];

●

the proposed purchases of subscription shares, assuming sufficient shares of common stock are available to satisfy their subscriptions; and

●

the total shares of common stock to be held upon completion of the conversion.

In each case, it is assumed that subscription shares are sold at the minimum of the offering range. See “The Conversion and Offering—Additional Limitations on Common Stock Purchases.” Regulations of the Office of Thrift Supervision prohibit our directors and officers from selling the shares they purchase in the offering for one year after the date of purchase. Subscriptions by management through our 401(k) plan are included in the proposed purchases set forth below and will be counted as part of the maximum number of shares such individuals may subscribe for in the stock offering and as part of the maximum number of shares directors and officers may purchase in the stock offering.

Proposed Purchases of Stock in the
Offering (1)

Total Common Stock to be Held at
Minimum of Offering Range (3)

Name of Beneficial Owner

Number of
Exchange Shares to
Be Held (2)

Number of
Shares

Amount

Number of
Shares

Percentage of
Shares
Outstanding

Directors:

James L. Breeden

Laura G. Weisshar

Kay M. Hoveland

Rita H. Zwern

Michael J. Sacher

Robert C. Steinbach

Giovani O. Dacumos

Diane L. Peterson-More

Executive Officers who are not Directors:

Dustin Luton

Jean M. Carandang

Nancy J. Huber

Jeanne R. Thompson

*	Less than 1%.

(1)	Includes proposed subscriptions, if any, by associates.

(2)	Based on information presented in “Beneficial Ownership of Common Stock,” and assuming an exchange ratio of 0.7673 at the minimum of the offering range.

(3)	At the maximum of the offering range, directors and executive officers would own _____ shares, or ____% of our outstanding shares of common stock.

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THE CONVERSION AND OFFERING

The boards of directors of K-Fed Bancorp and K-Fed Mutual Holding Company have approved the plan of conversion and reorganization. The plan of conversion and reorganization must also be approved by the members of K-Fed Mutual Holding Company (depositors of Kaiser Federal Bank) and the stockholders of K-Fed Bancorp. A special meeting of members and a special meeting of stockholders have been called for this purpose. The Office of Thrift Supervision has conditionally approved the plan of conversion and reorganization; however, such approval does not constitute a recommendation or endorsement of the plan of conversion and reorganization by that agency.

General

The respective boards of directors of K-Fed Mutual Holding Company and K-Fed Bancorp adopted the plan of conversion and reorganization on May 27, 2010. Pursuant to the plan of conversion and reorganization, our organization will convert from the mutual holding company form of organization to the fully stock form. K-Fed Mutual Holding Company, the mutual holding company parent of K-Fed Bancorp, will be merged into K-Fed Bancorp, and K-Fed Mutual Holding Company will no longer exist. K-Fed Bancorp, which owns 100% of Kaiser Federal Bank, will be merged into a new Maryland corporation named Kaiser Federal Financial Group, Inc. As part of the conversion, the 66.7% ownership interest of K-Fed Mutual Holding Company in K-Fed Bancorp will be offered for sale in the stock offering. When the conversion is completed, all of the outstanding common stock of Kaiser Federal Bank will be owned by Kaiser Federal Financial Group, Inc., and all of the outstanding common stock of Kaiser Federal Financial Group, Inc. will be owned by public stockholders. K-Fed Mutual Holding Company and K-Fed Bancorp will cease to exist. A diagram of our corporate structure before and after the conversion is set forth in the “Summary” section of this prospectus.

Under the plan of conversion and reorganization, at the completion of the conversion and offering, each share of K-Fed Bancorp common stock owned by persons other than K-Fed Mutual Holding Company will be converted automatically into the right to receive new shares of Kaiser Federal Financial Group, Inc. common stock determined pursuant to an exchange ratio. The exchange ratio will ensure that immediately after the exchange of existing shares of K-Fed Bancorp for new shares, the public stockholders will own the same aggregate percentage of shares of common stock of Kaiser Federal Financial Group, Inc. that they owned in K-Fed Bancorp immediately prior to the conversion, excluding any shares they purchased in the offering and their receipt of cash paid in lieu of fractional shares.

Kaiser Federal Financial Group, Inc. intends to retain between $27.9 million and $38.0 million of the net proceeds of the offering (excluding its loan to the Employee Stock Ownership Plan) and to invest between $32.0 million and $43.5 million of the net proceeds in Kaiser Federal Bank. The conversion will be consummated only upon the issuance of at least the minimum number of shares of our common stock offered pursuant to the plan of conversion and reorganization.

The plan of conversion and reorganization provides that we will offer shares of common stock for sale in the subscription offering to eligible account holders, our tax-qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan, supplemental eligible account holders and other members. In addition, we expect to offer common stock for sale in a community offering to members of the general public, with a preference given in the following order:

●

Natural persons (including trusts of natural persons) residing in the California counties of Los Angeles, Orange, San Bernardino, Riverside and Santa Clara; and

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●

K-Fed Bancorp’s public stockholders as of [Stockholder Record Date].

We have the right to accept or reject, in whole or in part, any orders to purchase shares of the common stock received in the community offering. The community offering, if any, may begin at the same time as, during, or after the subscription offering and must be completed within 45 days after the completion of the subscription offering unless otherwise extended by the Office of Thrift Supervision. See “—Community Offering.”

We also may offer for sale shares of common stock not purchased in the subscription or community offerings through a syndicated community offering to be managed by Keefe, Bruyette & Woods, Inc. See “—Syndicated Community Offering” herein.

We determined the number of shares of common stock to be offered in the offering based upon an independent valuation appraisal of the estimated pro forma market value of Kaiser Federal Financial Group, Inc. All shares of common stock to be sold in the offering will be sold at $10.00 per share. Investors will not be charged a commission to purchase shares of common stock. The independent valuation will be updated and the final number of the shares of common stock to be issued in the offering will be determined at the completion of the offering. See “—Stock Pricing and Number of Shares to be Issued” for more information as to the determination of the estimated pro forma market value of the common stock.

The following is a brief summary of the conversion and is qualified in its entirety by reference to the provisions of the plan of conversion and reorganization. A copy of the plan of conversion and reorganization is available for inspection at each branch office of Kaiser Federal Bank and at the Western Regional and the Washington, D.C. offices of the Office of Thrift Supervision. The plan of conversion and reorganization is also filed as an exhibit to K-Fed Mutual Holding Company’s application to convert from mutual to stock form of which this prospectus is a part, copies of which may be obtained from the Office of Thrift Supervision. The plan of conversion and reorganization is also filed as an exhibit to the registration statement we have filed with the Securities and Exchange Commission, of which this prospectus is a part, copies of which may be obtained from the Securities and Exchange Commission or online at the Securities and Exchange Commission’s website, www.sec.gov. See “Where You Can Find Additional Information.”

Reasons for the Conversion

Our board of directors decided at this time to convert to a fully public stock form of ownership and conduct the offering in order to increase our capital position and support future growth. Completing the conversion and offering is necessary for us to continue to grow and execute our business strategy. We believe that our conversion to a fully public company and the increased capital resources that will result from the sale of our shares of common stock will provide us with the flexibility to:

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eliminate some of the uncertainties associated with proposed financial regulatory reforms which may result in changes to our primary bank regulator and holding company regulator as well as changes in regulations applicable to us, including, but not limited to, capital requirements, treatment of waived dividends by the mutual holding company, payment of dividends and conversion to full stock form;

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support internal growth through increased lending in the communities we serve;

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improve the liquidity of our shares of common stock and implement more flexible capital management strategies;

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As a fully converted stock holding company, we will have greater flexibility in structuring future mergers and acquisitions, including the form of consideration that we can use to pay for an acquisition. Our current mutual holding company structure and our relatively small asset size limit our ability to offer shares of our common stock as consideration for a merger or acquisition since K-Fed Mutual Holding Company is required to own a majority of our shares of common stock. Potential sellers often want stock for at least part of the purchase price. Our new stock holding company structure will enable us to offer stock or cash consideration, or a combination of stock and cash, and will therefore enhance our ability to compete with other bidders when acquisition opportunities arise. We do not currently have any agreement or understanding as to any specific acquisition.

Approvals Required

The affirmative vote of a majority of the total votes eligible to be cast by the members of K-Fed Mutual Holding Company is required to approve the plan of conversion and reorganization. By their approval of the plan of conversion and reorganization, the members of K-Fed Mutual Holding Company will also be approving the merger of K-Fed Mutual Holding Company into K-Fed Bancorp. The affirmative vote of the holders of at least two-thirds of the outstanding shares of common stock of K-Fed Bancorp and the affirmative vote of the holders of a majority of the outstanding shares of common stock of K-Fed Bancorp held by the public stockholders of K-Fed Bancorp are also required to approve the plan of conversion and reorganization. The plan of conversion and reorganization also must be approved by the Office of Thrift Supervision, which has given its conditional approval.

Share Exchange Ratio for Current Stockholders

Office of Thrift Supervision regulations provide that in a conversion of a mutual holding company to fully stock form, the public stockholders will be entitled to exchange their shares for common stock of the new holding company, provided that the mutual holding company demonstrates to the satisfaction of the Office of Thrift Supervision that the basis for the exchange is fair and reasonable. At the completion of the conversion, each publicly held share of K-Fed Bancorp common stock will be automatically converted into the right to receive a number of shares of Kaiser Federal Financial Group, Inc. common stock. The number of shares of common stock will be determined pursuant to the exchange ratio, which ensures that the public stockholders will own the same percentage of common stock in Kaiser Federal Financial Group, Inc. after the conversion as they held in K-Fed Bancorp immediately prior to the conversion, exclusive of their purchase of additional shares of common stock in the offering and their receipt of cash in lieu of fractional exchange shares. The exchange ratio will not depend on the market value of Kaiser Federal Financial Group, Inc. common stock. The exchange ratio will be based on the percentage of K-Fed Bancorp common stock held by the public, the independent valuation of Kaiser Federal Financial Group, Inc. prepared by RP Financial, LC. and the number of shares of common stock issued in the offering. The exchange ratio is expected to range from approximately 0.7673 exchange shares for each publicly held share of K-Fed Bancorp at the minimum of the offering range to 1.1939 exchange shares for each publicly held share of K-Fed Bancorp at the adjusted maximum of the offering range.

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The following table shows how the exchange ratio will adjust, based on the number of shares of common stock issued in the offering. The table also shows how many shares of Kaiser Federal Financial Group, Inc. a hypothetical owner of K-Fed Bancorp common stock would receive in the exchange for 100 shares of K-Fed Bancorp common stock owned at the completion of the conversion, depending on the number of shares issued in the offering.

	Shares to be Sold in This Offering					Shares of Kaiser Federal Financial Group, Inc. to be Issued for Shares of K- Fed Bancorp					Total Shares of Common Stock to be Issued in Conversion and Offering		Exchange Ratio		Equivalent Value of Shares Based Upon Offering Price (1)		Equivalent Pro Forma Book Value Per Exchanged Share (2)		New Shares to be Received for 100 Existing Shares
	Amount		Percent			Amount		Percent					Exchange Ratio		Equivalent Value of Shares Based Upon Offering Price (1)		Equivalent Pro Forma Book Value Per Exchanged Share (2)		New Shares to be Received for 100 Existing Shares

Minimum		6,800,000		66.7	%		3,399,002		33.3	%		10,199,002		0.7673	$	7.67	$	11.30		76
Midpoint		8,000,000		66.7			3,998,826		33.3			11,998,826		0.9028		9.03		12.08		90
Maximum		9,200,000		66.7			4,598,650		33.3			13,798,650		1.0382		10.38		12.85		103
15% above Maximum		10,580,000		66.7			5,288,448		33.3			15,868,448		1.1939		11.94		13.75		119

(1)	Represents the value of shares of Kaiser Federal Financial Group, Inc. common stock to be received in the conversion by a holder of one share of K-Fed Bancorp, pursuant to the exchange ratio, based upon the $10.00 per share offering price.

(2)	Represents the pro forma book value per share at each level of the offering range multiplied by the respective exchange ratio.

Options to purchase shares of K-Fed Bancorp common stock that are outstanding immediately prior to the completion of the conversion will be converted into options to purchase shares of Kaiser Federal Financial Group, Inc. common stock, with the number of shares subject to the option and the exercise price per share to be adjusted based upon the exchange ratio. The aggregate exercise price, term and vesting period of the options will remain unchanged.

Exchange of Existing Stockholders’ Stock Certificates

The conversion of existing outstanding shares of K-Fed Bancorp common stock into the right to receive shares of Kaiser Federal Financial Group, Inc. common stock will occur automatically at the completion of the conversion. As soon as practicable after the completion of the conversion, our exchange agent will send a transmittal form to each public stockholder of K-Fed Bancorp who holds stock certificates. The transmittal forms will contain instructions on how to exchange stock certificates of K-Fed Bancorp common stock for stock certificates of Kaiser Federal Financial Group, Inc. common stock. We expect that stock certificates evidencing shares of Kaiser Federal Financial Group, Inc. common stock will be distributed within five business days after the exchange agent receives properly executed transmittal forms, K-Fed Bancorp stock certificates and other required documents. Shares held by public stockholders in street name (such as in a brokerage account) will be exchanged automatically upon the completion of the conversion; no transmittal forms will be mailed relating to these shares.

No fractional shares of Kaiser Federal Financial Group, Inc. common stock will be issued to any public stockholder of K-Fed Bancorp when the conversion is completed. For each fractional share that would otherwise be issued to a stockholder who holds a stock certificate, we will pay by check an amount equal to the product obtained by multiplying the fractional share interest to which the holder would otherwise be entitled by the $10.00 offering purchase price per share. Payment for fractional shares will be made as soon as practicable after the receipt by the exchange agent of the transmittal forms and the surrendered K-Fed Bancorp stock certificates. If your shares of common stock are held in street name, you will automatically receive cash in lieu of fractional shares in your account.

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You should not forward your stock certificates until you have received transmittal forms, which will include forwarding instructions. After the conversion, stockholders will not receive shares of Kaiser Federal Financial Group, Inc. common stock and will not be paid dividends on the shares of Kaiser Federal Financial Group, Inc. common stock until existing certificates representing shares of K-Fed Bancorp common stock are surrendered for exchange in compliance with the terms of the transmittal form. When stockholders surrender their certificates, any unpaid dividends will be paid without interest. For all other purposes, however, each certificate that represents shares of K-Fed Bancorp common stock outstanding at the effective date of the conversion will be considered to evidence ownership of shares of Kaiser Federal Financial Group, Inc. common stock into which those shares have been converted by virtue of the conversion.

If a certificate for K-Fed Bancorp common stock has been lost, stolen or destroyed, our exchange agent will issue a new stock certificate upon receipt of appropriate evidence as to the loss, theft or destruction of the certificate, appropriate evidence as to the ownership of the certificate by the claimant, and appropriate and customary indemnification, which is normally effected by the purchase of a bond from a surety company at the stockholder’s expense.

All shares of Kaiser Federal Financial Group, Inc. common stock that we issue in exchange for existing shares of K-Fed Bancorp common stock will be considered to have been issued in full satisfaction of all rights pertaining to such shares of common stock, subject, however, to our obligation to pay any dividends or make any other distributions with a record date prior to the effective date of the conversion that may have been declared by us on or prior to the effective date, and which remain unpaid at the effective date.

Effects of Conversion on Depositors, Borrowers and Members

Continuity. While the conversion is being accomplished, the normal business of Kaiser Federal Bank of accepting deposits and making loans will continue without interruption. Kaiser Federal Bank will continue to be a federally chartered savings bank and will continue to be regulated by the Office of Thrift Supervision. After the conversion, Kaiser Federal Bank will continue to offer existing services to depositors, borrowers and other customers. The directors serving K-Fed Bancorp at the time of the conversion will be the directors of Kaiser Federal Financial Group, Inc. after the conversion.

Effect on Deposit Accounts. Pursuant to the plan of conversion and reorganization, each depositor of Kaiser Federal Bank at the time of the conversion will automatically continue as a depositor after the conversion, and the deposit balance, interest rate and other terms of such deposit accounts will not change as a result of the conversion. Each such account will be insured by the Federal Deposit Insurance Corporation to the same extent as before the conversion. Depositors will continue to hold their existing certificates, passbooks and other evidences of their accounts.

Effect on Loans. No loan outstanding from Kaiser Federal Bank will be affected by the conversion, and the amount, interest rate, maturity and security for each loan will remain as it was contractually fixed prior to the conversion.

Effect on Voting Rights of Members. At present, all depositors of Kaiser Federal Bank are members of, and have voting rights in, K-Fed Mutual Holding Company as to all matters requiring membership action. Upon completion of the conversion, depositors will cease to be members of K-Fed Mutual Holding Company and will no longer have voting rights. Upon completion of the conversion, all voting rights in Kaiser Federal Bank will be vested in Kaiser Federal Financial Group, Inc. as the sole stockholder of Kaiser Federal Bank. The stockholders of Kaiser Federal Financial Group, Inc. will possess exclusive voting rights with respect to Kaiser Federal Financial Group, Inc. common stock.

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Tax Effects. We will receive an opinion of counsel or tax advisor with regard to federal and state income tax consequences of the conversion to the effect that the conversion will not be a taxable transaction for federal or state income tax purposes to K-Fed Mutual Holding Company, K-Fed Bancorp, the public stockholders of K-Fed Bancorp (except for cash paid for fractional shares), members of K-Fed Mutual Holding Company, eligible account holders, supplemental eligible account holders, or Kaiser Federal Bank. See “—Material Income Tax Consequences.”

Effect on Liquidation Rights. Each depositor in Kaiser Federal Bank has both a deposit account in Kaiser Federal Bank and a pro rata ownership interest in the net worth of K-Fed Mutual Holding Company based upon the deposit balance in his or her account. This ownership interest is tied to the depositor’s account and has no tangible market value separate from the deposit account. This interest may only be realized in the event of a complete liquidation of K-Fed Mutual Holding Company and Kaiser Federal Bank. Any depositor who opens a deposit account obtains a pro rata ownership interest in K-Fed Mutual Holding Company without any additional payment beyond the amount of the deposit. A depositor who reduces or closes his or her account receives a portion or all of the balance in the deposit account but nothing for his or her ownership interest in the net worth of K-Fed Mutual Holding Company, which is lost to the extent that the balance in the account is reduced or closed.

Consequently, depositors in a stock subsidiary of a mutual holding company normally have no way of realizing the value of their ownership interest, which has realizable value only in the unlikely event that K-Fed Mutual Holding Company and Kaiser Federal Bank are liquidated. If this occurs, the depositors of record at that time, as owners, would share pro rata in any residual surplus and reserves of K-Fed Mutual Holding Company after other claims, including claims of depositors to the amounts of their deposits, are paid.

Under the plan of conversion, however, depositors will receive rights in liquidation accounts maintained by Kaiser Federal Financial Group, Inc. and Kaiser Federal Bank representing the amount of (i) K-Fed Mutual Holding Company’s ownership interest in K-Fed Bancorp’s total stockholders’ equity as of the date of the latest statement of financial condition used in this prospectus plus (ii) the value of the net assets of K-Fed Mutual Holding Company as of the date of the latest statement of financial condition of K-Fed Mutual Holding Company prior to the consummation of the conversion (excluding its ownership of K-Fed Bancorp). Kaiser Federal Financial Group, Inc. and Kaiser Federal Bank shall continue to hold the liquidation accounts for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders who continue to maintain deposits in Kaiser Federal Bank. The liquidation accounts are also designed to provide payments to depositors of their liquidation interests in the event of a liquidation of Kaiser Federal Financial Group, Inc. and Kaiser Federal Bank or of Kaiser Federal Bank. The liquidation account in Kaiser Federal Bank would be used only in the event that Kaiser Federal Financial Group, Inc. does not have sufficient assets to fund its obligations under its liquidation account. The total obligation of Kaiser Federal Financial Group, Inc. and Kaiser Federal Bank under their respective liquidation accounts will never exceed the dollar amount of Kaiser Federal Financial Group, Inc.’s liquidation account as adjusted from time to time pursuant to the plan of conversion and Office of Thrift Supervision Regulations. See “—Liquidation Rights.”

Stock Pricing and Number of Shares to be Issued

The plan of conversion and reorganization and federal regulations require that the aggregate purchase price of the common stock sold in the offering must be based on the appraised pro forma market value of the common stock, as determined by an independent valuation. We have retained RP Financial, LC. to prepare an independent valuation appraisal. For its services in preparing the initial valuation, RP Financial, LC. will receive a fee of $100,000, and will reimburse RP Financial, LC. for reasonable out-of-pocket expenses, and an additional $10,000 for each valuation update, as necessary. We have agreed to indemnify RP Financial, LC. and its employees and affiliates against specified losses, including any losses in connection with claims under the federal securities laws, arising out of its services as independent appraiser, except where such liability results from RP Financial, LC.’s bad faith or negligence.

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The independent valuation was prepared by RP Financial, LC. in reliance upon the information contained in this prospectus, including the consolidated financial statements of K-Fed Bancorp. RP Financial, LC. also considered the following factors, among others:

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the present results and financial condition of K-Fed Bancorp and the projected results and financial condition of Kaiser Federal Financial Group, Inc.;

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the economic and demographic conditions in K-Fed Bancorp’s existing market area;

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certain historical, financial and other information relating to K-Fed Bancorp;

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a comparative evaluation of the operating and financial characteristics of K-Fed Bancorp with those of other similarly situated publicly traded savings institutions;

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the impact of the conversion and offering on K-Fed Bancorp’s stockholders’ equity and earnings potential;

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the proposed dividend policy of Kaiser Federal Financial Group, Inc.; and

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the trading market for securities of comparable institutions and general conditions in the market for such securities.

The independent valuation appraisal considered the pro forma impact of the offering. Consistent with the Office of Thrift Supervision appraisal guidelines, the appraisal applied three primary methodologies: (i) the pro forma price-to-book value approach applied to both reported book value and tangible book value; (ii) the pro forma price-to-earnings approach applied to reported and core earnings; and (iii) the pro forma price-to-assets approach. The market value ratios applied in the three methodologies were based upon the current market valuations of the peer group companies. RP Financial, LC. placed the greatest emphasis on the price-to-earnings and price-to-book approaches in estimating pro forma market value. RP Financial, LC. did not consider a pro forma price to assets approach to be meaningful in preparing the appraisal, as this approach is more meaningful when a company has low equity or earnings. The price to assets approach is less meaningful for a company like us, as we have equity in excess of regulatory capital requirements and positive reported and core earnings.

In applying each of the valuation methods, RP Financial considered adjustments to the pro forma market value based on a comparison of Kaiser Federal Financial Group, Inc. with the peer group. RP Financial made slight upward adjustments for financial condition, profitability, growth and viability of earnings and dividends and a slight downward adjustment for marketing of the issue. No adjustments were made for asset growth, primary market area, liquidity of the issue, management and effect of government regulations and regulatory reform.

RP Financial, LC. made a slight upward adjustment for financial condition based on the capital impact of the offering coupled with the enhanced liquidity position resulting from the cash received as a result of the offering. A slight upward adjustment was applied for profitability, growth and earnings in view of the potential for earnings growth as a result of the offering and owing to the future earnings as maturing borrowed funds are replaced with funds at lower current market interest rates. RP Financial, LC. made a slight upward adjustment for dividends due to our strong pro forma capital position in comparison to the peer group, which may enhance our ability to pay dividends. RP Financial, LC. also made a slight downward adjustment for marketing of the issue, following its analysis of trends in the market for thrift stocks, the market for new issues (including thrift conversions) and the local acquisition market for thrift stocks.

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Included in RP Financial, LC.’s independent valuation were certain assumptions as to the pro forma earnings of Kaiser Federal Financial Group, Inc. after the conversion that were utilized in determining the appraised value. These assumptions included estimated expenses, an assumed after-tax rate of return of 41.10% for the nine months ended March 31, 2010 on the net offering proceeds and purchases in the open market of 4% of the common stock issued in the offering by the stock-based benefit plan at the $10.00 per share purchase price. See “Pro Forma Data” for additional information concerning these assumptions. The use of different assumptions may yield different results.

The independent valuation states that as of May 7, 2010, the estimated pro forma market value of Kaiser Federal Financial Group, Inc. was $120.0 million. Based on Office of Thrift Supervision regulations, this market value forms the midpoint of a range with a minimum of $102.0 million and a maximum of $138.0 million. The board of directors decided to offer the shares of common stock for a price of $10.00 per share primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions. The aggregate offering price of the shares will be equal to the valuation range multiplied by the percentage of K-Fed Bancorp common stock owned by K-Fed Mutual Holding Company. The number of shares offered will be equal to the aggregate offering price of the shares divided by the price per share. Based on the valuation range, the percentage of K-Fed Bancorp common stock owned by K-Fed Mutual Holding Company and the $10.00 price per share, the minimum of the offering range will be 6,800,000 shares, the midpoint of the offering range will be 8,000,000 shares and the maximum of the offering range will be 9,200,000 shares.

The board of directors of Kaiser Federal Financial Group, Inc. reviewed the independent valuation and, in particular, considered the following:

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K-Fed Bancorp’s financial condition and results of operations;

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a comparison of financial performance ratios of K-Fed Bancorp to those of other financial institutions of similar size;

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market conditions generally and in particular for financial institutions; and

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the historical trading price of the publicly held shares of K-Fed Bancorp common stock.

All of these factors are set forth in the independent valuation. The board of directors also reviewed the methodology and the assumptions used by RP Financial, LC. in preparing the independent valuation and believes that such assumptions were reasonable. The offering range may be amended with the approval of the Office of Thrift Supervision, if required, as a result of subsequent developments in the financial condition of K-Fed Bancorp or Kaiser Federal Bank or market conditions generally. In the event the independent valuation is updated to amend the pro forma market value of Kaiser Federal Financial Group, Inc. to less than $102.0 million or more than $158.7 million, the appraisal will be filed with the Securities and Exchange Commission by a post-effective amendment to Kaiser Federal Financial Group, Inc.’s registration statement.

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The following table presents a summary of selected pricing ratios for the peer group companies and Kaiser Federal Financial Group, Inc. (on a pro forma basis) based on annual earnings and other information as of and for the twelve months ended March 31, 2010, and stock price information for the peer group companies as of May 7, 2010, as reflected in the appraisal report. Compared to the average pricing of the peer group, our pro forma pricing ratios at the midpoint of the offering range indicated a discount of 8.3% on a price-to-book value basis, a discount of 9.7% on a price-to-tangible book value basis and a premium of 142.5% on a price-to-earnings basis. Our board of directors, in reviewing and approving the appraisal, considered the range of price-to-earnings multiples and the range of price-to-book value and price-to-tangible book value ratios at the different amounts of shares to be sold in the offering The appraisal did not consider one valuation approach to be more important than the other. The estimated appraised value and the resulting premium/discount took into consideration the potential financial impact of the conversion and offering as well as the trading price of K-Fed Bancorp’s common stock. The closing price of the common stock was $____ per share on ____________, 2010, the last trading day immediately preceding the announcement of the conversion, and $9.75 per share on May 7, 2010, the effective date of the appraisal.

	Price-to-earnings Multiple			Price-to-book value ratio			Price-to-tangible book value ratio
Kaiser Federal Financial Group, Inc. (on a pro forma basis, assuming completion of the conversion)
Adjusted Maximum		52.10	x		86.81	%		88.81	%
Maximum		46.40	x		80.78	%		82.71	%
Midpoint		41.20	x		74.74	%		76.69	%
Minimum		35.79	x		67.93	%		69.83	%

Valuation of peer group companies, all of which are fully converted (on an historical basis)
Averages		16.99	x(1)		81.47	%		84.91	%
Medians		11.84	x(1)		77.80	%		83.60	%

(1)	Only 4 out of a total of 10 peer group companies had meaningful earnings multiples.

The independent valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing our shares of common stock. RP Financial, LC. did not independently verify our consolidated financial statements and other information that we provided to them, nor did RP Financial, LC. independently value our assets or liabilities. The independent valuation considers Kaiser Federal Bank as a going concern and should not be considered as an indication of the liquidation value of Kaiser Federal Bank. Moreover, because the valuation is necessarily based upon estimates and projections of a number of matters, all of which may change from time to time, no assurance can be given that persons purchasing our common stock in the offering will thereafter be able to sell their shares at prices at or above the $10.00 price per share.

Following commencement of the subscription offering, the maximum of the valuation range may be increased by up to 15%, or up to $158.7 million, without resoliciting subscribers, which will result in a corresponding increase of up to 15% in the maximum of the offering range to up to 10,580,000 shares, to reflect changes in the market and financial conditions or demand for the shares. We will not decrease the minimum of the valuation range and the minimum of the offering range without a resolicitation of subscribers. The subscription price of $10.00 per share will remain fixed. See “—Additional Limitations on Common Stock Purchases” as to the method of distribution of additional shares to be issued in the event of an increase in the offering range of up to 10,580,000 shares.

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If the update to the independent valuation at the conclusion of the offering results in an increase in the maximum of the valuation range to more than $158.7 million and a corresponding increase in the offering range to more than 10,580,000 shares, or a decrease in the minimum of the valuation range to less than $102.0 million and a corresponding decrease in the offering range to fewer than 6,800,000 shares, then we will promptly return with interest at 0.25% all funds previously delivered to us to purchase shares of common stock in the subscription and community offerings and cancel deposit account withdrawal authorizations and, after consulting with the Office of Thrift Supervision, we may terminate the plan of conversion and reorganization. Alternatively, we may establish a new offering range, extend the offering period and commence a resolicitation of purchasers or take other actions as permitted by the Office of Thrift Supervision in order to complete the offering. In the event that we extend the offering and conduct a resolicitation, purchasers would have the opportunity to maintain, change or cancel their stock orders within a specified period. If a purchaser does not respond during the period, his or her stock order will be canceled and payment will be returned promptly, with interest at Kaiser Federal Bank’s passbook savings rate, and deposit account withdrawal authorizations will be canceled. Any single offering extension will not exceed 90 days; aggregate extensions may not conclude beyond [Extension date #2], which is two years after the special meeting of members to vote on the conversion.

An increase in the number of shares to be issued in the offering would decrease both a subscriber’s ownership interest and Kaiser Federal Financial Group, Inc.’s pro forma earnings and stockholders’ equity on a per share basis while increasing pro forma earnings and stockholders’ equity on an aggregate basis. A decrease in the number of shares to be issued in the offering would increase both a subscriber’s ownership interest and Kaiser Federal Financial Group, Inc.’s pro forma earnings and stockholders’ equity on a per share basis, while decreasing pro forma earnings and stockholders’ equity on an aggregate basis. For a presentation of the effects of these changes, see “Pro Forma Data.”

Copies of the independent valuation appraisal report of RP Financial, LC. and the detailed memorandum setting forth the method and assumptions used in the appraisal report are available for inspection at the main office of Kaiser Federal Bank and as specified under “Where You Can Find Additional Information.”

Subscription Offering and Subscription Rights

In accordance with the plan of conversion and reorganization, rights to subscribe for shares of common stock in the subscription offering have been granted in the following descending order of priority. The filling of all subscriptions that we receive will depend on the availability of common stock after satisfaction of all subscriptions of all persons having prior rights in the subscription offering and to the maximum, minimum and overall purchase and ownership limitations set forth in the plan of conversion and reorganization and as described below under “—Additional Limitations on Common Stock Purchases.”

Priority 1: Eligible Account Holders. Each Kaiser Federal Bank depositor with aggregate deposit account balances of $50.00 or more (a “Qualifying Deposit”) at the close of business on March 31, 2009 (an “Eligible Account Holder”) will receive, without payment therefor, nontransferable subscription rights to purchase up to $500,000 (50,000 shares) of our common stock, subject to the overall purchase limitations. See “—Additional Limitations on Common Stock Purchases.” If there are not sufficient shares available to satisfy all subscriptions, shares will first be allocated so as to permit each Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares or the number of shares for which he or she subscribed. Thereafter, any remaining shares will be allocated to each Eligible Account Holder whose subscription remains unfilled in the proportion that the amount of his or her Qualifying Deposit bears to the total amount of Qualifying Deposits of all subscribing Eligible Account Holders whose subscriptions remain unfilled. If an amount so allocated exceeds the amount subscribed for by any one or more Eligible Account Holders, the excess shall be reallocated among those Eligible Account Holders whose subscriptions are not fully satisfied until all available shares have been allocated.

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To ensure proper allocation of our shares of common stock, each Eligible Account Holder must list on his or her stock order form all deposit accounts in which he or she has an ownership interest on March 31, 2009. In the event of oversubscription, failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed. In the event of an oversubscription, the subscription rights of Eligible Account Holders who are also directors or executive officers of K-Fed Bancorp or their associates will be subordinated to the subscription rights of other Eligible Account Holders to the extent attributable to their increased deposits in the 12 months preceding March 31, 2009.

Priority 2: Tax-Qualified Plans. Our tax-qualified employee plans, including our employee stock ownership plan and 401(k) plan, will receive, without payment therefor, nontransferable subscription rights to purchase in the aggregate up to 10% of the shares of common stock sold in the offering, although our employee stock ownership plan intends to purchase 6% of the shares of common stock sold in the offering. If market conditions warrant, in the judgment of its trustees, the employee stock ownership plan may instead elect to purchase shares in the open market following the completion of the conversion. The amount of the subscription requests by the 401(k) plan will be determined by its participants, who will have the right to invest all or a portion of their 401(k) plan accounts in our common stock, subject to the maximum purchase limitations. However, to comply with the limitations applicable to our tax-qualified employee plans, our 401(k) plan may purchase no more than 6% of the shares of common stock sold in the offering.

Priority 3: Supplemental Eligible Account Holders. To the extent that there are sufficient shares of common stock remaining after satisfaction of subscriptions by Eligible Account Holders and our tax-qualified employee stock benefit plans, each Kaiser Federal Bank depositor with a Qualifying Deposit at the close of business on [Supplemental Record Date] who is not an Eligible Account Holder (“Supplemental Eligible Account Holder”) will receive, without payment therefor, nontransferable subscription rights to purchase up to $500,000 (50,000 shares) of common stock, subject to the overall purchase limitations. See “—Additional Limitations on Common Stock Purchases.” If there are not sufficient shares available to satisfy all subscriptions, shares will be allocated so as to permit each Supplemental Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares of common stock or the number of shares for which he or she subscribed. Thereafter, unallocated shares will be allocated to each Supplemental Eligible Account Holder whose subscription remains unfilled in the proportion that the amount of his or her Qualifying Deposit bears to the total amount of Qualifying Deposits of all Supplemental Eligible Account Holders whose subscriptions remain unfilled.

To ensure proper allocation of common stock, each Supplemental Eligible Account Holder must list on the stock order form all deposit accounts in which he or she has an ownership interest at [Supplemental Record Date]. In the event of oversubscription, failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed.

Priority 4: Other Members. To the extent that there are shares of common stock remaining after satisfaction of subscriptions by Eligible Account Holders, our tax-qualified employee stock benefit plans, and Supplemental Eligible Account Holders, each depositor of Kaiser Federal Bank as of the close of business on [Member Record Date], who is not an Eligible Account Holder or Supplemental Eligible Account Holder (“Other Members”) will receive, without payment therefor, nontransferable subscription rights to purchase up to $500,000 (50,000 shares) of common stock, subject to the overall purchase limitations. See “—Additional Limitations on Common Stock Purchases.” If there are not sufficient shares available to satisfy all subscriptions, shares will be allocated so as to permit each Other Member to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares of common stock or the number of shares for which he or she subscribed. Thereafter, available shares will be allocated in the proportion that the amount of the subscription of each Other Member bears to the total amount of the subscriptions of all Other Members whose subscriptions remain unsatisfied.

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To ensure proper allocation of common stock, each Other Member must list on the stock order form all deposit accounts in which he or she had an ownership interest at [Member Record Date]. In the event of oversubscription, failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed.

Expiration Date. The subscription offering will expire at 2:00 p.m., Pacific Time, on [expiration date], unless extended by us for up to 45 days or such additional periods with the approval of the Office of Thrift Supervision, if necessary. Subscription rights will expire whether or not each eligible depositor or borrower can be located. We may decide to extend the expiration date of the subscription offering for any reason, whether or not subscriptions have been received for shares at the minimum, midpoint or maximum of the offering range. Subscription rights which have not been exercised prior to the expiration date will become void.

We will not execute orders until at least the minimum number of shares of common stock have been sold in the offering. If at least 6,800,000 shares have not been sold in the offering by [Extension date #1] and the Office of Thrift Supervision has not consented to an extension, all funds delivered to us to purchase shares of common stock in the offering will be returned promptly, with interest at 0.25% for funds received in the subscription and community offerings, and all deposit account withdrawal authorizations will be canceled. If an extension beyond [Extension date #1] is granted by the Office of Thrift Supervision, we will resolicit purchasers in the offering as described under “—Procedures for Purchasing Shares—Expiration Date.”

Community Offering

To the extent that shares of common stock remain available for purchase after satisfaction of all subscriptions of Eligible Account Holders, our tax-qualified employee stock benefit plans, Supplemental Eligible Account Holders and Other Members, we expect to offer shares pursuant to the plan of conversion and reorganization to members of the general public in a community offering. Shares would be offered with the following preferences:

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Natural persons (including trusts of natural persons) residing in the California counties of Los Angeles, Orange, San Bernardino, Riverside and Santa Clara;

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K-Fed Bancorp’s public stockholders as of [Stockholder Record Date]; and

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Other members of the general public.

Subscribers in the community offering may purchase up to $500,000 (50,000 shares) of common stock, subject to the overall purchase limitations. See “—Additional Limitations on Common Stock Purchases.” The minimum purchase is 25 shares. The opportunity to purchase shares of common stock in the community offering category is subject to our right, in our sole discretion, to accept or reject any such orders in whole or in part either at the time of receipt of an order or as soon as practicable following the expiration date of the offering.

If we do not have sufficient shares of common stock available to fill the orders of natural persons (including trusts of natural persons) residing in the California counties of Los Angeles, Orange, San Bernardino, Riverside and Santa Clara, we will allocate the available shares among those persons in a manner that permits each of them, to the extent possible, to purchase the lesser of 100 shares or the number of shares subscribed for by such person. Thereafter, unallocated shares will be allocated among natural persons residing in those counties whose orders remain unsatisfied on an equal number of shares basis per order. If oversubscription occurs due to the orders of public stockholders of K-Fed Bancorp or members of the general public, the allocation procedures described above will apply to the stock orders of such persons. In connection with the allocation process, orders received for shares of common stock in the community offering will first be filled up to a maximum of 2% of the shares sold in the offering, and thereafter any remaining shares will be allocated on an equal number of shares basis per order until all shares have been allocated.

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The term “residing” or “resident” as used in this prospectus means any person who occupies a dwelling within the California counties of Los Angeles, Orange, San Bernardino, Riverside and Santa Clara, has a present intent to remain within this community for a period of time, and manifests the genuineness of that intent by establishing an ongoing physical presence within the community, together with an indication that this presence within the community is something other than merely transitory in nature. We may utilize deposit or loan records or other evidence provided to us to decide whether a person is a resident. In all cases, however, the determination shall be in our sole discretion.

Expiration Date. The community offering may begin during or after the subscription offering, and is currently expected to terminate at the same time as the subscription offering, and must terminate no more than 45 days following the subscription offering, unless extended. Kaiser Federal Financial Group, Inc. may decide to extend the community offering for any reason and is not required to give purchasers notice of any such extension unless such period extends beyond [Extension date #1], in which event we will resolicit purchasers.

Syndicated Community Offering

As a final step in the conversion, the plan of conversion and reorganization provides that, if feasible, all shares of common stock not purchased in the subscription offering and community offering, if any, may be offered for sale to selected members of the general public in a syndicated community offering. Keefe, Bruyette & Woods, Inc. as agent of Kaiser Federal Financial Group, Inc. will seek to form a syndicated of registered broker-dealers to assist in the sale of the common stock on a best efforts basis in the syndicated community offering. We expect that the syndicated community offering will begin as soon as practicable after termination of the subscription offering and the community offering, if any. We, in our sole discretion, have the right to reject orders, in whole or in part, received in the syndicated community offering. Neither Keefe, Bruyette & Woods, Inc. nor any registered broker-dealer shall have any obligation to take or purchase any shares of common stock in the syndicated community offering.

The price at which common stock is sold in the syndicated community offering will be the same price at which shares are offered and sold in the subscription offering and community offering. No person may purchase more than $500,000 (50,000 shares) of common stock in the syndicated community offering, subject to the maximum purchase limitations. See “—Additional Limitations on Common Stock Purchases.” In connection with the allocation process, unless the Office of Thrift Supervision permits otherwise, orders received for shares of common stock in the syndicated community offering will first be filled up to a maximum of 2% of the shares sold in the offering, and thereafter any remaining shares will be allocated on an equal number of shares basis per order until all shares have been allocated.

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If a syndicated community offering is held, Keefe, Bruyette & Woods, Inc. will serve as sole book running manager. In such capacity, Keefe, Bruyette & Woods, Inc. may form a syndicate of other broker-dealers who are Financial Industry Regulatory Authority member firms. Neither Keefe, Bruyette & Woods, Inc. nor any registered broker-dealer will have any obligation to take or purchase any shares of the common stock in the syndicated community offering. The syndicated community offering will be conducted in accordance with certain Securities and Exchange Commission rules applicable to best efforts offerings. Under these rules, Keefe, Bruyette & Woods, Inc. or the other broker-dealers participating in the syndicated community offering generally will accept payment for shares of common stock to be purchased in the syndicated community offering through a “sweep” arrangement under which a customer’s brokerage account at the applicable participating broker-dealer will be debited in the amount of the purchase price for the shares of common stock that such customer wishes to purchase in the syndicated community offering on the settlement date. Customers who authorize participating broker-dealers to debit their brokerage accounts are required to have the funds for the payment in their accounts on, but not before, the settlement date which will only occur if the minimum of the offering range is met. Customers who do not wish to authorize participating broker-dealers to debit their brokerage accounts will not be permitted to purchase shares of common stock in the syndicated community offering. Customers without brokerage accounts will not be able to participate in the syndicated community offering. Institutional investors will pay Keefe, Bruyette & Woods, Inc., in its capacity as sole book running manager, for shares purchased in the syndicated community offering on the settlement date through the services of the Depository Trust Company on a delivery versus payment basis. The closing of the syndicated community offering is subject to conditions set forth in an agency agreement among Kaiser Federal Financial Group, Inc., K-Fed Bancorp, K-Fed Mutual Holding Company and Kaiser Federal Bank on one hand and Keefe, Bruyette & Woods, Inc. on the other hand. If and when all the conditions for the closing are met, funds for common stock sold in the syndicated community offering, less fees and commissions payable by us, will be delivered promptly to us. If the offering is consummated, but some or all of an interested investor’s funds are not accepted by us, those funds will be returned to the interested investor promptly after closing, without interest. If the offering is not consummated, funds in the account will be returned promptly, without interest, to the potential investor. Normal customer ticketing will be used for order placement. In the syndicated community offering, order forms will not be used.

The syndicated community offering will be completed within 45 days after the termination of the subscription offering, unless extended by Kaiser Federal Bank with the approval of the Office of Thrift Supervision.

If for any reason we cannot effect a syndicated community offering of shares of common stock not purchased in the subscription and community offerings, or in the event that there is an insignificant number of shares remaining unsold after the subscription, community and syndicated community offerings, we will try to make other arrangements for the sale of unsubscribed shares, if possible. The Office of Thrift Supervision must approve any such arrangements.

Additional Limitations on Common Stock Purchases

The plan of conversion and reorganization includes the following additional limitations on the number of shares of common stock that may be purchased in the offering:

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No person may purchase fewer than 25 shares of common stock;

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Tax qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan, may purchase in the aggregate up to 10% of the shares of common stock issued in the offering, including shares issued in the event of an increase in the offering range of up to 15%;

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Except for the employee stock ownership plan, as described above, no person or entity, together with associates or persons acting in concert with such person or entity, may purchase more than $1,000,000 (100,000 shares) of common stock in all categories of the offering combined;

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Current stockholders of K-Fed Bancorp are subject to an ownership limitation. As previously described, current stockholders of K-Fed Bancorp will receive shares of Kaiser Federal Financial Group, Inc. common stock in exchange for their existing shares of K-Fed Bancorp common stock. The number of shares of common stock that a stockholder may purchase in the offering, together with associates or persons acting in concert with such stockholder, when combined with the shares that the stockholder and his or her associates will receive in exchange for existing K-Fed Bancorp common stock, may not exceed 5% of the shares of common stock of Kaiser Federal Financial Group, Inc. to be issued and outstanding at the completion of the conversion; and

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The maximum number of shares of common stock that may be purchased in all categories of the offering by executive officers and directors of Kaiser Federal Bank and their associates, in the aggregate, when combined with shares of common stock issued in exchange for existing shares, may not exceed 25% of the total shares issued in the conversion.

Depending upon market or financial conditions, our board of directors, with the approval of the Office of Thrift Supervision and without further approval of members of K-Fed Mutual Holding Company, may decrease or increase the purchase and ownership limitations. If a purchase limitation is increased, subscribers in the subscription offering who ordered the maximum amount, and who indicated on their stock order form a desire to be resolicited, will be given the opportunity to increase their orders up to the then applicable limit. The effect of this type of resolicitation will be an increase in the number of shares of common stock owned by persons who choose to increase their orders. In the event that the maximum purchase limitation is increased to 5% of the shares sold in the offering, such limitation may be further increased to 9.99%, provided that orders for shares of common stock exceeding 5% of the shares sold in the offering shall not exceed in the aggregate 10% of the total shares sold in the offering.

In the event of an increase in the offering range of up to 10,580,000 shares of common stock, shares will be allocated in the following order of priority in accordance with the plan of conversion and reorganization:

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to fill the subscriptions of our tax-qualified employee benefit plans, including the employee stock ownership plan, for up to 10% of the total number of shares of common stock issued in the offering;

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in the event that there is an oversubscription at the Eligible Account Holder, Supplemental Eligible Account Holder or Other Member levels, to fill unfilled subscriptions of these subscribers according to their respective priorities; and

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to fill unfilled subscriptions in the community offering, with preference given first to natural persons (including trusts of natural persons) residing in California counties of Los Angeles, Orange, San Bernardino, Riverside and Santa Clara, then to K-Fed Bancorp’s public stockholders as of [Stockholder Record Date] and then to members of the general public.

The term “associate” of a person means:

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any corporation or organization, other than K-Fed Bancorp, Kaiser Federal Bank or a majority-owned subsidiary of Kaiser Federal Bank, of which the person is a senior officer, partner or 10% beneficial stockholder;

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any trust or other estate in which the person has a substantial beneficial interest or serves as a trustee or in a similar fiduciary capacity; provided, however, it does not include any employee stock benefit plan in which the person has a substantial beneficial interest or serves as trustee or in a similar fiduciary capacity; and

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any blood or marriage relative of the person, who either has the same home as the person or who is a director or officer of K-Fed Bancorp or Kaiser Federal Bank.

The term “acting in concert” means:

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knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or

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a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise.

A person or company that acts in concert with another person or company (“other party”) will also be deemed to be acting in concert with any person or company who is also acting in concert with that other party, except that any tax-qualified employee stock benefit plan will not be deemed to be acting in concert with its trustee or a person who serves in a similar capacity solely for the purpose of determining whether common stock held by the trustee and common stock held by the employee stock benefit plan will be aggregated.

We have the sole discretion to determine whether prospective purchasers are “associates” or “acting in concert.” Persons having the same address, and persons exercising subscription rights through qualifying deposits registered at the same address will be deemed to be acting in concert unless we determine otherwise.

Our directors are not treated as associates of each other solely because of their membership on the board of directors. Common stock purchased in the offering will be freely transferable except for shares purchased by directors and certain officers of Kaiser Federal Financial Group, Inc. or Kaiser Federal Bank and except as described below. Any purchases made by any associate of Kaiser Federal Financial Group, Inc. or Kaiser Federal Bank for the explicit purpose of meeting the minimum number of shares of common stock required to be sold in order to complete the offering shall be made for investment purposes only and not with a view toward redistribution. In addition, under Financial Industry Regulatory Authority guidelines, members of the Financial Industry Regulatory Authority and their associates are subject to certain restrictions on transfer of securities purchased in accordance with subscription rights and to certain reporting requirements upon purchase of these securities. For a further discussion of limitations on purchases of our shares of common stock at the time of conversion and thereafter, see “—Certain Restrictions on Purchase or Transfer of Our Shares after Conversion” and “Restrictions on Acquisition of Kaiser Federal Financial Group, Inc.”

Plan of Distribution; Selling Agent Compensation

We have engaged Keefe, Bruyette & Woods, Inc., a broker-dealer registered with the Financial Industry Regulatory Authority, as a selling agent in connection with the offering of our common stock. In its role as selling agent, Keefe, Bruyette & Woods, Inc., will:

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provide advice on the financial and securities market implications of the plan of conversion and reorganization and related corporate documents, including our business plan;

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assist in structuring our stock offering, including developing and assisting in implementing a market strategy for the stock offering;

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review all offering documents, including this prospectus, stock order forms and related offering materials (we are responsible for the preparation and filing of such documents);

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assist us in preparing for and scheduling meetings with potential investors and broker-dealers, as necessary;

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assist us in analyzing proposals from outside vendors retained in connection with the stock offering, including printers, transfer agents and appraisal firms;

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assist us in the drafting and distribution of press releases as required or appropriate in connection with the stock offering;

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meet with the board of directors and management to discuss any of these services; and

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provide such other financial advisory and investment banking services in connection with the stock offering as may be agreed upon by Keefe, Bruyette & Woods, Inc. and us.

For these services, Keefe, Bruyette & Woods, Inc. will receive a management fee of $50,000, payable in four consecutive monthly installments commencing May 2010, which will be credited against the success fees in the subscription and community offerings. A success fee of 1.0% of the aggregate dollar amount of the common stock sold in the subscription and community offerings will be paid to Keefe, Bruyette & Woods, Inc., each if the conversion is consummated, excluding shares purchased by our directors, officers and employees and members of their immediate families, our employee stock ownership plan and our tax-qualified or stock-based compensation or similar plans (except individual retirement accounts). In addition, Keefe, Bruyette & Woods, Inc. will not receive any fees for the exchange shares issued to current stockholders of K-Fed Bancorp as part of the conversion.

The plan of conversion and reorganization provides that, if necessary, all shares of common stock not purchased in the subscription offering and community offering may be offered for sale to the general public in a syndicated community offering. Keefe, Bruyette & Woods, Inc. as agent of Kaiser Federal Financial Group, Inc. will seek to form a syndicate of registered broker-dealers to assist in the sale of the common stock on a best efforts basis in the syndicated community offering. Neither Keefe, Bruyette & Woods, Inc. nor any registered broker-dealer will have any obligation to take or purchase any shares of common stock in the syndicated community offering. If there is a syndicated community offering, Keefe, Bruyette & Woods, Inc. will receive a management fee not to exceed 5.5% of the aggregate dollar amount of the common stock sold in the syndicated community offering. Of this amount, Keefe, Bruyette & Woods, Inc. will pass on to selected broker-dealers, who assist in the syndicated community offering, an amount competitive with gross underwriting discounts charged at such time for comparable amounts of stock sold at a comparable price per share in a similar market environment.

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We also will reimburse Keefe, Bruyette & Woods, Inc. for its reasonable out-of-pocket expenses associated with its marketing effort up to a maximum of $50,000. In addition, we will reimburse Keefe, Bruyette & Woods, Inc. for fees and expenses of its counsel not to exceed $100,000. If the plan of conversion and reorganization is terminated or if Keefe, Bruyette & Woods, Inc.’s engagement is terminated in accordance with the provisions of the agreement, Keefe, Bruyette & Woods, Inc. will only receive reimbursement of its reasonable out-of-pocket expenses and the portion of the management fee payable and will return any amounts paid or advanced by us in excess of these amounts. We will indemnify Keefe, Bruyette & Woods, Inc. against liabilities and expenses (including legal fees) related to or arising out of Keefe, Bruyette & Woods, Inc.’s engagement as our selling agent and performance of services as our selling agent.

We have also engaged Keefe, Bruyette & Woods, Inc. to act as our conversion agent in connection with the stock offering. In its role as conversion agent, Keefe, Bruyette & Woods, Inc. will, among other things:

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consolidate accounts and develop a central file;

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prepare proxy forms and proxy materials;

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tabulate proxies and ballots;

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act as inspector of election at the special meeting of members;

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assist us in establishing and managing the Stock Information Center;

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assist our financial printer with labeling of stock offering materials;

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process stock order forms and certification forms and produce daily reports and analysis;

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assist our transfer agent with the generation and mailing of stock certificates;

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advise us on interest and refund calculations; and

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create tax forms for interest reporting.

For these services, Keefe, Bruyette & Woods, Inc. will receive a fee of $75,000, and we have made an advance payment of $25,000 to Keefe, Bruyette & Woods, Inc. with respect to this fee. We also will reimburse Keefe, Bruyette & Woods, Inc. for its reasonable out-of-pocket expenses associated with its acting as conversion agent not to exceed $5,000. If the plan of conversion and reorganization is terminated or if Keefe, Bruyette & Woods, Inc.’s engagement is terminated in accordance with the provisions of the agreement, Keefe, Bruyette & Woods, Inc. will be entitled to the advance payment and also receive reimbursement of its reasonable out-of-pocket expenses. We will indemnify Keefe, Bruyette & Woods, Inc. against liabilities and expenses (including legal fees) related to or arising out of Keefe, Bruyette & Woods, Inc.’s engagement as our conversion agent and performance of services as our conversion agent.

Some of our directors and executive officers may participate in the solicitation of offers to purchase common stock. These persons will be reimbursed for their reasonable out-of-pocket expenses incurred in connection with the solicitation. Other regular employees of Kaiser Federal Bank may assist in the offering, but only in ministerial capacities, and may provide clerical work in effecting a sales transaction. No offers or sales may be made by tellers or at the teller counters. No sales activity will be conducted in a Kaiser Federal Bank banking office. Investment-related questions of prospective purchasers will be directed to executive officers or registered representatives of Keefe, Bruyette & Woods, Inc. Our other employees have been instructed not to solicit offers to purchase shares of common stock or provide advice regarding the purchase of common stock. We will rely on Rule 3a4-1 under the Securities Exchange Act of 1934, as amended, and sales of common stock will be conducted within the requirements of Rule 3a4-1, so as to permit officers, directors and employees to participate in the sale of common stock. None of our officers, directors or employees will be compensated in connection with their participation in the offering.

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Prospectus Delivery

To ensure that each purchaser receives a prospectus at least 48 hours before the expiration date of the offering in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, we may not mail a prospectus any later than five days prior to the expiration date or hand deliver any later than two days prior to the expiration date. Execution of a stock order form will confirm receipt of delivery in accordance with Rule 15c2-8. Order forms will only be distributed with or preceded by a prospectus.

In the syndicated community offering, a prospectus in electronic format may be made available on the Internet sites or through other online services maintained by Keefe, Bruyette & Woods, Inc. or one or more other members of the syndicate, or by their respective affiliates. In those cases, prospective investors may view offering terms online and, depending upon the syndicate member, prospective investors may be allowed to place orders online. The members of the syndicate may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made on the same basis as other allocations.

Other than the prospectus in electronic format, the information on the Internet sites referenced in the preceding paragraph and any information contained in any other Internet site maintained by any member of the syndicate is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or by Keefe, Bruyette & Woods, Inc. or any other member of the syndicate in its capacity as selling agent or syndicate member and should not be relied upon by investors.

Procedure for Purchasing Shares

Expiration Date. The subscription and community offerings will expire at 2:00 p.m., Pacific Time, on [expiration date], unless we extend one or both for up to 45 days, with the approval of the Office of Thrift Supervision, if required. This extension may be approved by us, in our sole discretion, without notice to purchasers in the offering. Any extension of the subscription and/or community offering beyond [Extension date #1] would require the Office of Thrift Supervision’s approval. If the offering is so extended, or if the offering range is decreased or is increased above the adjusted maximum of the offering range, we may conduct a resolicitation and subscribers would have the opportunity to maintain, change or cancel their stock orders within a specified period. If a subscriber does not respond during the period, his or her stock order will be canceled and payment will be returned promptly, with interest at Kaiser Federal Bank’s passbook savings rate, and deposit account withdrawal authorizations will be canceled.

We reserve the right in our sole discretion to terminate the offering at any time and for any reason, in which case we will cancel any deposit account withdrawal authorizations and promptly return all funds submitted, with interest at 0.25% from the date of receipt as described above.

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Use of Order Forms in the Subscription and Community Offerings. In order to purchase shares of common stock in the subscription and community offerings, you must properly complete an original stock order form and remit full payment. We are not required to accept orders submitted on photocopied or facsimiled order forms. All order forms must be received (not postmarked) prior to 2:00 p.m., Pacific Time, on [expiration date]. We are not required to accept order forms that are not received by that time, are not signed or are otherwise executed defectively or are received without full payment or without appropriate deposit account withdrawal instructions. We are not required to notify subscribers of incomplete or improperly executed order forms, and we have the right to waive or permit the correction of incomplete or improperly executed order forms. We do not represent, however, that we will do so and we have no affirmative duty to notify any prospective subscriber of any such defects. You may submit your order form and payment by mail using the stock order return envelope provided, or by overnight delivery to our Stock Information Center at the address noted on the stock order form. You may hand-deliver stock order forms to Kaiser Federal Bank’s home office, located at 1359 North Grand Avenue, Covina, California 91724. Hand-delivered stock order forms will only be accepted at this location. We will not accept stock order forms at our branch offices. Please do not mail stock order forms to Kaiser Federal Bank.

Once tendered, an order form cannot be modified or revoked without our consent. We reserve the absolute right, in our sole discretion, to reject orders received in the community offering, in whole or in part, at the time of receipt or at any time prior to completion of the offering. If you are ordering shares in the subscription offering, you must represent that you are purchasing shares for your own account and that you have no agreement or understanding with any person for the sale or transfer of the shares. We have the right to reject any order submitted in the offering by a person who we believe is making false representations or who we otherwise believe, either alone or acting in concert with others, is violating, evading, circumventing, or intends to violate, evade or circumvent the terms and conditions of the plan of conversion and reorganization. Our interpretation of the terms and conditions of the plan of conversion and reorganization and of the acceptability of the order forms will be final.

By signing the order form, you will be acknowledging that the common stock is not a deposit or savings account and is not federally insured or otherwise guaranteed by Kaiser Federal Bank or the federal government, and that you received a copy of this prospectus. However, signing the order form will not result in you waiving your rights under the Securities Act of 1933 or the Securities Exchange Act of 1934.

Payment for Shares. Payment for all shares of common stock will be required to accompany all completed order forms for the purchase to be valid. Payment for shares in the subscription and community offerings may be made by:

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personal check, bank check or money order, made payable to Kaiser Federal Financial Group, Inc.; or

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authorization of withdrawal from the types of Kaiser Federal Bank deposit accounts described on the stock order form.

Appropriate means for designating withdrawals from deposit accounts at Kaiser Federal Bank are provided on the order form. The funds designated must be available in the account(s) at the time the order form is received. A hold will be placed on these funds, making them unavailable to the depositor. Funds authorized for withdrawal will continue to earn interest within the account at the contract rate until the offering is completed, at which time the designated withdrawal will be made. Interest penalties for early withdrawal applicable to certificate accounts will not apply to withdrawals authorized for the purchase of shares of common stock; however, if a withdrawal results in a certificate account with a balance less than the applicable minimum balance requirement, the certificate will be canceled at the time of withdrawal without penalty and the remaining balance will earn interest at the current passbook rate subsequent to the withdrawal. In the case of payments made by personal check, these funds must be available in the account(s). Checks and money orders received in the subscription and community offerings will be immediately cashed and placed in a segregated account at Kaiser Federal Bank and will earn interest at 0.25% from the date payment is processed until the offering is completed or terminated.

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You may not remit cash, wire transfers, Kaiser Federal Bank line of credit checks or any type of third-party checks (including those payable to you and endorsed over to Kaiser Federal Financial Group, Inc.). You may not designate on your stock order form direct withdrawal from a Kaiser Federal Bank retirement account. See “—Using Individual Retirement Account Funds.” Additionally, you may not designate a direct withdrawal from Kaiser Federal Bank accounts with check-writing privileges. Please provide a check instead. If you request that we directly withdraw the funds, we reserve the right to interpret that as your authorization to treat those funds as if we had received a check for the designated amount, and we will immediately withdraw the amount from your checking account. If permitted by the Office of Thrift Supervision, in the event we resolicit large purchasers, as described above in “Additional Limitations on Common Stock Purchases,” such purchasers who wish to increase their purchases will not be able to use personal checks to pay for the additional shares.

Once we receive your executed stock order form, it may not be modified, amended or rescinded without our consent, unless the offering is not completed by [Extension date #1]. In such event, we will resolicit subscribers, and you will have the opportunity to maintain, change or cancel your order. If you do not provide us with a written indication of your intent, your funds will be returned to you, with interest.

Regulations prohibit Kaiser Federal Bank from lending funds or extending credit to any persons to purchase shares of common stock in the offering.

We shall have the right, in our sole discretion, to permit institutional investors to submit irrevocable orders together with the legally binding commitment for payment and to thereafter pay for the shares of common stock for which they subscribe in the community offering at any time prior to 48 hours before the completion of the conversion. This payment may be made by wire transfer.

If our employee stock ownership plan purchases shares in the offering, it will not be required to pay for such shares until completion of the offering, provided that there is a loan commitment from an unrelated financial institution or Kaiser Federal Financial Group, Inc. to lend to the employee stock ownership plan the necessary amount to fund the purchase.

Using Individual Retirement Account Funds. If you are interested in using funds in your individual retirement account or other retirement account to purchase shares of common stock, you must do so through a self-directed retirement account. By regulation, Kaiser Federal Bank’s retirement accounts are not self-directed, so they cannot be invested in our shares of common stock. Therefore, if you wish to use funds that are currently in a Kaiser Federal Bank retirement account, you may not designate on the order form that you wish funds to be withdrawn from the account for the purchase of common stock. The funds you wish to use for the purchase of common stock will instead have to be transferred to an independent trustee or custodian, such as a brokerage firm, offering self-directed retirement accounts. The purchase must be made through that account. If you do not have such an account, you will need to establish one before placing a stock order. An annual administrative fee may be payable to the independent trustee or custodian. There will be no early withdrawal or Internal Revenue Service interest penalties for these transfers. Individuals interested in using funds in an individual retirement account or any other retirement account, whether held at Kaiser Federal Bank or elsewhere, to purchase shares of common stock should contact our Stock Information Center for guidance as soon as possible, preferably at least two weeks prior to the [expiration date] offering deadline. Processing such transactions takes additional time, and whether such funds can be used may depend on limitations imposed by the institutions where such funds are currently held. We cannot guarantee that you will be able to use such funds.

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Delivery of Stock Certificates. Certificates representing shares of common stock sold in the subscription offering and community offering will be mailed to the certificate registration address noted by purchasers on the stock order form. Stock certificates will be sent to purchasers by first-class mail as soon as practicable after the completion of the conversion and stock offering. We expect trading in the stock to begin on the business day of or on the business day following the completion of the conversion and stock offering. It is possible that until certificates for the common stock are delivered to purchasers, purchasers might not be able to sell the shares of common stock that they ordered, even though the shares of common stock will have begun trading. Your ability to sell the shares of common stock before receiving your stock certificate will depend on arrangements you may make with a brokerage firm. If you are currently a stockholder of K-Fed Bancorp, see “—Exchange of Existing Stockholders’ Stock Certificates.”

Other Restrictions. Notwithstanding any other provision of the plan of conversion and reorganization, no person is entitled to purchase any shares of common stock to the extent the purchase would be illegal under any federal or state law or regulation, including state “blue sky” regulations, or would violate regulations or policies of the Financial Industry Regulatory Authority, particularly those regarding free riding and withholding. We may ask for an acceptable legal opinion from any purchaser as to the legality of his or her purchase and we may refuse to honor any purchase order if an opinion is not timely furnished. In addition, we are not required to offer shares of common stock to any person who resides in a foreign country, or in a State of the United States with respect to which any of the following apply:

(i)

a small number of persons otherwise eligible to subscribe for shares under the plan of conversion reside in such state;

(ii)

the issuance of subscription rights or the offer or sale of shares of common stock to such persons would require us, under the securities laws of such state, to register as a broker, dealer, salesman or agent or to register or otherwise qualify our securities for sale in such state; or

(iii)

such registration or qualification would be impracticable for reasons of cost or otherwise.

Restrictions on Transfer of Subscription Rights and Shares

Office of Thrift Supervision regulations prohibit any person with subscription rights, including the Eligible Account Holders, Supplemental Eligible Account Holders and Other Members, from transferring or entering into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the plan of conversion and reorganization or the shares of common stock to be issued upon their exercise. These rights may be exercised only by the person to whom they are granted and only for his or her account. When registering your stock purchase on the order form, you should not add the name(s) of persons who do not have subscription rights or who qualify only in a lower purchase priority than you do. Doing so may jeopardize your subscription rights. Each person exercising subscription rights will be required to certify that he or she is purchasing shares solely for his or her own account and that he or she has no agreement or understanding regarding the sale or transfer of such shares. The regulations also prohibit any person from offering or making an announcement of an offer or intent to make an offer to purchase subscription rights or shares of common stock to be issued upon their exercise prior to completion of the offering.

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We will pursue any and all legal and equitable remedies in the event we become aware of the transfer of subscription rights, and we will not honor orders that we believe involve the transfer of subscription rights.

Stock Information Center

Our banking office personnel may not, by law, assist with investment-related questions about the offering. If you have any questions regarding the conversion or offering, please call our Stock Information Center. The toll-free phone number is [Stock Information Number]. The Stock Information Center is open Monday through Friday between 10:00 a.m. and 4:00 p.m., Pacific Time. The Stock Information Center will be closed on weekends and bank holidays.

Liquidation Rights

Liquidation prior to the conversion. In the unlikely event that K-Fed Mutual Holding Company is liquidated prior to the conversion, all claims of creditors of K-Fed Mutual Holding Company would be paid first. Thereafter, if there were any assets of K-Fed Mutual Holding Company remaining, these assets would first be distributed to certain depositors of Kaiser Federal Bank under such depositors’ liquidation rights. The amount received by such depositors would be equal to their pro rata interest in the remaining value of K-Fed Mutual Holding Company after claims of creditors, based on the relative size of their deposit accounts.

Liquidation following the conversion. The plan of conversion and reorganization provides for the establishment, upon the completion of the conversion, of a liquidation account by Kaiser Federal Financial Group, Inc. for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders in an amount equal to (i) K-Fed Mutual Holding Company’s ownership interest in K-Fed Bancorp’s total stockholders’ equity as of the date of the latest statement of financial condition used in this prospectus plus (ii) the value of the net assets of K-Fed Mutual Holding Company as of the date of the latest statement of financial condition of K-Fed Mutual Holding Company prior to the consummation of the conversion (excluding its ownership of K-Fed Bancorp). The plan of conversion also provides for the establishment of a parallel liquidation account in Kaiser Federal Bank to support the Kaiser Federal Financial Group, Inc. liquidation account in the event Kaiser Federal Financial Group, Inc. does not have sufficient assets to fund its obligations under the Kaiser Federal Financial Group, Inc. liquidation account.

In the unlikely event that Kaiser Federal Bank were to liquidate after the conversion, all claims of creditors, including those of depositors, would be paid first. However, except with respect to the liquidation account to be established in K-Fed Bancorp, a depositor’s claim would be solely for the principal amount of his or her deposit accounts plus accrued interest. Depositors generally would not have an interest in the value of the assets of Kaiser Federal Bank or Kaiser Federal Financial Group, Inc. above that amount.

The liquidation account established by Kaiser Federal Financial Group, Inc. is designed to provide depositors a liquidation interest (exchanged for the liquidation interests such persons had in K-Fed Mutual Holding Company) after the conversion in the event of a liquidation of Kaiser Federal Financial Group, Inc. and Kaiser Federal Bank or a liquidation solely of Kaiser Federal Bank. Specifically, in the unlikely event that either (i) Kaiser Federal Bank or (ii) Kaiser Federal Financial Group, Inc. and Kaiser Federal Bank were to liquidate after the conversion, all claims of creditors, including those of depositors, would be paid first, followed by a distribution to depositors as of March 31, 2009 and [Supplemental Record Date] of their interests in the liquidation account maintained by Kaiser Federal Financial Group, Inc. Also, in a complete liquidation of both entities, or of just Kaiser Federal Bank, when Kaiser Federal Financial Group, Inc. has insufficient assets (other than the stock of Kaiser Federal Bank) to fund the liquidation account distribution due to Eligible Account Holders and Supplemental Eligible Account Holders and Kaiser Federal Bank has positive net worth, Kaiser Federal Bank shall immediately make a distribution to fund Kaiser Federal Financial Group, Inc.’s remaining obligations under the liquidation account. In no event will any Eligible Account Holder or Supplemental Eligible Account Holder be entitled to a distribution that exceeds such holder’s interest in the liquidation account maintained by Kaiser Federal Financial Group, Inc. as adjusted from time to time pursuant to the plan of conversion and Office of Thrift Supervision regulations. If Kaiser Federal Financial Group, Inc. is completely liquidated or sold apart from a sale or liquidation of Kaiser Federal Bank, then the Kaiser Federal Financial Group, Inc. liquidation account will cease to exist and Eligible Account Holders and Supplemental Eligible Account Holders will receive an equivalent interest in the Kaiser Federal Bank liquidation account, subject to the same rights and terms as the Kaiser Federal Financial Group, Inc. liquidation account.

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Pursuant to the plan of conversion and reorganization, after two years from the date of conversion and upon the written request of the Office of Thrift Supervision, Kaiser Federal Financial Group, Inc. will transfer or eliminate the liquidation account and the depositors’ interests in such account to Kaiser Federal Bank and the liquidation account shall thereupon become the liquidation account of Kaiser Federal Bank.

Under the rules and regulations of the Office of Thrift Supervision, a post-conversion merger, consolidation, or similar combination or transaction with another depository institution or depository institution holding company in which Kaiser Federal Financial Group, Inc. or Kaiser Federal Bank is not the surviving institution, would not be considered a liquidation. In such a transaction, the liquidation account would be assumed by the surviving institution or company.

Each Eligible Account Holder and Supplemental Eligible Account Holder would have an initial pro-rata interest in the liquidation account for each deposit account, including savings accounts, transaction accounts such as negotiable order of withdrawal accounts, money market deposit accounts, and certificates of deposit, with a balance of $50.00 or more held in Kaiser Federal Bank on March 31, 2009 or [Supplemental Record Date] equal to the proportion that the balance of each Eligible Account Holder’s and Supplemental Eligible Account Holder’s deposit account on March 31, 2009 and [Supplemental Record Date], respectively, bears to the balance of all deposit accounts of Eligible Account Holders and Supplemental Eligible Account Holders in Kaiser Federal Bank on such date.

If, however, on any June 30 annual closing date commencing after the effective date of the conversion, the amount in any such deposit account is less than the amount in the deposit account on March 31, 2009 or [Supplemental Record Date], or any other annual closing date, then the interest in the liquidation account relating to such deposit account would be reduced from time to time by the proportion of any such reduction, and such interest will cease to exist if such deposit account is closed. In addition, no interest in the liquidation account would ever be increased despite any subsequent increase in the related deposit account. Payment pursuant to liquidation rights of Eligible Account Holders and Supplemental Eligible Account Holders would be separate and apart from the payment of any insured deposit accounts to such depositor. Any assets remaining after the above liquidation rights of Eligible Account Holders and Supplemental Eligible Account Holders are satisfied would be available for distribution to stockholders.

Material Income Tax Consequences

Completion of the conversion is subject to the prior receipt of an opinion of counsel or tax advisor with respect to federal and state income tax consequences of conversion to K-Fed Mutual Holding Company, K-Fed Bancorp, Kaiser Federal Bank, Eligible Account Holders, Supplemental Eligible Account Holders and Other Members of K-Fed Mutual Holding Company. Unlike private letter rulings, opinions of counsel or tax advisors are not binding on the Internal Revenue Service or any state taxing authority, and such authorities may disagree with such opinions. In the event of such disagreement, there can be no assurance that Kaiser Federal Financial Group, Inc. or Kaiser Federal Bank would prevail in a judicial proceeding.

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The merger of K-Fed Mutual Holding Company with and into K-Fed Bancorp will qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code.

The constructive exchange of Eligible Account Holders’ and Supplemental Eligible Account Holders’ liquidation interests in K-Fed Mutual Holding Company for liquidation interests in K-Fed Bancorp will satisfy the continuity of interest requirement of Section 1.368-1(b) of the Federal Income Tax Regulations.

None of K-Fed Mutual Holding Company, K-Fed Bancorp, Eligible Account Holders nor Supplemental Eligible Account Holders, will recognize any gain or loss on the transfer of the assets of K-Fed Mutual Holding Company to K-Fed Bancorp in constructive exchange for liquidation interests established in K-Fed Bancorp for the benefit of such persons who remain depositors of Kaiser Federal Bank.

The basis of the assets of K-Fed Mutual Holding Company and the holding period of such assets to be received by K-Fed Bancorp will be the same as the basis and holding period of such assets in K-Fed Mutual Holding Company immediately before the exchange.

The merger of K-Fed Bancorp with and into Kaiser Federal Financial Group, Inc. will constitute a mere change in identity, form or place of organization within the meaning of Section 368(a)(1)(F) of the Code and therefore will qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Code. Neither K-Fed Bancorp nor Kaiser Federal Financial Group, Inc. will recognize gain or loss as a result of such merger.

The basis of the assets of K-Fed Bancorp and the holding period of such assets to be received by Kaiser Federal Financial Group, Inc. will be the same as the basis and holding period of such assets in K-Fed Bancorp immediately before the exchange.

Current stockholders of K-Fed Bancorp will not recognize any gain or loss upon their exchange of K-Fed Bancorp common stock for Kaiser Federal Financial Group, Inc. common stock.

Eligible Account Holders and Supplemental Eligible Account Holders will not recognize any gain or loss upon the exchange of their constructive liquidation interests in K-Fed Bancorp for interests in the liquidation account in Kaiser Federal Financial Group, Inc.

The constructive exchange of the Eligible Account Holders and Supplemental Eligible Account Holders constructive liquidation interests in K-Fed Bancorp for interests in the liquidation account established in Kaiser Federal Financial Group, Inc. will satisfy the continuity of interest requirement of Section 1.368-1(b) of the Federal Income Tax Regulations.

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10.

Each stockholder’s aggregate basis in shares of Kaiser Federal Financial Group, Inc. common stock (including fractional share interests) received in the exchange will be the same as the aggregate basis of K-Fed Bancorp common stock surrendered in the exchange.

11.

Each stockholder’s holding period in his or her Kaiser Federal Financial Group, Inc. common stock received in the exchange will include the period during which the K-Fed Bancorp common stock surrendered was held, provided that the K-Fed Bancorp common stock surrendered is a capital asset in the hands of the stockholder on the date of the exchange.

12.

Cash received by any current stockholder of K-Fed Bancorp in lieu of a fractional share interest in shares of Kaiser Federal Financial Group, Inc. common stock will be treated as having been received as a distribution in full payment in exchange for a fractional share interest of Kaiser Federal Financial Group, Inc. common stock, which such stockholder would otherwise be entitled to receive. Accordingly, a stockholder will recognize gain or loss equal to the difference between the cash received and the basis of the fractional share. If the common stock is held by the stockholder as a capital asset, the gain or loss will be capital gain or loss.

13.

It is more likely than not that the fair market value of the nontransferable subscription rights to purchase Kaiser Federal Financial Group, Inc. common stock is zero. Accordingly, no gain or loss will be recognized by Eligible Account Holders, Supplemental Eligible Account Holders or Other Members upon distribution to them of nontransferable subscription rights to purchase shares of Kaiser Federal Financial Group, Inc. common stock. Eligible Account Holders, Supplemental Eligible Account Holders and Other Members will not realize any taxable income as the result of the exercise by them of the nontransferable subscriptions rights.

14.

It is more likely than not that the fair market value of the benefit provided by the liquidation account of Kaiser Federal Bank supporting the payment of the Kaiser Federal Financial Group, Inc. liquidation account in the event Kaiser Federal Financial Group, Inc. lacks sufficient net assets is zero. Accordingly, it is more likely than not that no gain or loss will be recognized by Eligible Account Holders and Supplemental Eligible Account Holders upon the constructive distribution to them of such rights in the Kaiser Federal Bank liquidation account as of the effective date of the merger of K-Fed Bancorp with and into Kaiser Federal Financial Group, Inc.

15.

It is more likely than not that the basis of the shares of Kaiser Federal Financial Group, Inc. common stock purchased in the offering by the exercise of nontransferable subscription rights will be the purchase price. The holding period of the Kaiser Federal Financial Group, Inc. common stock purchased pursuant to the exercise of nontransferable subscription rights will commence on the date on which the right to acquire such stock was exercised.

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16.

No gain or loss will be recognized by Kaiser Federal Financial Group, Inc. on the receipt of money in exchange for Kaiser Federal Financial Group, Inc. common stock sold in the offering.

We believe that the tax opinions summarized above address all material federal income tax consequences that are generally applicable to K-Fed Mutual Holding Company, K-Fed Bancorp, Kaiser Federal Bank, Kaiser Federal Financial Group, Inc. and persons receiving subscription rights and stockholders of K-Fed Bancorp. With respect to items 13 and 15 above, Luse Gorman Pomerenk & Schick, P.C. noted that the subscription rights will be granted at no cost to the recipients, are legally non-transferable and of short duration, and will provide the recipient with the right only to purchase shares of common stock at the same price to be paid by members of the general public in any community offering. The firm further noted that RP Financial, LC. has issued a letter that the subscription rights have no ascertainable fair market value. The firm also noted that the Internal Revenue Service has not in the past concluded that subscription rights have value. Based on the foregoing, Luse Gorman Pomerenk & Schick, P.C. believes that it is more likely than not that the nontransferable subscription rights to purchase shares of common stock have no value. However, the issue of whether or not the nontransferable subscription rights have value is based on all the facts and circumstances. If the subscription rights granted to Eligible Account Holders, Supplemental Eligible Account Holders and Other Members are deemed to have an ascertainable value, receipt of these rights could result in taxable gain to those Eligible Account Holders, Supplemental Eligible Account Holders and Other Members who exercise the subscription rights in an amount equal to the ascertainable value, and we could recognize gain on a distribution. Eligible Account Holders, Supplemental Eligible Account Holders and Other Members are encouraged to consult with their own tax advisors as to the tax consequences in the event that subscription rights are deemed to have an ascertainable value.

The opinion as to item 14 above is based on the position that: (i) no holder of an interest in a liquidation account has ever received any payment attributable to a liquidation account; (ii) the interests in the liquidation accounts are not transferable; (iii) the amounts due under the liquidation account with respect to each Eligible Account Holder and Supplemental Eligible Account Holder will be reduced as their deposits in Kaiser Federal Bank are reduced; and (iv) the Kaiser Federal Bank liquidation account payment obligation arises only if Kaiser Federal Financial Group, Inc. lacks sufficient assets to fund the liquidation account.

In addition, we have received a letter from RP Financial, LC. stating its belief that the benefit provided by the Kaiser Federal Bank liquidation account supporting the payment of the liquidation account in the event Kaiser Federal Financial Group, Inc. lacks sufficient net assets does not have any economic value at the time of the conversion. Based on the foregoing, Luse Gorman Pomerenk & Schick, P.C. believes it is more likely than not that such rights in the Kaiser Federal Bank liquidation account have no value. If such rights are subsequently found to have an economic value, income may be recognized by each Eligible Account Holder or Supplemental Eligible Account Holder in the amount of such fair market value as of the date of the conversion.

The opinion of Luse Gorman Pomerenk & Schick, P.C., unlike a letter ruling issued by the Internal Revenue Service, is not binding on the Internal Revenue Service and the conclusions expressed therein may be challenged at a future date. The Internal Revenue Service has issued favorable rulings for transactions substantially similar to the proposed reorganization and stock offering, but any such ruling may not be cited as precedent by any taxpayer other than the taxpayer to whom the ruling is addressed. We do not plan to apply for a letter ruling concerning the transactions described herein.

We have also received an opinion from Moffett & Grigorian LLP that the California state income tax consequences are consistent with the federal income tax consequences.

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The federal tax opinion has been filed with the Securities and Exchange Commission as an exhibit to Kaiser Federal Financial Group, Inc.’s registration statement.

Certain Restrictions on Purchase or Transfer of Our Shares after Conversion

All shares of common stock purchased in the offering by a director or certain officers of Kaiser Federal Bank generally may not be sold for a period of one year following the closing of the conversion, except in the event of the death of the director or executive officer. Each certificate for restricted shares will bear a legend giving notice of this restriction on transfer, and instructions will be issued to the effect that any transfer within this time period of any certificate or record ownership of the shares other than as provided above is a violation of the restriction. Any shares of common stock issued at a later date as a stock dividend, stock split, or otherwise, with respect to the restricted stock will be similarly restricted. The directors and executive officers of Kaiser Federal Financial Group, Inc. also will be restricted by the insider trading rules under the Securities Exchange Act of 1934.

Purchases of shares of our common stock by any of our directors, certain officers and their associates, during the three-year period following the closing of the conversion may be made only through a broker or dealer registered with the Securities and Exchange Commission, except with the prior written approval of the Office of Thrift Supervision. This restriction does not apply, however, to negotiated transactions involving more than 1% of our outstanding common stock or to purchases of our common stock by our stock option plan or any of our tax-qualified employee stock benefit plans or non-tax-qualified employee stock benefit plans, including any restricted stock plans.

Office of Thrift Supervision regulations prohibit Kaiser Federal Financial Group, Inc. from repurchasing its shares of common stock during the first year following conversion unless compelling business reasons exist for such repurchases. After one year, the Office of Thrift Supervision does not impose any repurchase restrictions.

COMPARISON OF STOCKHOLDERS’ RIGHTS FOR EXISTING

STOCKHOLDERS OF K-FED BANCORP

General. As a result of the conversion, existing stockholders of K-Fed Bancorp will become stockholders of Kaiser Federal Financial Group, Inc. There are differences in the rights of stockholders of K-Fed Bancorp and stockholders of Kaiser Federal Financial Group, Inc. caused by differences between federal and Maryland law and regulations and differences in K-Fed Bancorp’s federal stock charter and bylaws and Kaiser Federal Financial Group, Inc.’s Maryland articles of incorporation and bylaws.

This discussion is not intended to be a complete statement of the differences affecting the rights of stockholders, but rather summarizes the material differences and similarities affecting the rights of stockholders. See “Where You Can Find Additional Information” for procedures for obtaining a copy of Kaiser Federal Financial Group, Inc.’s articles of incorporation and bylaws.

Authorized Capital Stock. The authorized capital stock of K-Fed Bancorp consists of 18,000,000 shares of common stock, $0.01 par value per share, and 2,000,000 shares of preferred stock.

The authorized capital stock of Kaiser Federal Financial Group, Inc. consists of 100,000,000 shares of common stock, $0.01 par value per share, and 25,000,000 shares of preferred stock, par value $0.01 per share.

Under the Maryland General Corporation Law and Kaiser Federal Financial Group, Inc.’s articles of incorporation, the board of directors may increase or decrease the number of authorized shares without stockholder approval. Stockholder approval is required to increase or decrease the number of authorized shares of K-Fed Bancorp.

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K-Fed Bancorp’s charter and Kaiser Federal Financial Group, Inc.’s articles of incorporation both authorize the board of directors to establish one or more series of preferred stock and, for any series of preferred stock, to determine the terms and rights of the series, including voting rights, dividend rights, conversion and redemption rates and liquidation preferences. As a result of the ability to fix voting rights for a series of preferred stock, our board of directors has the power, to the extent consistent with its fiduciary duty, to issue a series of preferred stock to persons friendly to management in order to attempt to block a hostile tender offer, merger or other transaction by which a third party seeks control. We currently have no plans for the issuance of additional shares for such purposes.

Issuance of Capital Stock. Pursuant to applicable laws and regulations, K-Fed Mutual Holding Company is required to own not less than a majority of the outstanding shares of K-Fed Bancorp common stock. K-Fed Mutual Holding Company will no longer exist following completion of the conversion.

Kaiser Federal Financial Group, Inc.’s articles of incorporation do not contain restrictions on the issuance of shares of capital stock to directors, officers or controlling persons, whereas K-Fed Bancorp’s stock charter restricts such issuances to general public offerings, or to directors for qualifying shares, unless the share issuance or the plan under which they would generally be issued has been approved by the stockholders. However, stock-based compensation plans, such as stock option plans and restricted stock plans, would have to be submitted for approval by Kaiser Federal Financial Group, Inc. stockholders due to requirements of the Nasdaq Stock Market and in order to qualify stock options for favorable federal income tax treatment.

Voting Rights. Neither K-Fed Bancorp’s stock charter or bylaws nor Kaiser Federal Financial Group, Inc.’s articles of incorporation or bylaws provide for cumulative voting for the election of directors. For additional information regarding voting rights, see “—Limitations on Voting Rights of Greater-than-10% Stockholders” below.

Payment of Dividends. K-Fed Bancorp’s ability to pay dividends depends, to a large extent, upon Kaiser Federal Bank’s ability to pay dividends to K-Fed Bancorp, which is restricted by Office of Thrift Supervision regulations and by federal income tax considerations related to federal savings associations.

The same restrictions will apply to Kaiser Federal Bank’s payment of dividends to Kaiser Federal Financial Group, Inc. In addition, Maryland law generally provides that Kaiser Federal Financial Group, Inc. is limited to paying dividends in an amount equal to its capital surplus over payments that would be owed upon dissolution to stockholders whose preferential rights upon dissolution are superior to those receiving the dividend, and to an amount that would not make it insolvent.

Board of Directors. K-Fed Bancorp’s bylaws and Kaiser Federal Financial Group, Inc.’s articles of incorporation require the board of directors to be divided into three classes and that the members of each class shall be elected for a term of three years and until their successors are elected and qualified, with one class being elected annually.

Under K-Fed Bancorp’s bylaws, any vacancies on the board of directors may be filled by the affirmative vote of a majority of the remaining directors although less than a quorum of the board of directors. Persons elected by the board of directors of K-Fed Bancorp to fill vacancies may only serve until the next election of directors by stockholders. Under Kaiser Federal Financial Group, Inc.’s bylaws, any vacancy occurring on the board of directors, including any vacancy created by reason of an increase in the number of directors, may be filled only by the affirmative vote of two-thirds of the remaining directors, and any director so chosen shall hold office for the remainder of the term to which the director has been elected and until his or her successor is elected and qualified.

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Limitations on Liability. The charter and bylaws of K-Fed Bancorp do not limit the personal liability of directors.

Kaiser Federal Financial Group, Inc.’s articles of incorporation provide that directors will not be personally liable for monetary damages to Kaiser Federal Financial Group, Inc. for certain actions as directors, except for (i) receipt of an improper personal benefit from their positions as directors, (ii) actions or omissions that are determined to have involved active and deliberate dishonesty, or (iii) to the extent allowed by Maryland law. These provisions might, in certain instances, discourage or deter stockholders or management from bringing a lawsuit against directors for a breach of their duties even though such an action, if successful, might benefit Kaiser Federal Financial Group, Inc.

Indemnification of Directors, Officers, Employees and Agents. As generally allowed under current Office of Thrift Supervision regulations, K-Fed Bancorp will indemnify its directors, officers and employees for any costs incurred in connection with any litigation involving such person’s activities as a director, officer or employee if such person obtains a final judgment on the merits in his or her favor. In addition, indemnification is permitted in the case of a settlement, a final judgment against such person, or final judgment other than on the merits, if a majority of disinterested directors determines that such person was acting in good faith within the scope of his or her employment as he or she could reasonably have perceived it under the circumstances and for a purpose he or she could reasonably have believed under the circumstances was in the best interests of K-Fed Bancorp or its stockholders. K-Fed Bancorp also is permitted to pay ongoing expenses incurred by a director, officer or employee if a majority of disinterested directors concludes that such person may ultimately be entitled to indemnification. Before making any indemnification payment, K-Fed Bancorp is required to notify the Office of Thrift Supervision of its intention, and such payment cannot be made if the Office of Thrift Supervision objects to such payment.

The articles of incorporation of Kaiser Federal Financial Group, Inc. provide that it shall indemnify (1) its current and former directors and officers to the fullest extent required or permitted by Maryland law, including the advancement of expenses and (2) other employees or agents to such extent as shall be authorized by the board of directors and Maryland Law. Maryland law allows Kaiser Federal Financial Group, Inc. to indemnify any person for expenses, liabilities, settlements, judgments and fines in suits in which such person has been made a party by reason of the fact that he or she is or was a director, officer or employee of Kaiser Federal Financial Group, Inc. No such indemnification may be given if the acts or omissions of the person are adjudged to be in bad faith and material to the matter giving rise to the proceeding, if such person is liable to the corporation for an unlawful distribution, or if such person personally received a benefit to which he or she was not entitled. The right to indemnification includes the right to be paid the expenses incurred in advance of final disposition of a proceeding.

Special Meetings of Stockholders. K-Fed Bancorp’s bylaws provide that special meetings of stockholders may be called by the Chairman, the president, a majority of the members of the board of directors or the holders of not less than one-tenth of the outstanding capital stock entitled to vote at the meeting. Kaiser Federal Financial Group, Inc.’s bylaws provide that special meetings of stockholders may be called by the president, by a majority vote of the total authorized directors, or upon the written request of stockholders entitled to cast at least a majority of all votes entitled to vote at the meeting.

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Stockholder Nominations and Proposals. K-Fed Bancorp’s bylaws provide that stockholders may submit nominations for election of directors at an annual meeting of stockholders and may propose any new business to be taken up at such a meeting by filing the proposal in writing with K-Fed Bancorp at least five days before the date of any such meeting.

Kaiser Federal Financial Group, Inc.’s bylaws provide that any stockholder desiring to make a nomination for the election of directors or a proposal for new business at a meeting of stockholders must submit written notice to Kaiser Federal Financial Group, Inc. at least 80 days prior and not earlier than 90 days prior to such meeting. However, if less than 90 days’ notice or prior public disclosure of the date of the meeting is given to stockholders, such written notice must be submitted by a stockholder not later than the tenth day following the day on which notice of the meeting was mailed to stockholders or such public disclosure was made.

Management believes that it is in the best interest of Kaiser Federal Financial Group, Inc. and its stockholders to provide sufficient time to enable management to disclose to stockholders information about a dissident slate of nominations for directors. This advance notice requirement may also give management time to solicit its own proxies in an attempt to defeat any dissident slate of nominations, should management determine that doing so is in the best interests of stockholders generally. Similarly, adequate advance notice of stockholder proposals will give management time to study such proposals and to determine whether to recommend to the stockholders that such proposals be adopted. In certain instances, such provisions could make it more difficult to oppose management’s nominees or proposals, even if stockholders believe such nominees or proposals are in their best interests.

Stockholder Action Without a Meeting. The bylaws of K-Fed Bancorp provide that any action to be taken or which may be taken at any annual or special meeting of stockholders may be taken if a consent in writing, setting forth the actions so taken, is given by the holders of all outstanding shares entitled to vote. The bylaws of Kaiser Federal Financial Group, Inc. do not provide for action to be taken by stockholders without a meeting. Under Maryland law, action may be taken by stockholders without a meeting if all stockholders entitled to vote on the action consent to taking such action without a meeting.

Stockholder’s Right to Examine Books and Records. A federal regulation, which is applicable to K-Fed Bancorp, provides that stockholders may inspect and copy specified books and records after proper written notice for a proper purpose. Maryland law provides that a stockholder may inspect a company’s bylaws, stockholder minutes, annual statement of affairs and any voting trust agreements. However, only a stockholder or group of stockholders who together, for at least six months, hold at least 5% of the company’s total shares, have the right to inspect a company’s stock ledger, list of stockholders and books of accounts.

Limitations on Voting Rights of Greater-than-10% Stockholders. Kaiser Federal Financial Group, Inc.’s articles of incorporation provide that no beneficial owner, directly or indirectly, of more than 10% of the outstanding shares of common stock will be permitted to vote any shares in excess of such 10% limit. K-Fed Bancorp’s charter does not provide such a limit on voting common stock.

In addition, Office of Thrift Supervision regulations provide that for a period of three years following the date of the completion of the offering, no person, acting singly or together with associates in a group of persons acting in concert, may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of a class of Kaiser Federal Financial Group, Inc.’s equity securities without the prior written approval of the Office of Thrift Supervision. Where any person acquires beneficial ownership of more than 10% of a class of Kaiser Federal Financial Group, Inc.’s equity securities without the prior written approval of the Office of Thrift Supervision, the securities beneficially owned by such person in excess of 10% may not be voted by any person or counted as voting shares in connection with any matter submitted to the stockholders for a vote, and will not be counted as outstanding for purposes of determining the affirmative vote necessary to approve any matter submitted to the stockholders for a vote.

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Mergers, Consolidations and Sales of Assets. A federal regulation applicable to K-Fed Bancorp generally requires the approval of two-thirds of the board of directors and the holders of two-thirds of the outstanding stock of K-Fed Bancorp entitled to vote thereon for mergers, consolidations and sales of all or substantially all of K-Fed Bancorp’s assets. Such regulation permits K-Fed Bancorp to merge with another corporation without obtaining the approval of its stockholders if:

(i)

it does not involve an interim savings institution;

(ii)

K-Fed Bancorp’s federal stock charter is not changed;

(iii)

each share of K-Fed Bancorp’s stock outstanding immediately prior to the effective date of the transaction will be an identical outstanding share or a treasury share of K-Fed Bancorp after such effective date; and

(iv)

either:

(a)

no shares of voting stock of K-Fed Bancorp and no securities convertible into such stock are to be issued or delivered under the plan of combination; or

(b)

the authorized but unissued shares or the treasury shares of voting stock of K-Fed Bancorp to be issued or delivered under the plan of combination, plus those initially issuable upon conversion of any securities to be issued or delivered under such plan, do not exceed 15% of the total shares of voting stock of K-Fed Bancorp outstanding immediately prior to the effective date of the transaction.

Under Maryland law, “business combinations” between Kaiser Federal Financial Group, Inc. and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, statutory share exchange or, in circumstances specified in the statute, certain transfers of assets, certain stock issuances and transfers, liquidation plans and reclassifications involving interested stockholders and their affiliates or issuance or reclassification of equity securities. Maryland law defines an interested stockholder as: (i) any person who beneficially owns 10% or more of the voting power of Kaiser Federal Financial Group, Inc.’s voting stock after the date on which Kaiser Federal Financial Group, Inc. had 100 or more beneficial owners of its stock; or (ii) an affiliate or associate of Kaiser Federal Financial Group, Inc. at any time after the date on which Kaiser Federal Financial Group, Inc. had 100 or more beneficial owners of its stock who, within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then-outstanding voting stock of Kaiser Federal Financial Group, Inc. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

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After the five-year prohibition, any business combination between Kaiser Federal Financial Group, Inc. and an interested stockholder generally must be recommended by the board of directors of Kaiser Federal Financial Group, Inc. and approved by the affirmative vote of at least: (i) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of Kaiser Federal Financial Group, Inc., and (ii) two-thirds of the votes entitled to be cast by holders of voting stock of Kaiser Federal Financial Group, Inc. other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder. These super-majority vote requirements do not apply if Kaiser Federal Financial Group, Inc.’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

Evaluation of Offers. The articles of incorporation of Kaiser Federal Financial Group, Inc. provide that its board of directors, when evaluating a transaction that would or may involve a change in control of Kaiser Federal Financial Group, Inc. (whether by purchases of its securities, merger, consolidation, share exchange, dissolution, liquidation, sale of all or substantially all of its assets, proxy solicitation or otherwise), may, in connection with the exercise of its business judgment in determining what is in the best interests of Kaiser Federal Financial Group, Inc. and its stockholders and in making any recommendation to the stockholders, give due consideration to all relevant factors, including, but not limited to:

●

the economic effect, both immediate and long-term, upon Kaiser Federal Financial Group, Inc.’s stockholders, including stockholders, if any, who do not participate in the transaction;

●

the social and economic effect on the present and future employees, creditors and customers of, and others dealing with, Kaiser Federal Financial Group, Inc. and its subsidiaries and on the communities in which Kaiser Federal Financial Group, Inc. and its subsidiaries operate or are located;

●

whether the proposal is acceptable based on the historical, current or projected future operating results or financial condition of Kaiser Federal Financial Group, Inc.;

●

whether a more favorable price could be obtained for Kaiser Federal Financial Group, Inc.’s stock or other securities in the future;

●

the reputation and business practices of the other entity to be involved in the transaction and its management and affiliates as they would affect the employees of Kaiser Federal Financial Group, Inc. and its subsidiaries;

●

the future value of the stock or any other securities of Kaiser Federal Financial Group, Inc. or the other entity to be involved in the proposed transaction;

●

any antitrust or other legal and regulatory issues that are raised by the proposal;

●

the business and historical, current or expected future financial condition or operating results of the other entity to be involved in the transaction, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the proposed transaction, and other likely financial obligations of the other entity to be involved in the proposed transaction; and

●

the ability of Kaiser Federal Financial Group, Inc. to fulfill its objectives as a financial institution holding company and on the ability of its subsidiary financial institution(s) to fulfill the objectives of a federally insured financial institution under applicable statutes and regulations.

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If the board of directors determines that any proposed transaction should be rejected, it may take any lawful action to defeat such transaction.

K-Fed Bancorp’s charter and bylaws do not contain a similar provision.

Dissenters’ Rights of Appraisal. Office of Thrift Supervision regulations generally provide that a stockholder of a federally chartered corporation that engages in a merger, consolidation or sale of all or substantially all of its assets shall have the right to demand from such institution payment of the fair or appraised value of his or her stock in the corporation, subject to specified procedural requirements. The regulations also provide, however, that a stockholder of a federally chartered corporation whose shares are listed on a national securities exchange are not entitled to dissenters’ rights in connection with a merger if the stockholder is required to accept only “qualified consideration” for his or her stock, which is defined to include cash, shares of stock of any institution or corporation that at the effective date of the merger will be listed on a national securities exchange, or any combination of such shares of stock and cash.

Under Maryland law, stockholders of Kaiser Federal Financial Group, Inc. will not have dissenters’ appraisal rights in connection with a plan of merger or consolidation to which Kaiser Federal Financial Group, Inc. is a party as long as the common stock of Kaiser Federal Financial Group, Inc. trades on a national securities exchange.

Amendment of Governing Instruments. No amendment of K-Fed Bancorp’s stock charter may be made unless it is first proposed by the board of directors then preliminarily approved by the Office of Thrift Supervision, and thereafter approved by the holders of a majority of the total votes eligible to be cast at a legal meeting.

Kaiser Federal Financial Group, Inc.’s articles of incorporation may be amended, upon the submission of an amendment by the board of directors to a vote of the stockholders, by the affirmative vote of at least two-thirds of the outstanding shares of common stock, or by the affirmative vote of a majority of the outstanding shares of common stock if at least two-thirds of the members of the whole board of directors approves such amendment; provided, however, that approval by at least 80% of the outstanding voting stock is generally required to amend the following provisions:

(i)

The limitation on voting rights of persons who directly or indirectly beneficially own more than 10% of the outstanding shares of common stock;

(ii)

The division of the board of directors into three staggered classes;

(iii)

The ability of the board of directors to fill vacancies on the board;

(iv)

The requirement that directors may only be removed for cause and by the affirmative vote of at least a majority of the votes eligible to be cast by stockholders;

(v)

The ability of the board of directors to amend and repeal the bylaws;

(vi)

The ability of the board of directors to evaluate a variety of factors in evaluating offers to purchase or otherwise acquire Kaiser Federal Financial Group, Inc.;

(vii)

The authority of the board of directors to provide for the issuance of preferred stock;

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(viii)

The validity and effectiveness of any action lawfully authorized by the affirmative vote of the holders of a majority of the total number of outstanding shares of common stock;

(ix)

The number of stockholders constituting a quorum or required for stockholder consent;

(x)

The indemnification of current and former directors and officers, as well as employees and other agents, by Kaiser Federal Financial Group, Inc.;

(xi)

The limitation of liability of officers and directors to Kaiser Federal Financial Group, Inc. for money damages;

(xii)

The inability of stockholders to cumulate their votes in the election of directors;

(xiii) The advance notice requirements for stockholder proposals and nominations; and

(xiv)

The provision of the articles of incorporation requiring approval of at least 80% of the outstanding voting stock to amend the provisions of the articles of incorporation provided in (i) through (xiii) of this list.

The articles of incorporation also provide that the bylaws may be amended by the affirmative vote of a majority of our directors or by the stockholders by the affirmative vote of at least 80% of the total votes eligible to be voted at a duly constituted meeting of stockholders. Any amendment of this super-majority requirement for amendment of the bylaws would also require the approval of 80% of the outstanding voting stock.

RESTRICTIONS ON ACQUISITION OF KAISER FEDERAL FINANCIAL GROUP, INC.

Although the board of directors of Kaiser Federal Financial Group, Inc. is not aware of any effort that might be made to obtain control of Kaiser Federal Financial Group, Inc. after the conversion, the board of directors believes that it is appropriate to include certain provisions as part of Kaiser Federal Financial Group, Inc.’s articles of incorporation to protect the interests of Kaiser Federal Financial Group, Inc. and its stockholders from takeovers which the board of directors might conclude are not in the best interests of Kaiser Federal Bank, Kaiser Federal Financial Group, Inc. or Kaiser Federal Financial Group, Inc.’s stockholders.

The following discussion is a general summary of the material provisions of Kaiser Federal Financial Group, Inc.’s articles of incorporation and bylaws, Kaiser Federal Bank’s charter and bylaws and certain other regulatory provisions that may be deemed to have an “anti-takeover” effect. The following description of certain of these provisions is necessarily general and is not intended to be a complete description of the document or regulatory provision in question. Kaiser Federal Financial Group, Inc.’s articles of incorporation and bylaws are included as part of K-Fed Mutual Holding Company’s application for conversion filed with the Office of Thrift Supervision and Kaiser Federal Financial Group, Inc.’s registration statement filed with the Securities and Exchange Commission. See “Where You Can Find Additional Information.”

Articles of Incorporation and Bylaws of Kaiser Federal Financial Group, Inc.

Kaiser Federal Financial Group, Inc.’s articles of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of stockholders that may discourage future takeover attempts. As a result, stockholders who might desire to participate in such transactions may not have an opportunity to do so. In addition, these provisions will also render the removal of the board of directors or management of Kaiser Federal Financial Group, Inc. more difficult.

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Directors. The board of directors will be divided into three classes. The members of each class will be elected for a term of three years and only one class of directors will be elected annually. Thus, it would take at least two annual elections to replace a majority of the board of directors. Further, the bylaws impose notice and information requirements in connection with the nomination by stockholders of candidates for election to the board of directors or the proposal by stockholders of business to be acted upon at an annual meeting of stockholders.

Restrictions on Call of Special Meetings. The articles of incorporation and bylaws provide that special meetings of stockholders can be called by the President, by a majority of the whole board of directors or upon the written request of stockholders entitled to cast at least a majority of all votes entitled to vote at the meeting.

Prohibition of Cumulative Voting. The articles of incorporation prohibit cumulative voting for the election of directors.

Limitation of Voting Rights. The articles of incorporation provide that in no event will any person who beneficially owns more than 10% of the then-outstanding shares of common stock, be entitled or permitted to vote any of the shares of common stock held in excess of the 10% limit. This provision has been included in the articles of incorporation in reliance on Section 2-507(a) of the Maryland General Corporation Law, which entitles stockholders to one vote for each share of stock unless the articles of incorporation provide for a greater or lesser number of votes per share or limit or deny voting rights.

Restrictions on Removing Directors from Office. The articles of incorporation provide that directors may be removed only for cause, and only by the affirmative vote of the holders of at least a majority of the voting power of all of our then-outstanding common stock entitled to vote (after giving effect to the limitation on voting rights discussed above in “—Limitation of Voting Rights.”).

Authorized but Unissued Shares. After the conversion, Kaiser Federal Financial Group, Inc. will have authorized but unissued shares of common and preferred stock. See “Description of Capital Stock of Kaiser Federal Financial Group, Inc. Following the Conversion.” The articles of incorporation authorize 25,000,000 shares of serial preferred stock. Kaiser Federal Financial Group, Inc. is authorized to issue preferred stock from time to time in one or more series subject to applicable provisions of law, and the board of directors is authorized to fix the designations, and relative preferences, limitations, voting rights, if any, including without limitation, offering rights of such shares (which could be multiple or as a separate class). In the event of a proposed merger, tender offer or other attempt to gain control of Kaiser Federal Financial Group, Inc. that the board of directors does not approve, it may be possible for the board of directors to authorize the issuance of a series of preferred stock with rights and preferences that would impede the completion of the transaction. An effect of the possible issuance of preferred stock therefore may be to deter a future attempt to gain control of Kaiser Federal Financial Group, Inc. The board of directors has no present plan or understanding to issue any preferred stock.

Amendments to Articles of Incorporation and Bylaws. Amendments to the articles of incorporation must be approved by the board of directors and also by at least a majority of the outstanding shares of the voting stock; provided, however, that approval by at least 80% of the outstanding voting stock is generally required to amend certain provisions. A list of these provisions is provided under “Comparison of Stockholders’ Rights For Existing Stockholders of K-Fed Bancorp—Amendment of Governing Instruments” above.

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The articles of incorporation also provide that the bylaws may be amended by the affirmative vote of a majority of Kaiser Federal Financial Group, Inc.’s directors or by the stockholders by the affirmative vote of at least 80% of the total votes eligible to be voted at a duly constituted meeting of stockholders. Any amendment of this super-majority requirement for amendment of the bylaws would also require the approval of 80% of the outstanding voting shares.

The provisions requiring the affirmative vote of 80% of outstanding shares for certain stockholder actions have been included in the articles of incorporation of Kaiser Federal Financial Group, Inc. in reliance on Section 2-104(b)(4) of the Maryland General Corporation Law. Section 2-104(b)(4) permits the articles of incorporation to require a greater proportion of votes than the proportion that would otherwise be required for stockholder action under the Maryland General Corporation Law.

Business Combinations with Interested Stockholders. Maryland law restricts mergers, consolidations, sales of assets and other business combinations between Kaiser Federal Financial Group, Inc. and an “interested stockholder”. See “Comparison of Stockholder Rights for Existing Stockholders of K-Fed Bancorp—Mergers, Consolidations and Sales of Assets”, above.

Purpose and Anti-Takeover Effects of Kaiser Federal Financial Group, Inc.’s Articles of Incorporation and Bylaws. Our board of directors believes that the provisions described above are prudent and will reduce our vulnerability to takeover attempts and certain other transactions that have not been negotiated with and approved by our board of directors. These provisions also will assist us in the orderly deployment of the offering proceeds into productive assets during the initial period after the conversion. Our board of directors believes these provisions are in the best interests of Kaiser Federal Financial Group, Inc. and its stockholders. Our board of directors believes that it will be in the best position to determine the true value of Kaiser Federal Financial Group, Inc. and to negotiate more effectively for what may be in the best interests of all our stockholders. Accordingly, our board of directors believes that it is in the best interests of Kaiser Federal Financial Group, Inc. and all of our stockholders to encourage potential acquirers to negotiate directly with the board of directors and that these provisions will encourage such negotiations and discourage hostile takeover attempts. It is also the view of our board of directors that these provisions should not discourage persons from proposing a merger or other transaction at a price reflective of the true value of Kaiser Federal Financial Group, Inc. and that is in the best interests of all our stockholders.

Takeover attempts that have not been negotiated with and approved by our board of directors present the risk of a takeover on terms that may be less favorable than might otherwise be available. A transaction that is negotiated and approved by our board of directors, on the other hand, can be carefully planned and undertaken at an opportune time in order to obtain maximum value of Kaiser Federal Financial Group, Inc. for our stockholders, with due consideration given to matters such as the management and business of the acquiring corporation and maximum strategic development of Kaiser Federal Financial Group, Inc.’s assets.

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Although a tender offer or other takeover attempt may be made at a price substantially above the current market price, such offers are sometimes made for less than all of the outstanding shares of a target company. As a result, stockholders may be presented with the alternative of partially liquidating their investment at a time that may be disadvantageous, or retaining their investment in an enterprise that is under different management and whose objectives may not be similar to those of the remaining stockholders.

Despite our belief as to the benefits to stockholders of these provisions of Kaiser Federal Financial Group, Inc.’s articles of incorporation and bylaws, these provisions may also have the effect of discouraging a future takeover attempt that would not be approved by our board of directors, but pursuant to which stockholders may receive a substantial premium for their shares over then current market prices. As a result, stockholders who might desire to participate in such a transaction may not have any opportunity to do so. Such provisions will also make it more difficult to remove our board of directors and management. Our board of directors, however, has concluded that the potential benefits outweigh the possible disadvantages.

Charter of Kaiser Federal Bank

Kaiser Federal Bank’s charter provides that for a period of five years from the closing of the conversion and offering, no person other than Kaiser Federal Financial Group, Inc. may offer directly or indirectly to acquire the beneficial ownership of more than 10% of any class of equity security of Kaiser Federal Bank. This provision does not apply to any tax-qualified employee benefit plan of Kaiser Federal Bank or Kaiser Federal Financial Group, Inc. or to an underwriter or member of an underwriting or selling group involving the public sale or resale of securities of Kaiser Federal Financial Group, Inc. or any of its subsidiaries, so long as after the sale or resale, no underwriter or member of the selling group is a beneficial owner, directly or indirectly, of more than 10% of any class of equity securities of Kaiser Federal Bank. In addition, during this five-year period, all shares owned over the 10% limit may not be voted on any matter submitted to stockholders for a vote.

Conversion Regulations

Office of Thrift Supervision regulations prohibit any person from making an offer, announcing an intent to make an offer or participating in any other arrangement to purchase stock or acquire stock or subscription rights in a converting institution or its holding company from another person prior to completion of its conversion. Further, without the prior written approval of the Office of Thrift Supervision, no person may make an offer or announcement of an offer to purchase shares or actually acquire shares of a converted institution or its holding company for a period of three years from the date of the completion of the conversion if, upon the completion of such offer, announcement or acquisition, the person would become the beneficial owner of more than 10% of the outstanding stock of the institution or its holding company. The Office of Thrift Supervision has defined “person” to include any individual, group acting in concert, corporation, partnership, association, joint stock company, trust, unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities of an insured institution. However, offers made exclusively to a bank or its holding company, or an underwriter or member of a selling group acting on the converting institution’s or its holding company’s behalf for resale to the general public are excepted. The regulation also provides civil penalties for willful violation or assistance in any such violation of the regulation by any person connected with the management of the converting institution or its holding company or who controls more than 10% of the outstanding shares or voting rights of a converted institution or its holding company.

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Change in Control Regulations

Under the Change in Bank Control Act, no person may acquire control of an insured federal savings bank or its parent holding company unless the Office of Thrift Supervision has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition. In addition, Office of Thrift Supervision regulations provide that no company may acquire control of a savings bank without the prior approval of the Office of Thrift Supervision. Any company that acquires such control becomes a “savings and loan holding company” subject to registration, examination and regulation by the Office of Thrift Supervision.

Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or a determination by the Office of Thrift Supervision that the acquiror has the power to direct, or directly or indirectly to exercise a controlling influence over, the management or policies of the institution. Acquisition of more than 10% of any class of a savings bank’s voting stock, if the acquiror is also subject to any one of eight “control factors,” constitutes a rebuttable determination of control under the regulations. Such control factors include the acquiror being one of the two largest stockholders. The determination of control may be rebutted by submission to the Office of Thrift Supervision, prior to the acquisition of stock or the occurrence of any other circumstances giving rise to such determination, of a statement setting forth facts and circumstances which would support a finding that no control relationship will exist and containing certain undertakings. The regulations provide that persons or companies which acquire beneficial ownership exceeding 10% or more of any class of a savings bank’s stock who do not intend to participate in or seek to exercise control over a savings bank’s management or policies may qualify for a safe harbor by filing with the Office of Thrift Supervision a certification form that states, among other things, that the holder is not in control of such institution, is not subject to a rebuttable determination of control and will take no action which would result in a determination or rebuttable determination of control without prior notice to or approval of the Office of Thrift Supervision, as applicable. There are also rebuttable presumptions in the regulations concerning whether a group “acting in concert” exists, including presumed action in concert among members of an “immediate family.”

The Office of Thrift Supervision may prohibit an acquisition of control if it finds, among other things, that:

●

the acquisition would result in a monopoly or substantially lessen competition;

●

the financial condition of the acquiring person might jeopardize the financial stability of the institution; or

●

the competence, experience or integrity of the acquiring person indicates that it would not be in the interest of the depositors or the public to permit the acquisition of control by such person.

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DESCRIPTION OF CAPITAL STOCK OF KAISER FEDERAL FINANCIAL GROUP, INC.

FOLLOWING THE CONVERSION

General

Kaiser Federal Financial Group, Inc. is authorized to issue 100,000,000 shares of common stock, par value of $0.01 per share, and 25,000,000 shares of preferred stock, par value $0.01 per share. Kaiser Federal Financial Group, Inc. currently expects to issue in the offering and exchange up to 13,798,650 shares of common stock, subject to adjustment up to 15,868,448 shares. Kaiser Federal Financial Group, Inc. will not issue shares of preferred stock in the conversion. Each share of Kaiser Federal Financial Group, Inc. common stock will have the same relative rights as, and will be identical in all respects to, each other share of common stock. Upon payment of the subscription price for the common stock, in accordance with the plan of conversion and reorganization, all of the shares of common stock will be duly authorized, fully paid and nonassessable.

The shares of common stock of Kaiser Federal Financial Group, Inc. will represent nonwithdrawable capital, will not be an account of an insurable type, and will not be insured by the Federal Deposit Insurance Corporation or any other government agency.

Common Stock

Dividends. Kaiser Federal Financial Group, Inc. may pay dividends to an amount equal to the excess of our capital surplus over payments that would be owed upon dissolution to stockholders whose preferential rights upon dissolution are superior to those receiving the dividend, and to an amount that would not make us insolvent, as and when declared by our board of directors. The payment of dividends by Kaiser Federal Financial Group, Inc. is also subject to limitations that are imposed by law and applicable regulation, including restrictions on payments of dividends that would reduce Kaiser Federal Financial Group, Inc.’s assets below the then-adjusted balance of its liquidation account. The holders of common stock of Kaiser Federal Financial Group, Inc. will be entitled to receive and share equally in dividends as may be declared by our board of directors out of funds legally available therefor. If Kaiser Federal Financial Group, Inc. issues shares of preferred stock, the holders thereof may have a priority over the holders of the common stock with respect to dividends.

Voting Rights. Upon completion of the conversion, the holders of common stock of Kaiser Federal Financial Group, Inc. will have exclusive voting rights in Kaiser Federal Financial Group, Inc. They will elect Kaiser Federal Financial Group, Inc.’s board of directors and act on other matters as are required to be presented to them under Maryland law or as are otherwise presented to them by the board of directors. Generally, each holder of common stock will be entitled to one vote per share and will not have any right to cumulate votes in the election of directors. Any person who beneficially owns more than 10% of the then-outstanding shares of Kaiser Federal Financial Group, Inc.’s common stock, however, will not be entitled or permitted to vote any shares of common stock held in excess of the 10% limit. If Kaiser Federal Financial Group, Inc. issues shares of preferred stock, holders of the preferred stock may also possess voting rights. Certain matters require the approval of 80% of our outstanding common stock. As a federal stock savings bank, corporate powers and control of Kaiser Federal Bank are vested in its board of directors, who elect the officers of Kaiser Federal Bank and who fill any vacancies on the board of directors. Voting rights of Kaiser Federal Bank are vested exclusively in the owners of the shares of capital stock of Kaiser Federal Bank, which will be Kaiser Federal Financial Group, Inc., and voted at the direction of Kaiser Federal Financial Group, Inc.’s board of directors. Consequently, the holders of the common stock of Kaiser Federal Financial Group, Inc. will not have direct control of Kaiser Federal Bank.

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Liquidation. In the event of any liquidation, dissolution or winding up of Kaiser Federal Bank, Kaiser Federal Financial Group, Inc., as the holder of 100% of Kaiser Federal Bank’s capital stock, would be entitled to receive all assets of Kaiser Federal Bank available for distribution, after payment or provision for payment of all debts and liabilities of Kaiser Federal Bank, including all deposit accounts and accrued interest thereon, and after distribution of the balance in the liquidation account to Eligible Account Holders and Supplemental Eligible Account Holders. In the event of liquidation, dissolution or winding up of Kaiser Federal Financial Group, Inc., the holders of its common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities (including payments with respect to its liquidation account), all of the assets of Kaiser Federal Financial Group, Inc. available for distribution. If preferred stock is issued, the holders thereof may have a priority over the holders of the common stock in the event of liquidation or dissolution.

Preemptive Rights. Holders of the common stock of Kaiser Federal Financial Group, Inc. will not be entitled to preemptive rights with respect to any shares that may be issued. The common stock is not subject to redemption.

Preferred Stock

None of the shares of Kaiser Federal Financial Group, Inc.’s authorized preferred stock will be issued as part of the offering or the conversion. Preferred stock may be issued with preferences and designations as our board of directors may from time to time determine. Our board of directors may, without stockholder approval, issue shares of preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control.

TRANSFER AGENT

The transfer agent and registrar for Kaiser Federal Financial Group, Inc.’s common stock is Computershare Limited, California.

EXPERTS

The consolidated financial statements of K-Fed Bancorp and subsidiary as of June 30, 2009 and 2008, and for each of the years in the three-year period ended June 30, 2009, have been included herein in reliance upon the report of Crowe Horwath LLP, independent registered public accounting firm, which is included herein and upon the authority of said firm as experts in accounting and auditing.

RP Financial, LC. has consented to the publication herein of the summary of its report setting forth its opinion as to the estimated pro forma market value of the shares of common stock upon completion of the conversion and offering and its letters with respect to subscription rights and the liquidation accounts.

LEGAL MATTERS

Luse Gorman Pomerenk & Schick, P.C., Washington, D.C., counsel to Kaiser Federal Financial Group, Inc., K-Fed Mutual Holding Company, K-Fed Bancorp and Kaiser Federal Bank, will issue to Kaiser Federal Financial Group, Inc. its opinion regarding the legality of the common stock and the federal income tax consequences of the conversion. Moffett & Grigorian LLP has provided an opinion to us regarding the California income tax consequences of the conversion. Certain legal matters will be passed upon for Keefe, Bruyette & Woods, Inc. by Breyer & Associates PC, McLean, Virginia.

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WHERE YOU CAN FIND ADDITIONAL INFORMATION

Kaiser Federal Financial Group, Inc. has filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 with respect to the shares of common stock offered hereby. As permitted by the rules and regulations of the Securities and Exchange Commission, this prospectus does not contain all the information set forth in the registration statement. Such information, including the appraisal report which is an exhibit to the registration statement, can be examined without charge at the public reference facilities of the Securities and Exchange Commission located at 100 F Street, N.E., Washington, D.C. 20549, and copies of such material can be obtained from the Securities and Exchange Commission at prescribed rates. The Securities and Exchange Commission telephone number is 1-800-SEC-0330. In addition, the Securities and Exchange Commission maintains a web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission, including Kaiser Federal Financial Group, Inc. The statements contained in this prospectus as to the contents of any contract or other document filed as an exhibit to the registration statement are, of necessity, brief descriptions of the material terms of, and should be read in conjunction with, such contract or document.

K-Fed Mutual Holding Company has filed with the Office of Thrift Supervision an Application on Form AC with respect to the conversion. This prospectus omits certain information contained in the application. The application may be examined at the principal office of the Office of Thrift Supervision, 1700 G Street, N.W., Washington, D.C. 20552, and at the Western Regional Office of the Office of Thrift Supervision, located at 225 East John Carpenter Freeway, Suite 500, Irving, Texas 75062. Our plan of conversion and reorganization is available, upon request, at each of our branch offices.

In connection with the offering, Kaiser Federal Financial Group, Inc. will register its common stock under Section 12(b) of the Securities Exchange Act of 1934 and, upon such registration, Kaiser Federal Financial Group, Inc. and the holders of its common stock will become subject to the proxy solicitation rules, reporting requirements and restrictions on common stock purchases and sales by directors, officers and greater than 10% stockholders, the annual and periodic reporting and certain other requirements of the Securities Exchange Act of 1934. Under the plan of conversion and reorganization, Kaiser Federal Financial Group, Inc. has undertaken that it will not terminate such registration for a period of at least three years following the offering.

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Maryland	6712	Being Applied For
(State or Other Jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
Incorporation or Organization)	Classification Code Number)	Identification Number)

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company o
(Do not check if a smaller reporting company)

Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per share	Proposed maximum aggregate offering price	Amount of registration fee
Common Stock, $0.01 par value per share	15,868,448 shares	$10.00	$158,684,480 (1)	$11,315(2)

		Page

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Statements of Financial Condition at March 31, 2010 (unaudited), June 30, 2009 and 2008		F-3

Consolidated Statements of Income for the Nine Months Ended March 31, 2010 and 2009 (unaudited) and for the Years ended June 30, 2009, 2008 and 2007		F-4

Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the Nine Months Ended March 31, 2010 (unaudited) and for the Years Ended June 30, 2009, 2008 and 2007		F-5

Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2010 and 2009 (unaudited) and for the Years Ended June 30, 2009, 2008 and 2007		F-7

Notes to Consolidated Financial Statements		F-9


		/s/ Crowe Horwath LLP
Oak Brook, Illinois		Crowe Horwath LLP

September 8, 2009

	March 31, 2010			June 30, 2009			June 30, 2008
	(Unaudited)
ASSETS
Cash and due from banks	$	8,697		$	32,685		$	18,580
Federal funds sold		57,440			41,020			32,660
Total cash and cash equivalents		66,137			73,705			51,240
Interest earning time deposits in other financial institutions		24,146			25,508			—
Securities available-for-sale, at fair value		2,748			4,236			8,539
Securities held-to-maturity, fair value of $4,215, $5,625 and $7,308 at March 31, 2010, June 30, 2009 and June 30, 2008, respectively		4,101			5,528			7,504
Federal Home Loan Bank stock, at cost		12,649			12,649			12,540
Loans receivable, net of allowance for loan losses of $12,820, $4,586 and $3,229 at March 31, 2010, June 30, 2009 and June 30, 2008, respectively		752,607			746,875			742,191
Accrued interest receivable		3,154			3,402			3,278
Premises and equipment, net		2,167			2,562			3,059
Core deposit intangible		99			147			226
Goodwill		3,950			3,950			3,950
Bank-owned life insurance		12,250			11,884			11,408
Real estate owned		976			496			1,045
Other assets		8,150			4,155			4,311
Total assets	$	893,134		$	895,097		$	849,291
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits
Noninterest bearing	$	65,032		$	50,161		$	43,267
Interest bearing		583,706			516,032			451,791
Total deposits		648,738			566,193			495,058
Federal Home Loan Bank advances, short-term		62,000			70,000			28,000
Federal Home Loan Bank advances, long-term		85,000			137,004			207,019
State of California time deposit		—			25,000			25,000
Accrued expenses and other liabilities		4,375			4,342			3,886
Total liabilities		800,113			802,539			758,963
Commitments and contingent liabilities
Stockholders’ equity
Nonredeemable 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, 2010 — 14,728,440 shares issued June 30, 2009 — 14,728,440 shares issued June 30, 2008 — 14,713,440 shares issued		147			147			147
Additional paid-in capital		59,473			59,134			58,448
Retained earnings		53,433			53,512			50,635
Accumulated other comprehensive income, net of tax of $38, $53 and $13 at March 31, 2010, June 30, 2009 and June 30, 2008, respectively		54			77			20
Unearned employee stock ownership plan (ESOP) shares		(1,820	)		(2,161	)		(2,616	)
Treasury stock, at cost (March 31, 2010— 1,437,115 shares; June 30, 2009 — 1,423,852 shares; June 30, 2008 —1,243,134 shares)		(18,266	)		(18,151	)		(16,306	)
Total stockholders’ equity		93,021			92,558			90,328
Total liabilities and stockholders’ equity	$	893,134		$	895,097		$	849,291

	For the Nine Months Ended March 31,						Years Ended June 30,
	2010			2009			2009			2008			2007
	(Unaudited)
Interest income
Interest and fees on loans	$	33,101		$	32,678		$	43,706		$	42,582		$	37,379
Interest on securities, taxable		278			485			606			1,085			1,365
Federal Home Loan Bank dividends		35			314			314			572			480
Other interest		374			425			547			999			1,942
Total interest income		33,788			33,902			45,173			45,238			41,166
Interest expense
Interest on deposits		8,229			10,098			12,975			14,945			14,879
Interest on borrowings		5,697			7,556			9,908			10,824			8,261
Total interest expense		13,926			17,654			22,883			25,769			23,140
Net interest income		19,862			16,248			22,290			19,469			18,026
Provision for loan losses		8,787			2,007			2,586			962			529
Net interest income after provision for loan losses		11,075			14,241			19,704			18,507			17,497
Noninterest income
Service charges and fees		1,722			1,755			2,227			2,259			2,013
ATM fees and charges		1,377			1,256			1,746			1,595			1,612
Referral commissions		232			230			309			309			259
Loss on equity investment		(225	)		(207	)		(249	)		(377	)		(99	)
Bank-owned life insurance		366			357			476			454			439
Other noninterest income		36			35			40			80			35
Total noninterest income		3,508			3,426			4,549			4,320			4,259
Noninterest expense
Salaries and benefits		6,254			6,077			8,166			8,099			7,689
Occupancy and equipment		1,770			1,777			2,378			2,314			2,091
ATM expense		1,294			1,172			1,591			1,346			1,249
Advertising and promotional		279			300			425			390			316
Professional services		682			635			769			876			913
Federal deposit insurance premiums		771			373			1,031			412			140
Postage		207			211			280			288			315
Telephone		523			412			581			497			461
Stock offering costs		—			—			—			1,279			—
Other operating expense		1,063			1,163			1,528			1,325			1,414
Total noninterest expense		12,843			12,120			16,749			16,826			14,588
Income before income tax expense		1,740			5,547			7,504			6,001			7,168
Income tax expense		427			2,013			2,755			2,133			2,504
Net income	$	1,313		$	3,534		$	4,749		$	3,868		$	4,664

Earnings per common share:
Basic	$	0.10		$	0.27		$	0.36		$	0.29		$	0.34
Diluted	$	0.10		$	0.27		$	0.36		$	0.29		$	0.34

			Common Stock																	Treasury Stock
	Comprehensive Income		Shares			Amount		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income, net			Unearned ESOP Shares			Shares			Amount			Total
Balance, July1, 2006				14,702,040		$	147	$	56,456		$	46,224		$	(247	)	$	(3,526	)		(495,970	)	$	(6,397	)	$	92,657
Staff Accounting Bulletin No. 108 adjustment (see Note 2)				—			—		—			(320	)		—			—			—			—			(320	)
Balance at July 1, 2006, as adjusted				14,702,040		$	147	$	56,456		$	45,904		$	(247	)	$	(3,526	)		(495,970	)	$	(6,397	)	$	92,337
Comprehensive income
Net income for the year ended June 30, 2007	$	4,664		—			—		—			4,664			—			—			—			—			4,664
Other comprehensive income – unrealized gain on securities, net of tax of $86		121		—			—		—			—			121			—			—			—			121
Total comprehensive income	$	4,785
Dividends declared ($0.39 per share) *				—			—		—			(1,844	)		—			—			—			—			(1,844	)
Purchase of treasury stock				—			—		—			—			—			—			(279,845	)		(4,946	)		(4,946	)
Stock options earned				—			—		259			—			—			—			—			—			259
Allocation of stock awards				—			—		366			—			—			—			—			—			366
Issuance of stock awards				35,000			—		—			—			—			—			—			—			—
Forfeiture of stock awards				(24,000	)		—		—			—			—			—			—			—			—
Exercise of stock options				11,720			—		170			—			—			—			—			—			170
Tax adjustment of stock awards and options				—			—		40			—			—			—			—			—			40
Allocation of ESOP common stock				—			—		335			—			—			455			—			—			790
Balance, June 30, 2007				14,724,760		$	147	$	57,626		$	48,724		$	(126	)	$	(3,071	)		(775,815	)	$	(11,343	)	$	91,957
Comprehensive income
Net income for the year ended June 30, 2008	$	3,868		—			—		—			3,868			—			—			—			—			3,868
Other comprehensive income – unrealized gain on securities, net of tax of $101		146		—			—		—			—			146			—			—			—			146
Total comprehensive income	$	4,014
Dividends declared ($0.42 per share) *				—			—		—			(1,957	)		—			—			—			—			(1,957	)
Purchase of treasury stock				—			—		—			—			—			—			(467,319	)		(4,963	)		(4,963	)
Stock options earned				—			—		347			—			—			—			—			—			347
Allocation of stock awards				—			—		417			—			—			—			—			—			417
Issuance of stock awards				5,000			—		—			—			—			—			—			—			—
Forfeiture of stock awards				(16,320	)		—		—			—			—			—			—			—			—
Tax adjustment of stock awards and options				—			—		(30	)		—			—			—			—			—			(30	)
Allocation of ESOP common stock				—			—		88			—			—			455			—			—			543
Balance, June 30, 2008				14,713,440		$	147	$	58,448		$	50,635		$	20		$	(2,616	)		(1,243,134	)	$	(16,306	)	$	90,328

	Nine Months Ended March 31,						Years Ended June 30,
	2010			2009			2009			2008			2007
	(Unaudited)
OPERATING ACTIVITIES
Net income	$	1,313		$	3,534		$	4,749		$	3,868		$	4,664
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of net premium on securities		2			7			8			22			248
(Accretion) amortization of net premiums on loan purchases		(17	)		39			31			168			39
Amortization (accretion) of net loan origination fees		52			(43	)		(31	)		(90	)		(51	)
Provision for loan losses		8,787			2,007			2,586			962			529
Federal Home Loan Bank (FHLB) stock dividend		—			(314	)		(314	)		(572	)		(480	)
Depreciation and amortization		588			646			853			880			742
Amortization of core deposit intangible		48			60			79			97			114
Loss on equity investment		225			207			249			377			99
Increase in cash surrender value of bank-owned life insurance		(366	)		(357	)		(476	)		(454	)		(439	)
Accretion of net premiums on purchased certificates of deposit		—			—			—			(37	)		(43	)
(Accretion) amortization of debt exchange costs		(4	)		(11	)		(15	)		4			68
Allocation of ESOP common stock		301			285			383			543			790
Allocation of stock awards		176			306			408			417			366
Stock options earned		203			265			350			347			259
Provision for deferred income taxes		—			—			(489	)		(118	)		55
Net change in accrued interest receivable		248			16			(124	)		(19	)		(492	)
Net change in other assets		(4,340	)		497			339			(290	)		191
Net change in accrued expenses and other liabilities		33			(268	)		456			117			394
Net cash provided by operating activities		7,249			6,876			9,042			6,222			7,053
INVESTING ACTIVITIES
Purchases of available-for-sale securities		—			—			—			—			(8,860	)
Proceeds from maturities and principal repayments of available-for-sale securities		1,453			3,698			4,397			5,271			6,745
Proceeds from maturities and principal repayments of held-to-maturity securities		1,426			562			1,976			13,592			3,425
Net change in interest earning time deposits with other financial institutions		1,362			(9,042	)		(25,508	)		7,363			1,647
Purchases of loans		—			—			—			—			(109,794	)
Net change in loans, excluding loan purchases		(15,929	)		(13,153	)		(9,219	)		(45,133	)		43,989
Proceeds from sale of real estate owned		1,026			1,565			2,574			251			—
Redemption (purchase) of FHLB stock		—			205			205			(2,098	)		(644	)
Purchase of equity investment		—			—			(64	)		(128	)		(128	)
Purchases of premises and equipment		(193	)		(279	)		(356	)		(456	)		(810	)
Net cash used in investing activities		(10,855	)		(16,444	)		(25,995	)		(21,338	)		(64,430	)
FINANCING ACTIVITIES
Proceeds from FHLB advances		—			—			—			93,500			40,000
Repayment of FHLB advances		(60,000	)		(28,000	)		(28,000	)		(68,500	)		(10,000	)
Dividends paid on common stock		(1,392	)		(1,414	)		(1,872	)		(1,957	)		(1,844	)
Purchase of treasury stock		(115	)		(1,762	)		(1,845	)		(4,963	)		(4,946	)
Net change in deposits		82,545			59,192			71,135			967			30,717
Increase in State of California time deposit		—			—			—			25,000			—
Repayment of State of California time deposit		(25,000	)		—			—			—			—
Exercise of stock options		—			—			—			—			170
Tax benefit from stock award vesting		—			—			—			(30	)		40

	June 30,
	2008			2007
	(In thousands)
Net income, as previously reported	$	3,908		$	4,704
Salaries and benefits expense		(70	)		(70	)
Income tax benefit		30			30
Net income, as adjusted	$	3,868		$	4,664

	Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Amortized Cost
	(In thousands)
March 31, 2010 (unaudited)
Mortgage-backed (residential):
Freddie Mac	$	390	$	12	$	—		$	378
Collateralized mortgage obligations (residential):
Freddie Mac		2,358		80	—				2,278
Total	$	2,748	$	92	$	—		$	2,656

June 30, 2009
Mortgage-backed (residential):
Freddie Mac	$	524	$	13	$	—		$	511
Collateralized mortgage obligations (residential):
Freddie Mac		3,712		117	—				3,595
Total	$	4,236	$	130	$	—		$	4,106

June 30, 2008
Mortgage-backed (residential):
Freddie Mac	$	3,557	$	—	$	(7	)	$	3,564
Collateralized mortgage obligations (residential):
Freddie Mac		4,982		40	—				4,942
Total	$	8,539	$	40	$	(7	)	$	8,506

	Carrying Amount		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
	(In thousands)
March 31, 2010 (unaudited)
Mortgage-backed
Fannie Mae	$	167	$	1	$	—		$	168
Freddie Mac		138		6		—			144
Ginnie Mae		100		3		—			103
Collateralized mortgage obligations
Fannie Mae		1,487		36		—			1,523
Freddie Mac		2,209		89		(21	)		2,277
Total	$	4,101	$	135	$	(21	)	$	4,215

June 30, 2009
Mortgage-backed
Fannie Mae	$	191	$	1	$	—		$	192
Freddie Mac		156		—		—			156
Ginnie Mae		111		4		—			115
Collateralized mortgage obligations
Fannie Mae		1,819		14		(1	)		1,832
Freddie Mac		3,251		93		(14	)		3,330
Total	$	5,528	$	112	$	(15	)	$	5,625
June 30, 2008
Mortgage-backed
Fannie Mae	$	235	$	1	$	—		$	236
Freddie Mac		178		2		—			180
Ginnie Mae		123		2		—			125
Collateralized mortgage obligations
Fannie Mae		2,274		—		(50	)		2,224
Freddie Mac		4,350		—		(150	)		4,200
Ginnie Mae		344		—		(1	)		343
Total	$	7,504	$	5	$	(201	)	$	7,308

	Less than 12 months						12 months or more				Total
	Fair		Unrealized				Fair		Unrealized		Fair		Unrealized
	Value		Loss				Value		Loss		Value		Loss
	(In thousands)
March 31, 2010 (unaudited)
Description of Securities
Collateralized mortgage obligations	$	571	$	(21	)	$	—	$	—		$	571	$	(21	)
Total temporarily impaired	$	571	$	(21	)	$	—	$	—		$	571	$	(21	)

June 30, 2009
Description of Securities
Collateralized mortgage obligations	$	1,353	$	(15	)	$	—	$	—		$	1,353	$	(15	)
Total temporarily impaired	$	1,353	$	(15	)	$	—	$	—		$	1,353	$	(15	)

June 30, 2008
Description of Securities
Mortgage-backed	$	—	$	—		$	3,557	$	(7	)	$	3,557	$	(7	)
Collateralized mortgage obligations		3,456		(64	)		3,311		(137	)		6,767		(201	)
Total temporarily impaired	$	3,456	$	(64	)	$	6,868	$	(144	)	$	10,324	$	(208	)

	March 31,			June 30,
	2010			2009			2008
	(Unaudited)
Real Estate:
One-to-four family residential, fixed rate	$	283,305		$	303,287		$	335,453
One-to-four family residential, variable rate		60,056			73,943			93,274
Multi-family residential, variable rate		260,243			196,575			132,290
Commercial real estate, variable rate		113,989			121,143			115,831
		717,593			694,948			676,848
Consumer:
Automobile		32,371			41,798			52,299
Home equity		1,105			1,299			1,405
Other consumer loans, primarily unsecured		13,830			13,119			14,883
		47,306			56,216			68,587
Total loans		764,899			751,164			745,435
Deferred net loan origination costs		590			376			33
Net discounts on purchased loans		(62	)		(79	)		(48	)
Allowance for loan losses		(12,820	)		(4,586	)		(3,229	)
	$	752,607		$	746,875		$	742,191

	Nine Months Ended March 31,						Years Ended June 30,
	2010			2009			2009			2008			2007
	(Unaudited)
Balance, beginning of period	$	4,586		$	3,229		$	3,229		$	2,805		$	2,722
Provision for loan losses		8,787			2,007			2,586			962			529
Recoveries		62			189			259			368			322
Loans charged off		(615	)		(1,122	)		(1,488	)		(906	)		(768	)
Balance, end of period	$	12,820		$	4,303		$	4,586		$	3,229		$	2,805

	Nine Months Ended March 31, 2010						June 30,
	2010			2009			2009			2008
	(Unaudited)
Beginning of period	$	496		$	1,045		$	1,045		$	238
Transfers in		1,375			1,263			1,949			1,045
Capitalized improvements		3			56			72		—
Valuation allowance	—			—			—			—
Sales		(898	)		(1,583	)		(2,570	)		(238	)
End of period	$	976		$	781		$	496		$	1,045

	Nine Months Ended March 31, 2010						June 30,
	2010			2009			2009			2008				2007
	(Unaudited)

Net gain (loss) on sales	$	128		$	(17	)	$	3		$	13		$	—
Provision for valuation allowance	—			—			—			—				—
Operating expenses, net of rental income		(46	)		(21	)		(22	)		(2	)		—
Total	$	82		$	(38	)	$	(19	)	$	11		$	—

Period ended June 30,	March 31, 2010		June 30, 2009
	(Unaudited)
2010	$	167	$	843
2011		708		449
2012		575		254
2013		658		264
2014		686		268
Thereafter		2,883		161
	$	5,677	$	2,239

	Nine Months Ended March 31,				Year Ended June 30,
	2010		2009		2009		2008
	(Unaudited)
Beginning of period	$	3,950	$	3,950	$	3,950	$	3,950
Acquired goodwill	—		—		—		—
Impairment	—		—		—		—
End of period	$	3,950	$	3,950	$	3,950	$	3,950

	Shares			Weighted Average Grant Date Fair Value
RRP shares at July 1, 2009		53,780		$	13.33
Granted	—			—
Vested		(28,780	)		14.31
RRP shares at March 31, 2010		25,000		$	12.19

	Shares			Weighted Average Grant Date Fair Value
RRP shares at July 1, 2008		66,560		$	14.78
Granted		15,000			9.10
Vested		(27,780	)		14.53
RRP shares at June 30, 2009		53,780		$	13.33

	March 31, 2010
	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(Unaudited)
Outstanding at beginning of period		484,400	$	12.07
Granted	—		—
Exercised	—		—
Forfeited or expired	—		—
Outstanding at end of period		484,400	$	12.07	6.50 years	$	—
Fully vested and expected to vest		484,400	$	12.07	6.50 years	$	—
Options exercisable at end of period		308,400	$	13.92	5.31 years	$	—

		June 30, 2009		June 30, 2008	June 30, 2007
		(In thousands, except per option data)
Intrinsic value of stock options exercised	$	—	$	—	$	28
Cash received from options exercised		—		—		170
Tax benefit realized from option exercises		—		—		5
Weighted average fair value of stock options granted	$	1.34	$	2.58	$	4.25

	June 30
	2009			2008
	(In thousands)
Deferred tax assets:
Allowance for loan losses	$	1,887		$	1,225
Accrued expenses		596			571
Accrued state income tax		269			254
RRP Plan		106			104
Other		164			156
Total deferred tax assets		3,022			2,310
Deferred tax liabilities:
Goodwill and other intangibles		(378	)		(283	)
Federal Home Loan Bank Stock dividends		(852	)		(722	)
Unrealized gain on securities available-for-sale		(54	)		(14	)
Total deferred tax liabilities		(1,284	)		(1,019	)
Net deferred tax asset, included in other assets	$	1,738		$	1,291

	Actual					Minimum Capital Adequacy Requirements					Minimum Required to be Well Capitalized Under Prompt Corrective Actions Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
March 31, 2010 (unaudited):
Total capital (to risk-weighted assets)	$	86,535		13.99	%	$	49,487		8.00	%	$	61,899		10.00	%
Tier 1 capital (to risk-weighted assets)		78,798		12.74			24,759		4.00			37,139		6.00
Tier 1 (core) capital (to adjusted tangible assets)		78,798		8.89			35,473		4.00			44,342		5.00

June 30, 2009:
Total capital (to risk-weighted assets)	$	80,077		13.32	%	$	48,096		8.00	%	$	60,120		10.00	%
Tier 1 capital (to risk-weighted assets)		76,713		12.76			24,048		4.00			36,072		6.00
Tier 1 (core) capital (to adjusted tangible assets)		76,713		8.65			35,493		4.00			44,367		5.00

June 30, 2008:
Total capital (to risk-weighted assets)	$	73,161		12.81	%	$	45,683		8.00	%	$	57,104		10.00	%
Tier 1 capital (to risk-weighted assets)		70,266		12.31			22,842		4.00			34,262		6.00
Tier 1 (core) capital (to adjusted tangible assets)		70,266		8.40			33,444		4.00			41,803		5.00

			Fair Value Measurements at March 31, 2010 Using
Assets at March 31, 2010 (unaudited):	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
Available-for-sale securities
Mortgage-backed securities (residential)	$	390	$	—	$	390	$	—
Collateralized mortgage obligations (residential)	$	2,358	$	—	$	2,358	$	—

			Fair Value Measurements at June 30, 2009 Using
Assets at June 30, 2009:	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
Available-for-sale securities
Mortgage-backed securities (residential)	$	524	$	—	$	524	$	—
Collateralized mortgage obligations (residential)	$	3,712	$	—	$	3,712	$	—

	Three months ended
	September 30		December 31			March 31		June 30
	(In thousands, except share data)
Fiscal Year 2010 (Unaudited)
Interest income	$	11,320	$	11,217		$	11,251		N/A
Interest expense		5,130		4,455			4,341		N/A
Net interest income		6,190		6,762			6,910		N/A
Provision for loan losses		865		5,650			2,272		N/A
Noninterest income		1,200		1,193			1,115		N/A
Other noninterest expense		4,273		4,320			4,250		N/A
Income (loss) before income tax		2,252		(2,015	)		1,503		N/A
Income tax expense (benefit)		842		(809	)		394		N/A
Net income (loss)	$	1,140	$	(1,206	)	$	1,109		N/A
Basic and Diluted earnings (loss) per share	$	0.11	$	(0.09	)	$	0.08		N/A

Fiscal Year 2009
Interest income	$	11,505	$	11,112		$	11,284	$	11,272
Interest expense		6,230		5,945			5,478		5,230
Net interest income		5,275		5,167			5,806		6,042
Provision for loan losses		363		984			660		579
Noninterest income		1,210		1,177			1,038		1,124
Other noninterest expense		3,935		3,965			4,218		4,631
Income before income tax		2,187		1,395			1,966		1,956
Income tax expense		778		464			772		741
Net income	$	1,409	$	931		$	1,194	$	1,215
Basic and Diluted earnings per share	$	0.10	$	0.07		$	0.09	$	0.10

Fiscal Year 2008
Interest income	$	10,987	$	11,251		$	11,586	$	11,414
Interest expense		6,460		6,488			6,499		6,322
Net interest income		4,527		4,763			5,087		5,092
Provision for loan losses		168		184			200		410
Noninterest income		1,041		1,040			1,132		1,107
Terminated stock offering costs	—			1,279		—		—
Other noninterest expense		3,853		3,802			3,928		3,964
Total noninterest expense		3,853		5,081			3,928		3,964
Income before income tax		1,547		538			2,091		1,825
Income tax expense		554		132			766		681
Net income	$	993	$	406		$	1,325	$	1,144
Basic and Diluted earnings per share	$	0.07	$	0.03		$	0.10	$	0.09

QUESTIONS AND ANSWERS FOR STOCKHOLDERS OF K-FED BANCORP REGARDING THE PLAN OF CONVERSION AND REORGANIZATION		1
SUMMARY		6
RISK FACTORS		12
PROPOSAL 1 — APPROVAL OF THE PLAN OF CONVERSION AND REORGANIZATION		17
PROPOSAL 2 — ADJOURNMENT OF THE SPECIAL MEETING		20
PROPOSALS 3a THROUGH 3c — INFORMATIONAL PROPOSALS RELATED TO THE ARTICLES OF INCORPORATION AND BYLAWS OF KAISER FEDERAL FINANCIAL GROUP, INC.		21
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA		24
FORWARD-LOOKING STATEMENTS		25
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING		26
OUR DIVIDEND POLICY		26
MARKET FOR THE COMMON STOCK		26
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE		27
CAPITALIZATION		28
PRO FORMA DATA		29
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		30
BUSINESS OF KAISER FEDERAL FINANCIAL GROUP, INC.		31
BUSINESS OF K-FED BANCORP AND KAISER FEDERAL BANK		31
SUPERVISION AND REGULATION		32
TAXATION		32
MANAGEMENT		33
BENEFICIAL OWNERSHIP OF COMMON STOCK		34
SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS		34
COMPARISON OF STOCKHOLDERS’ RIGHTS FOR EXISTING STOCKHOLDERS OF K-FED BANCORP		35
RESTRICTIONS ON ACQUISITION OF KAISER FEDERAL FINANCIAL GROUP, INC.		36
DESCRIPTION OF CAPITAL STOCK OF KAISER FEDERAL FINANCIAL GROUP, INC. FOLLOWING THE CONVERSION		37
TRANSFER AGENT		37
EXPERTS		37
LEGAL MATTERS		37
WHERE YOU CAN FIND ADDITIONAL INFORMATION		37
OTHER MATTERS		37
K-FED BANCORP INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

PART II:	INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.	Other Expenses of Issuance and Distribution

		Amount (1)

*	Registrant’s Legal Fees and Expenses	$	550,000
*	Registrant’s Accounting Fees and Expenses		115,000
*	Marketing Agent Fees and Expenses (1)		2,960,790
*	Marketing Agent Legal Fees and Expenses		100,000
*	Conversion Agent Fees and Expenses		80,000
*	Appraisal Fees and Expenses		110,000
*	Business Plan Fees and Expenses		41,000
*	Printing, Postage and Mailing		400,000
*	Filing Fees (FINRA, Nasdaq, SEC and OTS)		47,184
*	Transfer Agent and registrar fees and expenses		7,000
*	Certificate Printing		10,000
*	Proxy Solicitor		25,000
*	Other		64,816
*	Total	$	4,510,790

Item 15.	Recent Sales of Unregistered Securities
	Not Applicable.

Item 16.		Exhibits and Financial Statement Schedules:

		The exhibits and financial statement schedules filed as part of this registration statement are as follows:

	(a)	List of Exhibits