SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the Quarterly Period Ended December 31, 1996

                                       OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                         Commission File Number: 0-26556

                           KLAMATH FIRST BANCORP, INC.
             (Exact name of registrant as specified in its charter)

                     Oregon                                          93-1180440
---------------------------------------------                  ----------------
(State or other jurisdiction of incorporation                  (I.R.S. Employer
or organization)                                         Identification Number)

540 Main Street, Klamath Falls, Oregon                                    97601
---------------------------------------------                  ----------------
(Address of principal executive offices)                             (Zip Code)

Registrant's telephone number, including area code:              (541) 882-3444
                                                          ---------------------

Securities registered pursuant to Section 12(b) of the Act:                None
                                                               ----------------

Securities registered pursuant to Section 12(g) of the Act:       Common Stock,
                                                       par value $.01 per share
                                                       ------------------------
                                                               (Title of Class)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .

         As of January 31, 1997,  there were issued and  outstanding  10,451,223
shares of the Registrant's Common Stock. The Registrant's voting common stock is
traded  over-the-counter  and is listed on the Nasdaq  National Market under the
symbol "KFBI."



<PAGE>




                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY




                                TABLE OF CONTENTS

Part I.  Financial Information

Item 1.  Financial Statements                                              Page

         Consolidated Statements of Financial Condition
         (As of December 31, 1996 and September 30, 1996)                     3

         Consolidated Statements of Earnings (For the three months
         ended December 31, 1996 and 1995)                                    4

         Consolidated Statements of Shareholders' Equity
         (For the year ended September 30, 1996 and for the three
          months ended December 31, 1996)                                     5

         Consolidated Statements of Cash Flows (For the three months
         ended December 31, 1996 and 1995)                                  6-7

         Notes to Consolidated Financial Statements                         8-9

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                        10-13

Part II. Other Information

Item 1.  Legal Proceedings                                                   14

Item 2.  Changes in Securities                                               14

Item 3.  Defaults Upon Senior Securities                                     14

Item 4.  Submission of Matters to a Vote of Security Holders                 14

Item 5.  Other Information                                                   14

Item 6.  Exhibits and Reports on Form 8-K                                    14

Signatures                                                                   15







                                                           2

<PAGE>
<TABLE>
                                      KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                              AS OF DECEMBER 31, 1996 (Unaudited) and SEPTEMBER 30, 1996
<CAPTION>

                                                                                                     December 31,     September 30,
                                                                                                             1996              1996
ASSETS                                                                                              -------------     -------------

<S>                                                                                                 <C>               <C>          
Cash and due from banks ........................................................................    $   4,312,146     $   6,841,554
Federal funds sold .............................................................................       12,763,573         9,338,079
                                                                                                    -------------     -------------
   Total cash and cash equivalents .............................................................       17,075,719        16,179,633

Investment securities available for sale, at fair value ........................................       61,773,953        75,986,611
  (amortized cost: $62,402,968 and $77,071,211)
Investment securities held to maturity, at amortized cost (fair
  value: $9,846,550 and $9,860,165) ............................................................        9,797,660         9,827,193
Mortgage backed and related securities available for sale, at fair
  value (amortized cost: $70,189,710 and $74,249,350) ..........................................       70,685,246        74,109,321
Mortgage backed and related securities held to maturity, at amortized
  cost (fair value: $6,560,888 and $6,736,007) .................................................        6,535,659         6,783,001
Loans receivable, net ..........................................................................      488,591,338       473,555,988
Real estate owned ..............................................................................               --            69,483
Premises and equipment, net ....................................................................        4,884,560         4,964,262
Stock in Federal Home Loan Bank of Seattle, at cost ............................................        7,674,300         4,773,800
Accrued interest receivable, net ...............................................................        5,401,287         5,037,285
Other assets ...................................................................................          674,629           682,814
                                                                                                    -------------     -------------
   Total assets ................................................................................    $ 673,094,351     $ 671,969,391
                                                                                                    =============     =============

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
  Savings deposits .............................................................................    $ 401,813,385     $ 399,673,180
  Accrued interest on savings deposits .........................................................          755,824           712,408
  Advances from borrowers for taxes and insurance ..............................................          391,946         7,831,127
  Advances from Federal Home Loan Bank of Seattle ..............................................      101,000,000        90,000,000
  Short term borrowings ........................................................................        7,997,500        14,904,400
  Accrued interest on borrowings ...............................................................          490,165           323,163
  Pension liability ............................................................................          701,925           668,088
  Deferred federal and state income taxes ......................................................        1,971,147           735,596
  Other liabilities ............................................................................        5,413,109         3,710,455
                                                                                                    -------------     -------------
    Total liabilities ..........................................................................      520,535,001       518,558,417
                                                                                                    -------------     -------------

SHAREHOLDERS' EQUITY
  Preferred stock, $.01 par value, 500,000 shares authorized; none issued ......................               --                --
  Common stock, $.01 par value, 35,000,000 shares authorized,
    December 31, 1996 -11,372,470 issued, 10,002,360 outstanding;
    September 30, 1996 -11,612,470 issued, 10,242,360 shares outstanding .......................          113,724           116,124
  Additional paid-in-capital ...................................................................      107,145,313       110,762,678
  Retained earnings-substantially restricted ...................................................       60,306,003        59,082,479
  Unearned shares issued to ESOP ...............................................................       (8,563,188)       (8,807,850)
  Unearned shares issued to MRDP ...............................................................       (6,359,745)       (6,694,470)
  Net unrealized loss on securities available for sale .........................................          (82,757)       (1,047,987)
                                                                                                    -------------     -------------
    Total shareholders' equity .................................................................      152,559,350       153,410,974
                                                                                                    -------------     -------------
    Total liabilities and shareholders' equity .................................................    $ 673,094,351     $ 671,969,391
                                                                                                    =============     =============

      See notes to consolidated financial statements.
</TABLE>
                                                                     3
<PAGE>
<TABLE>
                                                 KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                                     CONSOLIDATED STATEMENTS OF EARNINGS
                                            FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
                                                                 (Unaudited)
<CAPTION>

                                                                                                   December 31,         December 31,
                                                                                                           1996                 1995
                                                                                                    -----------          -----------

<S>                                                                                                 <C>                  <C>        
INTEREST INCOME 
 Loans receivable .......................................................................           $ 9,606,330          $ 8,258,304
  Mortgage backed and related securities .................................................            1,269,267              264,855
  Investment securities ..................................................................            1,422,890            1,183,135
  Federal funds sold .....................................................................              284,254            1,080,825
  Interest bearing deposits ..............................................................               19,882              131,431
                                                                                                    -----------          -----------
    Total interest income ................................................................           12,602,623           10,918,550
                                                                                                    -----------          -----------

INTEREST EXPENSE
  Savings deposits .......................................................................            5,145,930            5,095,856
  FHLB advances ..........................................................................            1,541,397              427,139
  Other ..................................................................................              228,742               44,112
                                                                                                    -----------          -----------
    Total interest expense ...............................................................            6,916,069            5,567,107
                                                                                                    -----------          -----------
    Net interest income ..................................................................            5,686,554            5,351,443

Provision for loan losses ................................................................               30,000               30,000
                                                                                                    -----------          -----------

    Net interest income after provision for loan losses ..................................            5,656,554            5,321,443
                                                                                                    -----------          -----------

NON-INTEREST INCOME
  Fees and service charges ...............................................................               71,658               60,873
  Gain on sale of investments ............................................................                2,143                   --
  Gain on sale of real estate owned ......................................................               26,297                   --
  Other income ...........................................................................               12,412               18,597
                                                                                                    -----------          -----------
    Total non-interest income ............................................................              112,510               79,470
                                                                                                    -----------          -----------
NON-INTEREST EXPENSE
  Compensation, employee benefits and related expense ....................................            1,578,967              981,629
  Occupancy expense ......................................................................              234,485              231,320
  Data processing expense ................................................................              121,079               91,432
  Insurance premium expense ..............................................................              229,429              224,642
  Loss on sale of investments ............................................................               14,530                   --
  Loss on sale of real estate owned ......................................................                   --                4,690
  Other expense ..........................................................................              425,445              306,136
                                                                                                    -----------          -----------
    Total non-interest expense ...........................................................            2,603,935            1,839,849
                                                                                                    -----------          -----------

Earnings before income taxes .............................................................            3,165,129            3,561,064

Provision for income tax .................................................................            1,252,042            1,319,925
                                                                                                    -----------          -----------

Net earnings .............................................................................          $ 1,913,087          $ 2,241,139
                                                                                                    ===========          ===========

Earnings per common share (based on weighted average shares outstanding) .................          $       .19          $       .20
Weighted average number of shares outstanding ............................................           10,239,751           11,254,475

      See notes to consolidated financial statements.
</TABLE>
                                                                     4
<PAGE>
<TABLE>
                                                 KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                       FOR THE YEAR ENDED SEPTEMBER 30, 1996 AND THE THREE MONTHS ENDED DECEMBER 31, 1996 (Unaudited)
<CAPTION>

                                                    Additional                    Unearned    Unrealized      Unearned         Total
                      Common Stock  Common Stock       paid-in      Retained   ESOP shares gain(loss) on shares issued shareholders'
                            Shares        Amount       capital      earnings       at cost    securities       to MRDP        equity
                      ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------

<S>                     <C>         <C>           <C>           <C>           <C>           <C>           <C>          <C>        
Balance at
October 1, 1995 .....   12,233,125  $    122,331  $119,230,653  $ 55,811,362  $(9,786,500)  $  (692,781)  $      --    $164,685,065

Cash dividends ......         --            --            --      (2,838,680)        --            --            --      (2,838,680)

Earned ESOP shares ..         --            --         417,652          --        978,650          --            --       1,396,302

Unrealized loss on
securities available
for sale ............         --            --            --            --           --        (355,206)         --        (355,206)

Unearned shares
issued to MRDP Trust          --            --            --            --           --            --      (6,694,470)   (6,694,470)

Stock retirement ....     (620,655)       (6,207)   (8,885,627)         --           --            --            --      (8,891,834)

Net earnings ........         --            --            --       6,109,797         --            --            --       6,109,797
                      ------------  ------------  ------------  ------------ ------------  ------------  ------------  ------------
Balance at
September 30, 1996 ..   11,612,470  $    116,124  $110,762,678  $ 59,082,479 ($ 8,807,850) ($ 1,047,987) ($ 6,694,470) $153,410,974

Cash dividends ......         --            --            --        (689,563)        --            --            --        (689,563)

Unrealized gain on
securities available
for sale ............         --            --            --            --           --         965,230          --         965,230

Stock retirement ....     (240,000)       (2,400)   (3,732,600)         --           --            --            --      (3,735,000)

ESOP contribution ...         --            --         115,235          --        244,662          --            --         359,897

MRDP contribution ...         --            --            --            --           --            --         334,725       334,725

Net earnings ........         --            --            --       1,913,087         --            --            --       1,913,087
                      ------------  ------------  ------------  ------------ ------------  ------------  ------------  ------------
Balance at
December 31, 1996 ...   11,372,470  $    113,724  $107,145,313  $ 60,306,003 ($ 8,863,188) ($    82,757) ($ 6,359,745) $152,559,350
                      ============  ============  ============  ============ ============  ============  ============  ============


      See notes to consolidated financial statements.
</TABLE>

                                                                     5
<PAGE>
<TABLE>



                                                 KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
                                                                 (Unaudited)
<CAPTION>



                                                                                         December 31,                  December 31,
                                                                                                 1996                          1995
                                                                                        -------------                 -------------

<S>                                                                                     <C>                           <C>          
CASH FLOWS FROM OPERATING ACTIVITIES
   Net earnings ....................................................................    $   1,913,087                 $   2,241,139
                                                                                        -------------                 -------------
ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
   Depreciation ....................................................................           89,796                       102,225
   Provision for loan losses .......................................................           30,000                        30,000
   Compensation expense related to ESOP benefit ....................................          359,897                       320,261
   Compensation expense related to MRDP Trust ......................................          334,725                          --
   Net amortization of premiums (discounts) paid on
     investment and mortgage backed and related securities .........................          118,893                       (51,624)
   Increase in deferred loan fees, net of amortization .............................          155,724                        91,690
   Accretion of discounts on purchased loans .......................................              (81)                          (79)
   Net gain (loss) on sale of real estate owned and premises and equipment .........           (3,234)                        4,690
   FHLB stock dividend .............................................................         (124,300)                      (80,800)
CHANGES IN ASSETS AND LIABILITIES
   Accrued interest receivable .....................................................         (364,002)                     (832,738)
   Other assets ....................................................................            8,185                       150,938
   Accrued interest on savings deposits ............................................           43,416                      (418,589)
   Accrued interest on borrowings ..................................................          167,002                          --
   Pension liabilities .............................................................           33,837                        29,637
   Deferred federal and state income taxes .........................................        1,109,631                          --
   Other liabilities ...............................................................        1,825,964                      (959,705)
                                                                                        -------------                 -------------
Total adjustments ..................................................................        3,785,453                    (1,614,094)
                                                                                        -------------                 -------------
Net cash provided by operating activities ..........................................        5,698,540                       627,045
                                                                                        -------------                 -------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from maturity of investment securities held to maturity ................       28,949,466                     5,500,000
   Proceeds from maturity of investment securities available for sale ..............        2,000,000                          --
   Principal repayments received on mortgage backed and related securities .........        4,640,984                     1,026,279
   Principal repayments received on loans ..........................................       11,925,352                    13,026,991
   Loan originations ...............................................................      (27,146,345)                  (27,108,658)
   Purchase of investment securities held to maturity ..............................      (28,930,495)                         --
   Purchase of investment securities available for sale ............................       (3,413,607)                  (64,448,310)
   Purchase of mortgage backed and related securities held to maturity .............             --                            --
   Purchase of mortgage backed and related securities available for sale ...........       (5,151,261)                  (28,931,691)
   Purchase of FHLB stock ..........................................................       (2,776,200)                         --
   Proceeds from sale of investment securities available for sale ..................       16,080,419                          --
   Proceeds from sale of mortgage backed and related securities available for sale .        4,710,359                          --
   Proceeds from sale of real estate owned and premises and equipment ..............           72,717                        20,667
   Purchases of premises and equipment .............................................          (10,094)                      (50,236)
                                                                                        -------------                 -------------
Net cash used in investing activities ..............................................          951,295                  (100,964,958)
                                                                                        -------------                 -------------
                                                       (continued on next page)
</TABLE>

                                                                 6

<PAGE>


<TABLE>


                                             KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
                                                             (Unaudited)
                                                   (continued from privious page)
<CAPTION>

                                                                                         December 31,                   December 31,
                                                                                                 1996                          1995
                                                                                        -------------                 -------------
<S>                                                                                     <C>                           <C>           
CASH FLOWS FROM FINANCING ACTIVITIES
   Increase/(decrease) in savings deposits, net of withdrawals .....................    $   2,140,205                 ($  2,264,259)
   Proceeds from FHLB advances .....................................................       89,000,000                    20,000,000
   Repayments of FHLB advances .....................................................      (78,000,000)                         --
   Proceeds from short term borrowings .............................................        8,059,000                          --
   Repayments of short term borrowings .............................................      (14,965,900)                         --
   Repayment from stock over subscription ..........................................              --                    (65,685,300)
   Stock retirement ................................................................       (3,735,000)                         --
   Advances from borrowers for tax and insurance ...................................       (7,439,181)                   (7,167,001)
   Dividends paid ..................................................................         (812,873)                         --
                                                                                        -------------                 -------------
Net cash provided by financing activities ..........................................       (5,753,749)                  (55,116,560)

                                                                                        -------------                 -------------
Net (decrease) increase in cash and cash equivalents ...............................          896,086                  (155,454,473)

Cash and cash equivalents at beginning of quarter ..................................       16,179,633                   175,994,270
                                                                                        -------------                 -------------
Cash and cash equivalents at end of quarter ........................................    $  17,075,719                 $  20,539,797
                                                                                        =============                 =============
SUPPLEMENTAL SCHEDULE OF INTEREST AND INCOME
  TAXES PAID
   Interest paid ...................................................................    $   6,705,650                 $   5,985,696
   Income taxes paid ...............................................................            5,000                          --

SUPPLEMENTAL SCHEDULE OF NONCASH
  INVESTING ACTIVITIES
   Transfer of investment securities from held
     to maturity to available for sale at estimated fair market value ..............            $--                     $27,171,074
   Transfer of mortgage backed and related securities from held to maturity to
     available for sale at estimated fair value ....................................             --                       1,717,890
   Net unrealized gain on securities available for sale ............................          965,230                       224,788
   Dividends declared and accrued in other liabilities .............................          796,073                       611,655

      See notes to consolidated financial statements.

</TABLE>


                                                                 7

<PAGE>





                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited consolidated statements
contain all adjustments  (consisting of normal recurring accruals) necessary for
a fair presentation of Klamath First Bancorp,  Inc.'s (the "Company")  Financial
Condition  as of December 31, 1996,  and  September  30, 1996 and the Results of
Operations  for the  three  months  ended  December  31,  1996  and 1995 and the
Statements of Cash Flows for the three months ended  December 31, 1996 and 1995.
Certain  information  and  note  disclosures   normally  included  in  financial
statements prepared in accordance with generally accepted accounting  principles
have been omitted  pursuant to the rules and  regulations  of the Securities and
Exchange  Commission.   It  is  suggested  that  these  consolidated   financial
statements  be read in  conjunction  with  the  audited  consolidated  financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K. The results of operations for the three months ended December 31, 1996 are
not  necessarily  indicative of the results which may be expected for the entire
fiscal year.

2.  ALLOWANCE FOR LOAN LOSSES
<TABLE>

Activity in allowance for loan losses is summarized as follows:

<CAPTION>
                                                        December 31, 1996            September 30, 1996
                                                      -------------------           -------------------
<S>                                                             <C>                           <C>     
Balance, beginning of year                                      $927,820                      $807,820
Charge-offs                                                           --                            --
Additions                                                         30,000                       120,000
                                                      -------------------           -------------------
Balance, end of period                                          $957,820                      $927,820
                                                      ===================           ==================
</TABLE>

3.   ADVANCES FROM FEDERAL HOME LOAN BANK

Borrowings  at December 31, 1996  consisted of eight short term,  fixed rate and
adjustable rate London Interbank Offered Rate ("LIBOR") based advances totalling
$76.0 million and four long term, adjustable rate LIBOR based advances totalling
$25.0 million from the Federal Home Loan Bank of Seattle ("FHLB").  The advances
are  collateralized  in  aggregate  by  certain  mortgages  or deeds  of  trust,
securities of the U.S.  Government and agencies thereof and cash on deposit with
the FHLB.
<TABLE>

Scheduled maturities of advances from the FHLB were as follows:

<CAPTION>

                                December 31, 1996                                September 30, 1996
                     -----------------------------------------------  ------------------------------------------------
                                          Range of  Weighted average                       Range of   Weighted average
                            Amount  interest rates     interest rate         Amount  interest rates      interest rate
                     -------------   -------------     -------------  -------------  --------------   ----------------
<S>                  <C>               <C>                     <C>    <C>               <C>                      <C>  
Due within one year  $  76,000,000     5.44%-5.61%             5.50%  $  65,000,000     5.40%-5.64%               5.53%

After three but within  
four years .........    25,000,000     5.55%-5.66%             5.61%     25,000,000     5.53%-5.74%               5.66%
                     -------------                                    -------------
                     $ 101,000,000                                    $  90,000,000
                     =============                                    =============

</TABLE>


                                                                 8

<PAGE>




4.   SHORT TERM BORROWINGS

Securities  sold under  agreements to  repurchase  totalled $8.0 million with an
interest rate of 5.65%. All of the agreements are due within 90 days.

5.   REGULATORY CAPITAL
<TABLE>

The following  table  illustrates the compliance by Klamath First Federal Saving
and Loan  Association (the  "Association")  with applicable  regulatory  capital
requirements at December 31, 1996:

<CAPTION>
                                                                                     Categorized as "Well
                                                                      For Capital      Capitalized" Under
                                                                         Adequacy       Prompt Corrective
                                                   Actual                Purposes        Action Provision
                                             --------------------      -----------------      -------------------
                                                   Amount   Ratio          Amount  Ratio           Amount   Ratio
                                             ------------   -----      ----------  -----      -----------   -----
<S>                                          <C>            <C>         <C>          <C>       <C>           <C>
As of December 31, 1996:
 Total Capital: .........................    $115,115,858   39.1%       23,553,392   8.0        29,441,740    10.0%
  (To Risk Weighted Assets)
 Tier I Capital: ........................    $114,348,446   38.8%              N/A              17,665,044    6.0%
  (To Risk Weighted Assets)
 Tier I Capital: ........................    $114,348,446   18.1%       18,935,986   3.0        31,559,976    5.0%
  (To Total Assets)
 Tangible Capital: ......................    $114,348,446   18.1%        9,467,993   1.5%              N/A
  (To Total Assets)
</TABLE>


6.   SHAREHOLDERS' EQUITY

During the  quarter,  the Company  received  approval  from the Office of Thrift
Supervision to repurchase 10% of its outstanding  shares.  This repurchase began
on December 31, 1996, with the repurchase of 240,000  shares,  leaving a balance
of 821,247 to be repurchased  before  September 30, 1997.  The stock  repurchase
program,  however,  was completed on January  16th,  1997 at an average price of
$15.62 a share.

7.   EARNINGS PER SHARE

Earnings per share are computed based upon the weighted average number of shares
outstanding  during the period.  Shares  held by the  Company's  Employee  Stock
Ownership Plan ("ESOP") are considered outstanding only at such time as they are
committed for release. The Company's Management Recognition and Development Plan
("MRDP")  shares are  considered  outstanding at such time as they are committed
for release.  The company  completed its initial stock offering in October 1995.
Accordingly,  earnings per share for any periods beginning prior to December 31,
1995 are not applicable. Weighted average shares outstanding for the three month
period ending December 31, 1996 and December 31, 1995 were 10,239,751 shares and
11,254,475 shares, respectively.

                                        9

<PAGE>



                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

Safe Harbor Clause. This report contains certain  "forward-looking  statements."
The Company  desires to take  advantage of the "safe  harbor"  provisions of the
Private Securities Litigation Reform Act of 1995 and is including this statement
for the express purpose of availing itself of the protection of such safe harbor
with respect to all of such forward-looking  statements.  These  forward-looking
statements, which are included in Management's Discussion and Analysis, describe
future plans or  strategies  and include the  Company's  expectations  of future
financial  results.  The words "believe,"  "expect,"  "anticipate,"  "estimate,"
"project," and similar  expressions  identify  forward looking  statements.  The
Company's ability to predict results or the effect of future plans or strategies
is  inherently  uncertain.  Factors which could affect  actual  results  include
interest rate trends,  the general economic climate in the Company's market area
and the country as a whole,  loan delinquency  rates, and changes in federal and
state  regulation.   These  factors  should  be  considered  in  evaluating  the
forward-looking  statements,  and undue  reliance  should  not be placed on such
statements.

General

The  Company  became  the  unitary  savings  and loan  holding  company  for the
Association upon the Association's  conversion from a federally chartered mutual
to a federally  chartered stock savings and loan association  ("Conversion")  on
October 4, 1995. At December 31, 1996, the Company had total consolidated assets
of $673.1 million and consolidated  shareholders'  equity of $152.6 million. The
Company is  currently  not  engaged in any other  business  activity  other than
holding the stock of the  Association  and  investing  excess cash in investment
securities or mortgage backed securities. Accordingly, the information set forth
in this report,  including financial statements and related data, relates to the
Association.

As a traditional, community-oriented,  savings and loan, the Association focuses
on customer service within its principal market area. The Association's  primary
market  activity is attracting  deposits from the general public and using those
and other available sources of funds to originate permanent  residential one- to
four-family real estate loans within its market area and, to a lesser extent, on
commercial property and multi-family dwellings.

Net  interest  income,  which is the  difference  between  interest and dividend
income on interest-earning  assets,  primarily loans and investment  securities,
and interest expense on interest-bearing  deposits and borrowings,  is the major
source of profitability  for the Company.  Because the Company depends primarily
on net interest income for its earnings,  the focus of the Company's  management
is to create and implement strategies that will provide stable, positive spreads
between the yield on  interest-earning  assets and the cost of  interest-bearing
liabilities.  Such strategies include the Association's recent introduction of a
variable rate home equity  lending  program that will have an interest rate tied
to the Wall Street  Journal  published  prime rate with an additional  margin of
2.0%. To a lesser  degree,  the net earnings of the Company rely on the level of
its  non-interest  income.  The Company is aggressively  pursuing  strategies to
improve  its service  charges and other fees  income,  and  decreasing  its non-
interest expense,  which includes employee compensation and benefits,  occupancy
and  equipment  expense,  deposit  insurance  premiums and  miscellaneous  other
expenses, as well as federal and state income tax expense.

The Association is regulated by the Office of Thrift Supervision ("OTS") and its
deposits  are insured up to  applicable  limits  under the  Savings  Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").

The Association is a member of the Federal Home Loan Bank of Seattle, conducting
its business  through eight office  facilities,  with the main office located in
Klamath  Falls,  Oregon.  The  primary  market area of the  Association  are the
counties of Klamath, Jackson and Deschutes in Southern and Central Oregon.


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Recently Issued Accounting Pronouncements

     In October 1995, the Financial  Accounting  Standards Board ("FASB") issued
Statement of Accounting  Standard ("SFAS") No. 123,  "Accounting for Stock-Based
Compensation." This Statement prescribes  accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock and stock  appreciation  rights. The Statement defines a "fair value based
method" of accounting  for employee stock options and encourages all entities to
adopt that method of accounting  for all of their  employee  stock  compensation
plans. However, it also allows an entity to continue to measure compensation for
those plans using the "intrinsic value based method" under Accounting Principles
Board Opinion No. 25,  "Accounting for Stock Issued to Employees"  ("Opinion No.
25").

     Under the fair value  based  method,  compensation  cost is measured at the
grant date of the option based on the value of the award and is recognized  over
the service  period,  which is usually the vesting  period.  Under the intrinsic
value  based  method,  compensation  cost is the  excess,  if any, of the quoted
market  price of the  stock at grant  date or other  measurement  date  over the
amount an employee  must pay to acquire  the stock.  The stock  options  granted
under the Company's stock option plan have no intrinsic value at grant date, and
under Opinion No. 25 no compensation  cost is recognized for them.  Compensation
cost is  recognized  for other  types of  stock-based  compensation  plans under
Opinion No. 25. Beginning in fiscal year ending September 30, 1997, SFAS No. 123
requires  that  an  employer's  audited  financial  statements  include  certain
disclosures about stock-based compensation arrangements regardless of the method
used to account for them.  An employer  that  continues to apply the  accounting
provisions  of Opinion No. 25 will  disclose pro forma  amounts that reflect the
difference  between  compensation  cost, if any,  included in net income and the
related cost  measured by the fair value based  method,  including  tax effects,
that would have been recognized in the income statement if the fair valued based
method had been used.  The  Company  will  continue  to apply  Opinion No. 25 in
accounting for stock-based compensation plans.

Changes in Financial Condition

At December 31, 1996, the  consolidated  assets of the Company  totalled  $673.1
million,  an increase of $1.1  million or 0.16% from  September  30,  1996.  The
increase in total assets was a result of an increase in net loans  receivable of
$15.0 million and a $2.9 million  increase in FHLB stock.  These  increases were
offset by sales and repayments on mortgage backed securities of $3.7 million and
sales and maturities on investment securities of $14.2 million.


Net loans  receivable  increased by $15.0 million for the quarter,  or 3.17%, to
$488.6  million at December 31, 1996,  compared to $473.6 at September 30, 1996.
The increase was primarily the result of continued new loan demand,  prompted by
aggressive marketing efforts by each branch office, exceeding loan repayments.

Investment  securities  decreased $14.2 million, or 16.6%, from $85.8 million at
September 30, 1996 to $71.6 million at December 31, 1996. This was the result of
$30.9  million in  securities  maturing  during the quarter and $16.1 million of
securities that were sold, offset by the purchase of $32.3 million in additional
securities.

During the quarter ended December 31, 1996, $4.6 million of principal was repaid
on mortgage backed securities ("MBS") and $4.7 million in available for sale MBS
were sold. In addition,  $5.1 million in MBS were  purchased,  which resulted in
the  decreased  balance of $77.2  million at December 31, 1996 compared to $80.9
million at September 30, 1996, a decrease of $3.7 million, or 4.6%.

Savings  deposits  increased  $2.1  million,  or .5%,  from  $399.7  million  at
September 30, 1996 to $401.8 million at December 31, 1996. Management attributes
the increase to the maintaining of competitive interest rates. Interest credited
on accounts also contributed to the increase.


                                       11

<PAGE>



Advances  from  borrowers for taxes and  insurance  decreased  $7.4 million from
September  30, 1996 to December 31, 1996,  after paying $9.5 million in reserves
for the required  real estate  taxes due on the  Association's  loan  receivable
portfolio and $300,000 in refunds due to decreased real estate taxes due for the
prior twelve months.

Advances from the FHLB of Seattle increased $11.0 million,  or 12.2%, from $90.0
million at  September  30, 1996 to $101.0  million at  December  31,  1996.  The
increase was used to fund the $15.0 million in net loans receivable.

Total shareholders'  equity decreased $800,000,  or 0.6%, from $153.4 million at
September 30, 1996 to $152.6 million at December 31, 1996. This was the combined
result of $1.9  million in earnings  during the three month  period of September
30, 1996 to December 31, 1996,  the repurchase of stock on December 31, 1996 for
$3.7  million,  and declaring a dividend for the first  quarter  totalling  $0.8
million.

RESULTS OF OPERATION

     Comparison of Three Months Ended December 31, 1996 and 1995

General.  Net interest  income  increased  $335,111 or 6.26% comparing the three
month period  ending  December 31, 1996 to the same period  ending  December 31,
1995.  Interest income increased $1.7 million,  while interest expense increased
by only $1.3 million comparing the three month period ended December 31, 1995 to
the same period ended December 31, 1996.  Non-interest  income also increased by
$33,040, while non interest expense increased by $764,086 comparing the same two
periods.  This resulted in net income  decreasing  $300,000 or 14.6%,  from $2.2
million for the three  months  ended  December  31, 1995 to $1.9 million for the
three months ended December 31, 1996. The  additional  non-interest  expense was
primarily  attributable to an $597,000 increase in non-interest  expense related
to employee benefit plans adopted in connection with the Conversion.

Interest  Income.  The increase of $1.7 million in interest income was generated
by an additional  $70.2 million in average interest earning assets for the three
months ended  December 31, 1996 compared to 1995.  The decrease in federal funds
sold income of $.08 million resulted from federal funds sold being redeployed in
mortgage  backed  securities and loans  receivable,  resulting in a $1.0 million
increase  in interest  income on mortgage  backed  securities  and $1.3  million
increase in loans receivable.

The average  yield on interest  earning  assets  increased  25 basis points from
7.18% for the three months ended  December 31, 1995 to 7.43% for the same period
ended December 31, 1996. This reflects the Company's  continued effort to invest
in loans and investments with higher yields, without materially increasing risk.

Interest Expense. Interest expense on savings deposits increased $50,074 for the
three  months  ended  December  31, 1996 as compared to the same period in 1995.
Although total deposits grew by $19.7 million from December 31, 1995 to December
31, 1996, the average  interest paid on  interest-bearing  deposits  declined 11
basis points from 5.26% for the three  months  ended  December 31, 1995 to 5.15%
for the same period ended December 31, 1996.  Although the average cost of funds
decreased to 5.15%, total interest expense increased due to the $19.7 million in
deposit growth.

Provision for Loan Losses. For both three month periods ending December 31, 1996
and December 31, 1995,  the provision for loan losses was $30,000 and there were
not any charge offs during the quarter.  At December 31, 1996, the allowance for
loan losses was equal to 447.7% of  non-performing  assets compared to 485.9% at
September 30, 1996.  The decrease in the coverage ratio at December 31, 1996 was
the result of a slight increase  non-performing loans from $191,000 at September
30, 1996 to $214,000 at December 31, 1996.


                                       12

<PAGE>




Non-Interest  Income.  Non-interest  income  increased  $33,040,  or  41.6%,  to
$112,510 for the three months ended December 31, 1996 from $79,470 for the three
months ended  December 31, 1995.  The  increase was  primarily  attributable  to
increased  income from  additional fee income,  gains on the sale of real estate
owned and gain on sale of investments. Additional fee income came as a result of
aggressive  internal  marketing  efforts to improve  fee  income  from  checking
accounts, ATMs, and mortgage life insurance sales.

Non-Interest Expense. Non-interest expense increased $764,086, or 41.5%, for the
three months  ended  December  31,  1996,  from $1.8 million for the  comparable
period in 1995 to $2.6 million.  Of this increase,  $597,338 was attributable to
an increase in compensation and benefit expense in 1996,  reflecting the accrual
for Employee Stock Ownership Plan  contributions and the Management  Recognition
and Development Plan. The balance of the increase was a result of a loss on sale
of investments of $15,000.  The ratio of  non-interest  expense to average total
assets was 1.5% and 1.2% for the three months ended  December 31, 1996 and 1995,
respectively.

Income  Taxes.  Although the provision for income tax increased to 40% of pretax
income for the three  months ended  December  31, 1996,  compared to 37% for the
same period ended  December 31, 1995,  the provision for income taxes  decreased
$68,000 for the three months ended  December  31, 1996  compared  with the prior
year, as a result of lower pretax earnings for the quarter.

                                       13

<PAGE>





PART II - OTHER INFORMATION


Item 1.       Legal Proceedings

              The  Company  is  involved  in various  claims  and legal  actions
              arising in the normal course of business. Management believes that
              these  proceedings  will  not  result  in a  material  loss to the
              Company.

Item 2.       Changes in Securities

              Not applicable.

Item 3.       Defaults Upon Senior Securities

              Not applicable.

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


Not applicable.


Item 5.       Other Information

              Not applicable.


Item 6.       Exhibits and Reports on Form 8-K

              a)      Not applicable.

              b)      No Current Reports on Form 8-K were filed during the 
                      quarter ended December 31, 1996.



















                                       14

<PAGE>




                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                            KLAMATH FIRST BANCORP, INC.

Date:         February 14, 1997             By:    /s/ Gerald V. Brown
                                            ---------------------------
                                             Gerald V. Brown, President 
                                             and Chief Executive Officer


Date:         February 14, 1997              By:   /s/ Marshall Jay Alexander
                                             ---------------------------
                                             Marshall Jay Alexander, 
                                             Vice President
                                             and Chief Financial Officer
























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