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, 1998

                                             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  29,  1999,  there  were  issued  7,932,676  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 Balance Sheets
         (As of December 31, 1998 and September 30, 1998)                    3

         Consolidated Statements of Earnings (For the three months
         ended December 31, 1998 and 1997)                                   4

         Consolidated Statement of Shareholders' Equity
         (For the years ended September 30, 1998 and 1997 and for
         the three months ended December 31, 1998)                           5

         Consolidated Statements of Cash Flows (For the three
         months ended December 31, 1998 and 1997)                        6 - 7

         Notes to Consolidated Financial Statements                     8 - 11

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                           12 - 16

Part II. Other Information
-------- -------------------

Item 1.  Legal Proceedings                                                  17

Item 2.  Changes in Securities                                              17

Item 3.  Defaults Upon Senior Securities                                    17

Item 4.  Submission of Matters to a Vote of Security Holders                17

Item 5.  Other Information                                                  17

Item 6.  Exhibits and Reports on Form 8-K                                   17

Signatures                                                                  18











                                        2

<PAGE>
<TABLE>
<CAPTION>
                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                 AS OF DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
                                   (Unaudited)



                                                                        December 31, 1998                    September 30, 1998
ASSETS                                                                 ------------------                    ------------------

<S>                                                                        <C>                                   <C>        
Cash and due from banks                                                      $ 22,101,813                          $ 25,644,460
Interest bearing deposits with banks                                            3,340,243                            11,496,026
Federal funds sold and securities purchased under agreements to resell         17,259,522                            29,844,783
                                                                       ------------------                    ------------------
   Total cash and cash equivalents                                             42,701,578                            66,985,269

Investment securities available for sale, at fair value                                                             
  (amortized cost: $180,641,521 and $199,251,123)                             182,595,244                           203,224,184
Investment securities held to maturity, at amortized cost (fair                             
  value: $53,019,616 and $2,928,324)                                           52,974,310                             2,888,759
Mortgage backed and related securities available for sale, at fair                          
  value (amortized cost: $26,557,857 and $42,741,863)                          26,874,585                            43,335,857
Mortgage backed and related securities held to maturity, at amortized
  cost (fair value: $3,209,803 and $3,696,444)                                  3,190,751                             3,661,683
Loans receivable, net                                                         695,756,350                           668,146,380
Real estate owned                                                                  69,153                                    --
Premises and equipment, net                                                    12,193,688                            12,347,467
Stock in Federal Home Loan Bank of Seattle, at cost                            10,371,600                            10,172,900
Accrued interest receivable                                                     7,681,354                             7,471,717
Core deposit intangible                                                        11,017,849                            11,431,018
Other assets                                                                    2,250,537                             1,637,164
                                                                       ------------------                     -----------------
   Total assets                                                            $1,047,676,999                        $1,031,302,398
                                                                       ==================                     =================

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
  Deposit liabilities                                                        $716,029,348                          $689,541,345
  Accrued interest on deposit liabilities                                       1,282,525                             1,291,784
  Advances from borrowers for taxes and insurance                                 940,533                             9,420,791
  Advances from Federal Home Loan Bank of Seattle                             167,000,000                           167,000,000
  Short term borrowings                                                         8,595,000                            12,112,500
  Accrued interest on borrowings                                                  180,010                               213,957
  Pension liabilities                                                             812,041                               779,392
  Deferred federal and state income taxes                                       2,197,879                             3,655,944
  Other liabilities                                                             4,527,236                             2,205,730
                                                                       ------------------                    ------------------
    Total liabilities                                                         901,564,572                           886,221,443
                                                                       ------------------                    ------------------

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, 1998 - 9,916,766 issued, 8,900,195 outstanding
   September 30, 1998 - 9,916,766 issued, 8,898,972 outstanding                    99,168                                99,168
  Additional paid-in capital                                                   82,679,785                            82,486,183
  Retained earnings-substantially restricted                                   72,816,666                            71,051,445
  Unearned shares issued to ESOP                                               (6,605,888)                           (6,850,550)
  Unearned shares issued to MRDP                                               (4,284,984)                           (4,536,865)
  Net unrealized gain on securities available for sale, net of tax              1,407,680                             2,831,574
                                                                       ------------------                    ------------------
    Total shareholders' equity                                                146,112,427                           145,080,955
                                                                       ------------------                    ------------------
    Total liabilities and shareholders' equity                             $1,047,676,999                        $1,031,302,398
                                                                       ==================                    ==================
<FN>

      See notes to consolidated financial statements.
</FN>
</TABLE>
                                                             3

<PAGE>

<TABLE>
<CAPTION>

                                         KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                             CONSOLIDATED STATEMENTS OF EARNINGS
                                                         (Unaudited)

                                                                  Three Months Ended                         Three Months Ended
                                                                        December 31,                               December 31,
                                                                                1998                                       1997
                                                                      --------------                             --------------
INTEREST INCOME
<S>                                                                      <C>                                        <C>        
  Loans receivable                                                       $13,839,389                                $11,416,429
  Mortgage backed and related securities                                     561,210                                  1,107,748
  Investment securities                                                    3,429,265                                  4,191,435
  Federal funds sold                                                         207,560                                    148,649
  Interest bearing deposits                                                  240,149                                     81,027
                                                                      --------------                             --------------
    Total interest income                                                 18,277,573                                 16,945,288
                                                                      --------------                             --------------

INTEREST EXPENSE
  Deposit liabilities                                                      7,418,560                                  7,207,485
  FHLB advances                                                            2,211,396                                  1,689,424
  Other                                                                      157,660                                    289,429
                                                                      --------------                             --------------
    Total interest expense                                                 9,787,616                                  9,186,338
                                                                      --------------                             --------------
    Net interest income                                                    8,489,957                                  7,758,950

Provision for loan losses                                                    123,000                                     75,000
                                                                      --------------                             --------------
    Net interest income after provision for
      loan losses                                                          8,366,957                                  7,683,950
                                                                      --------------                             --------------

NON-INTEREST INCOME
  Fees and service charges                                                   691,677                                    605,364
  Gain on sale of investments                                                128,193                                         --
  Other income                                                                79,550                                     91,303
                                                                      --------------                             --------------
    Total non-interest income                                                899,420                                    696,667
                                                                      --------------                             --------------
NON-INTEREST EXPENSE
  Compensation, employee benefits and related expense                      2,413,886                                  2,479,533
  Occupancy expense                                                          559,105                                    520,511
  Data processing expense                                                    239,805                                    232,512
  Insurance premium expense                                                   69,975                                     67,340
  Loss on sale of investments                                                112,256                                         --
  Amortization of core deposit intangible                                    413,169                                    413,169
  Other expense                                                            1,266,881                                  1,115,411
                                                                      --------------                             --------------
    Total non-interest expense                                             5,075,077                                  4,828,476
                                                                      --------------                             --------------

Earnings before income taxes                                               4,191,300                                  3,552,141

Provision for income tax                                                   1,737,485                                  1,406,067
                                                                      --------------                             --------------

Net earnings                                                              $2,453,815                                 $2,146,074
                                                                      ==============                             ==============

Earnings per common share - basic                                              $0.28                                      $0.23
Earnings per common share - fully diluted                                      $0.27                                      $0.22
Weighted average common shares outstanding - basic                         8,911,878                                  9,247,916
Weighted average common shares outstanding - with dilution                 9,175,123                                  9,716,094
<FN>

 See notes to consolidated financial statements.
</FN>
</TABLE>

                                                             4

<PAGE>
<TABLE>
<CAPTION>

                                         KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                       CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1998 AND THE THREE MONTHS ENDED DECEMBER 31, 1998
                                                         (Unaudited)
                                                         
                            Common    Common    Additional                   Unearned       Unearned  Net unrealized           Total
                             Stock     Stock       paid-in     Retained   ESOP shares  shares issued      gain (loss)  shareholders'
                            Shares    Amount       capital     earnings       at cost  to MRDP Trust   on securities          equity
                        ----------  --------  ------------  -----------   ----------- --------------   -------------   -------------
Balance at
<S>                     <C>         <C>       <C>           <C>           <C>            <C>             <C>           <C>         
October 1, 1996 ....... 10,242,360  $116,124  $110,762,678  $59,082,479   $(8,807,850)   $(6,694,470)    $(1,047,987)  $153,410,974

Cash dividends ........       --        --            --     (2,895,234)         --             --              --       (2,895,234)

Net unrealized
gain (loss) on
securities
available for sale ....       --        --            --           --            --             --         1,512,041      1,512,041

Stock repurchased
and retired ........... (1,182,936)  (11,829)  (18,866,299)        --            --             --              --      (18,878,128)

ESOP contribution .....     97,865      --         705,260         --         978,650           --              --        1,683,910

MRDP contribution .....     78,293      --            --           --            --        1,071,130            --        1,071,130

Net earnings ..........       --        --            --      8,557,750          --             --              --        8,557,750
                         ---------   -------  ------------  -----------  ------------  -------------  --------------  -------------
Balance at
September 30, 1997 ....  9,235,582   104,295    92,601,639   64,744,995    (7,829,200)    (5,623,340)        464,054    144,462,443

Cash dividends ........       --        --            --     (3,244,587)         --             --              --       (3,244,587)

Net unrealized
gain (loss) on
securities
available for sale ....       --        --            --           --            --             --         2,367,520      2,367,520

Stock repurchased
and retired ...........   (544,085)   (5,440)  (11,556,044)        --            --             --              --      (11,561,484)

ESOP contribution .....     97,865      --       1,029,866         --         978,650           --              --        2,008,516

MRDP contribution .....     78,293      --            --           --            --        1,086,475            --        1,086,475

Exercise of stock
options ...............     31,317       313       410,722         --            --             --              --          411,035

Net earnings ..........       --        --            --      9,551,037          --             --              --        9,551,037
                         ---------   -------  ------------  -----------  ------------  -------------  --------------  -------------
Balance at
September 30, 1998 ....  8,898,972    99,168    82,486,183   71,051,445    (6,850,550)    (4,536,865)      2,831,574    145,080,955

Cash dividends ........       --        --            --       (688,594)         --             --              --         (688,594)

Net unrealized
gain (loss) on
securities
available for sale ....       --        --            --           --            --             --        (1,423,894)    (1,423,894)

ESOP contribution .....       --        --         193,602         --         244,662           --              --          438,264

MRDP contribution .....      1,223      --            --           --            --          251,881            --          251,881

Net earnings ..........       --        --            --      2,453,815          --             --              --        2,453,815

                        ----------  --------  ------------  -----------  ------------  -------------  --------------  -------------
Balance at
December 31, 1998 .....  8,900,195  $ 99,168  $ 82,679,785  $72,816,666  ($ 6,605,888) ($  4,284,984)    $ 1,407,680  $ 146,112,427
                        ==========  ========  ============  ===========  ============  =============  ==============  =============
<FN>

      See notes to consolidated financial statements.
</FN>
</TABLE>
                                                                    5
<PAGE>

<TABLE>
<CAPTION>


                                               KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
                                                               (Unaudited)


                                                                  Three Months      Three Months
                                                                         Ended             Ended
                                                                  December 31,      December 31,
                                                                          1998              1997
                                                                  ------------      ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                               <C>               <C>         
    Net earnings ................................................ $  2,453,815      $  2,146,074
                                                                 
ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
    Depreciation and amortization ...............................      724,661           697,640
    Provision for loan losses ...................................      123,000            75,000
    Compensation expense related to ESOP benefit ................      438,264           535,974
    Compensation expense related to MRDP Trust ..................      251,881           270,571
    Net amortization of premiums (discounts)  paid on
      investment and mortgage backed and related securities .....     (154,421)         (178,961)
    Increase in deferred loan fees, net of amortization .........      309,351           283,958
    Accretion of discounts on purchased loans ...................       (3,826)           14,907
    Net (gain) loss on sale of investment and mortgage
      backed and related securities .............................      (15,937)             --
    FHLB stock dividend .........................................     (198,700)         (144,100)
CHANGES IN ASSETS AND LIABILITIES
    Accrued interest receivable .................................     (209,637)       (1,444,935)
    Other assets ................................................     (722,526)         (889,816)
    Accrued interest on deposit liabilities .....................       (9,259)          (52,915)
    Accrued interest on borrowings ..............................      (33,947)         (184,436)
    Pension liabilities .........................................       32,649            30,649
    Deferred federal and state income taxes .....................     (585,356)           26,551
    Other liabilities ...........................................    2,525,421           961,422
                                                                  ------------      ------------
Net cash provided by operating activities .......................    4,925,433         2,147,583
                                                                  ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from maturity of investment securities
      held to maturity ..........................................   30,000,000        20,000,000
    Proceeds from maturity of investment securities
      available for sale ........................................   13,550,000        21,680,000
    Principal repayments received on mortgage backed
       and related securities held to maturity ..................      463,483           397,097
    Principal repayments received on mortgage backed
       and related securities available for sale ................    6,483,237         4,367,763
    Principal repayments received on loans ......................   46,578,685        20,595,908
    Loan originations ...........................................  (74,617,179)      (40,940,648)
    Loans purchased .............................................         --          (1,900,000)
    Purchase of investment securities held
      to maturity ...............................................  (79,711,523)             --
    Purchase of investment securities available
      for sale ..................................................         --          (3,753,870)
    Purchase of mortgage backed and related
      securities available for sale .............................         --          (5,035,162)
    Proceeds from sale of investment securities
      available for sale ........................................    5,109,374              --
    Proceeds from sale of mortgage backed and related
      securities available for sale .............................    9,454,776              --
    Purchases of premises and equipment .........................     (117,713)         (197,791)
                                                                  ------------      ------------
Net cash provided by (used in) investing activities .............  (42,806,860)       15,213,297
                                                                  ------------      ------------

</TABLE>

                                                                    6

<PAGE>

<TABLE>
<CAPTION>


                                               KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
                                                               (Unaudited)
                                                               (Continued)

                                                                  Three Months      Three Months
                                                                         Ended             Ended
                                                                  December 31,      December 31,
                                                                          1998              1997
                                                                  ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Increase in deposit
<S>                                                               <C>               <C>         
     liabilities, net of withdrawals ............................ $ 26,488,003      $  4,816,157
    Proceeds from FHLB advances .................................    5,000,000        45,000,000
    Repayments of FHLB advances .................................   (5,000,000)      (49,000,000)
    Proceeds from short term borrowings .........................    8,595,000        25,485,000
    Repayments of short term borrowings .........................  (12,112,500)      (26,517,500)
    Advances from borrowers for tax and insurance ...............   (8,480,258)       (8,140,202)
    Dividends paid ..............................................     (892,509)         (834,363)
                                                                  ------------      ------------
Net cash provided by (used in) financing activities .............   13,597,736        (9,190,908)
                                                                  ------------      ------------
Net (decrease) increase in cash and cash
  equivalents ...................................................  (24,283,691)        8,169,972

Cash and cash equivalents at beginning
  of period .....................................................   66,985,269        32,043,196
                                                                  ------------      ------------
Cash and cash equivalents at end of quarter ..................... $ 42,701,578      $ 40,213,168
                                                                  ============      ============
SUPPLEMENTAL SCHEDULE OF INTEREST AND
INCOME
  TAXES PAID
    Interest paid ............................................... $  9,830,823      $  9,377,162
    Income taxes paid ...........................................       50,000           690,762

SUPPLEMENTAL SCHEDULE OF NONCASH
  INVESTING ACTIVITIES
    Net unrealized gain (loss) on securities
      available for sale ........................................   (1,423,894)          363,286
    Dividends declared and accrued in other
      liabilities ...............................................      753,674           834,363

<FN>












    See notes to consolidated financial statements
</FN>
</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 financial
statements contain all adjustments  necessary for a fair presentation of Klamath
First Bancorp,  Inc.'s (the  "Company")  financial  condition as of December 31,
1998,  and  September 30, 1998,  the results of operations  for the three months
ended  December  31, 1998 and 1997 and the cash flows for the three months ended
December 31, 1998 and 1997.  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  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, 1998 and
1997 are not necessarily indicative of the results which may be expected for the
entire fiscal year.

2. COMPREHENSIVE INCOME

Effective October 1, 1998, the Company adopted Statement of Financial Accounting
Standards  ("SFAS")  No. 130,  "Reporting  Comprehensive  Income."  SFAS No. 130
requires all items that are required to be recognized under accounting standards
as components of  comprehensive  income to be reported in a financial  statement
that is displayed in equal prominence with the other financial statements and to
disclose as a part of shareholders'  equity  accumulated  comprehensive  income.
Comprehensive  income is defined as the  change in equity  during a period  from
transactions and other events from nonowner sources. The Company has chosen, for
purposes of its interim financial reporting,  to present comprehensive income in
the notes to the financial statements.

Comprehensive income is the total of net income and other comprehensive  income,
which for the Company is comprised  entirely of  unrealized  gains and losses on
securities  available  for sale and  realized  gains  and  losses on the sale of
securities available for sale.

For the three months ended December 31, 1998, the Company's total  comprehensive
income was $1.1  million  compared to $2.5  million for the three  months  ended
December  31,  1997.  Total  comprehensive  income  for the three  months  ended
December  31,  1998 was  comprised  of net  income  of $2.5  million  and  other
comprehensive loss of $1.4 million,  net of tax. Total comprehensive  income for
the three  months ended  December  31, 1997 was  comprised of net income of $2.1
million and other comprehensive income of $383,286, net of tax.

3. ALLOWANCE FOR LOAN LOSSES


Activity in allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>

                                  Three Months Ended             Year Ended
                                        December 31,           September 30,
                                                1998                   1998
                                         -----------            -----------
<S>                                      <C>                    <C>        
Balance, beginning of year ............. $ 1,949,677            $ 1,296,451
Charge-offs ............................      (3,000)               (20,774)
Additions ..............................     123,000                674,000
                                         -----------            -----------

Balance, end of period ................. $ 2,069,677            $ 1,949,677
                                         ===========            ===========
</TABLE>



                                        8

<PAGE>



4. ADVANCES FROM FEDERAL HOME LOAN BANK

Borrowings at December 31, 1998  consisted of two short term  advances  totaling
$30.0  million  and ten long term  advances  totaling  $137.0  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.

Scheduled maturities of advances from the FHLB were as follows:
<TABLE>
<CAPTION>


                                              December 31, 1998                                      September 30, 1998
                                ------------------------------------------------      ----------------------------------------------
                                                      Range of          Weighted                           Range of         Weighted
                                                      interest           average                           interest          average
                                      Amount             rates     interest rate            Amount            rates    interest rate
                                ------------       -----------     -------------      ------------      -----------     ------------
<S>                             <C>                <C>                     <C>        <C>               <C>                    <C>  
Due within one year              $30,000,000       5.08%-5.13%             5.11%       $30,000,000      5.54%-5.56%            5.55%

After two but within
five years                        55,000,000       5.29%-5.70%             5.46%        55,000,000      5.39%-5.74%            5.56%

After five but within
ten years                         82,000,000       4.77%-5.24%             4.96%        82,000,000      4.77%-5.24%            4.96%
                                ------------                                          ------------
                                $167,000,000                                          $167,000,000
                                ============                                          ============
</TABLE>

5. SHORT TERM BORROWINGS

Securities sold under agreements to repurchase totaled $8.1 million.  All of the
agreements  had interest rates of 5.60% and were due within 48 days. The Company
also had $500,000 in short term  borrowings with the Federal Reserve Bank of San
Francisco at December 31, 1998.  These  borrowings  carried an interest  rate of
4.50%.

6. SHAREHOLDERS' EQUITY

In  September  1998,  the  Board  of  Directors  authorized  the  repurchase  of
approximately  20  percent  of  the  Company's  outstanding  common  stock.  The
repurchase was completed  through a "Modified Dutch Auction  Tender." Under this
procedure, the Company's shareholders were given the opportunity to sell part or
all of their  shares to the Company at a price of not less than $18.00 per share
and not more than  $20.00 per share.  Results  of the offer  were  finalized  on
January 15,  1999 when the Company  announced  purchase of  1,984,090  shares at
$19.50 per  share.  This  represents  approximately  85.9  percent of the shares
tendered at $19.50 per share or below,  and 64.7 percent of all shares tendered.
The value of the shares purchased is approximately $38.7 million.

Following are selected  performance  ratios for December 31, 1998 and comparable
pro  forma  ratios as if the  transaction  had  occurred  in the  quarter  ended
December 31, 1998.  Income  statement data give effect to the purchase of shares
as of the  beginning  of the period.  The funds used to purchase  the shares are
considered  to have been  provided  by cash,  overnight  funds  and  short  term
investments.  The reduction in  investment  income that would have resulted from
using the funds for the  repurchase  of shares and the  reduction  in equity are
reflected  in the  ratios  shown  below.  The pro forma  data  assumes a rate of
interest  of 4.75% on  overnight  funds  and a rate of 5.89% on the  short  term
investments.  The pro forma data is not  necessarily  indicative  of the results
that would have been obtained had the transaction  been completed in the quarter
ended December 31, 1998.

                                        9

<PAGE>
<TABLE>
<CAPTION>



                                  Three Months Ended        Three Months Ended
                                    December 31,1998         December 31, 1998
                                              Actual                 Pro Forma
                                    ----------------         -----------------
<S>                                            <C>                       <C>  
Return on Average Equity                        6.67%                     8.33%
Earnings per Share - Basic                     $0.28                     $0.33
Dividend Payout Ratio                          35.19%                    29.12%
</TABLE>


7. EARNINGS PER SHARE

Earnings  per share  ("EPS")  is  computed  in  accordance  with  SFAS No.  128,
"Earnings  per Share," which was adopted by the Company as of December 31, 1997.
EPS for all prior  periods have been  restated to reflect the  adoption.  Shares
held by the Company's  Employee Stock Ownership Plan ("ESOP") that are committed
for release are considered common stock equivalents and are included in weighted
average  shares  outstanding  (denominator)  for the  calculation  of basic  and
diluted EPS.  Diluted EPS is computed  using the treasury  stock method,  giving
effect to potential  additional  common shares that were outstanding  during the
period. Potential dilutive common shares include shares awarded but not released
under the Company's  Management  Recognition and Development Plan ("MRDP"),  and
stock options granted under the Stock Option Plan. Following is a summary of the
effect of dilutive securities on weighted average number of shares (denominator)
for the basic and diluted EPS calculations.  There are no resulting  adjustments
to net earnings.
<TABLE>
<CAPTION>

                                                                      For the Three Months Ended
                                                             ---------------------------------------------
                                                             December 31, 1998           December 31, 1997
                                                             -----------------           -----------------

Weighted average common
<S>                                                                  <C>                         <C>      
shares outstanding - basic ............................              8,911,878                   9,247,916
                                                                  ------------                ------------
Effect of Dilutive Securities on Number of Shares:
MRDP shares ...........................................                 27,968                      76,473
Stock options .........................................                235,277                     391,705
                                                                  ------------                ------------
Total Dilutive Securities .............................                263,245                     468,178
                                                                  ------------                ------------
Weighted average common shares

 outstanding - with dilution ..........................              9,175,123                   9,716,094
                                                                  ============                ============
</TABLE>




                                                           10

<PAGE>



8. REGULATORY CAPITAL

The following table  illustrates the compliance by Klamath First Federal Savings
and Loan Association (the  "Association") with currently  applicable  regulatory
capital requirements at December 31, 1998:
<TABLE>
<CAPTION>
                                                                                                                To Be
                                                                                                 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>  
 Total Capital:              $86,289,627    16.0%                  $43,173,144     8.0%                  $53,966,430        10.0%
  (To Risk Weighted Assets)
 Tier I Capital:              84,219,949    15.6%                          N/A     N/A                    32,379,858         6.0%
  (To Risk Weighted Assets)
 Tier I Capital:              84,219,949     8.5%                   29,617,662     3.0%                   49,362,770         5.0%
  (To Total Assets)
 Tangible Capital:            84,219,949     8.5%                   14,839,876     1.5%                          N/A         N/A
  (To Tangible Assets)
</TABLE>



9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February 1998, SFAS No. 132, "Employers' Disclosures About Pensions and Other
Postretirement   Benefits,"  was  issued.   SFAS  No.  132  revises   employers'
disclosures about pensions and other  postretirement  benefit plans. It does not
change the  measurement  or  recognition  of those plans.  It  standardizes  the
disclosure  requirements for pensions and other  postretirement  benefits to the
extent practicable,  requires  additional  information on changes in the benefit
obligations  and fair  values  of plan  assets  that will  facilitate  financial
analysis,  and eliminates certain disclosures that are no longer as useful. This
Statement  becomes effective for fiscal years beginning after December 15, 1997.
Restatement of disclosures for earlier periods provided for comparative purposes
is required unless the information is not readily available.

In June 1998, SFAS No. 133,  "Accounting for Derivative  Instruments and Hedging
Activities,"  was  issued.  SFAS No.133  established  accounting  and  reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts  (collectively referred to as derivatives),  and for
hedging  activities.  It requires that an entity  recognize all  derivatives  as
either assets or liabilities in the statement of financial  position and measure
those instruments at fair value. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment, (b)
a hedge of the exposure to variable cash flows of a forecasted  transaction,  or
(c) a hedge of the foreign  currency  exposure of a net  investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated  forecasted  transaction.  This  Statement  becomes
effective  for fiscal years  beginning  after June 15,  1999,  and should not be
applied retroactively to financial statements of prior periods.

An analysis of the Company's current operations and practices indicates that the
Company  is not  involved  in  derivative  instruments  or  hedging  activities.
Accordingly, the adoption of these statements is not expected to have a material
impact on the financial statements of the Company.


                                       11

<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, an Oregon corporation,  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, 1998,  the Company had total
consolidated  assets of $1.05 billion and consolidated  shareholders'  equity of
$146.1  million.  The Company is currently not engaged in any business  activity
other than holding the stock of the  Association.  Accordingly,  the information
set forth in this  report,  including  financial  statements  and related  data,
relates primarily to the Association.

As a traditional, community-oriented,  savings and loan, the Association focuses
on  personalized   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,  loans on  commercial  property and  multi-family
dwellings.  To supplement  internal growth generated through its branch network,
the  Association  also  purchases   Oregon-based   commercial  real  estate  and
multi-family residential loans from other Oregon financial institutions, as well
as using mortgage  brokers to locate  construction  loans that meet our existing
conservative underwriting standards outside of the current branch market areas.

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 profit 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 expansion of its consumer
and commercial loan products.  Consumer and commercial  loans increased 98% from
$6.3  million at December 31, 1997 to $12.5  million at December 31, 1998.  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 charge and fee income, and control its non-interest  expense,  which
includes employee  compensation and benefits,  occupancy and equipment  expense,
deposit insurance premiums and miscellaneous other expenses.  The acquisition of
25 branches from Wells Fargo in 1997 contributed to improvement of the Company's
non-interest  income by  providing a larger  customer  base to generate  service
charge and fee income.

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").


                                       12

<PAGE>


The Association is a member of the Federal Home Loan Bank of Seattle, conducting
its  business  through  thirty-five  office  facilities,  with  the main  office
located in Klamath Falls,  Oregon.  The primary market areas of the  Association
are the state of Oregon and adjoining areas of California and Washington.

Year 2000 Readiness

As with other  organizations,  some of the data processing  programs used by the
Company were originally  designed to recognize  calendar years by their last two
digits.  Calculations  performed  using  these  truncated  fields  may not  work
properly with dates beyond 1999. Correct processing of date oriented information
is critical to the  operation of all  financial  institutions  because  computer
systems track deposit account and loan balances,  record transaction activity in
accounts,  and calculate  interest amounts,  among other activities.  Failure of
these  processes  could severely  hinder the ability to continue  operations and
provide  customer  service.  Because of the  critical  nature of the issue,  the
Company established a committee early in 1997 to address "Year 2000" issues. The
committee, consisting of executive management,  technical staff, and a full time
project  manager,  has chosen to use the Office of Thrift  Supervision Year 2000
Checklist as a guide for Year 2000  preparation.  The  committee is also using a
Year 2000  Testing  Guide and  Contingency  Guide  provided by Alex  Information
Systems, Inc. to complement the OTS checklist.

The Federal Financial Institutions Examination Council ("FFIEC") has also issued
guidelines for Year 2000 project management by financial institutions, which are
being  followed by the Company.  These  guidelines  identify the following  five
steps for Year 2000 conversion programs:

     Awareness  Phase - Define the Year 2000  problem and  establish a Year 2000
     program team and overall  strategy.  This step was completed by the Company
     as of September 30, 1997.

     Assessment Phase - Assess the size and complexity of the problem and detail
     the  magnitude of effort  necessary to address Year 2000 issues,  including
     hardware, software, networks, automated teller machines, etc. This step was
     approximately  99%  complete by December  31, 1998 and  assessment  will be
     ongoing until the Year 2000.

     Renovation Phase - This phase includes hardware and software upgrades,  and
     system  replacements.  This step was 100% complete for in-house  systems at
     December 31, 1998. This phase also encompasses ongoing discussions with and
     monitoring of outside servicers and third-party software providers.
     
     Validation/Testing  Phase - This process  includes  testing of hardware and
     software  components.  Testing is completed by performing  extensive  tests
     with the computer  dates changed to January 1,2, and 3, 2000.  Such testing
     will  continue  through June 30,  1999,  with the most  critical  functions
     tested  first.  This  allows time to correct  any  discovered  deficiencies
     before the end of 1999.  In-house systems are 100% tested, many third party
     vendors  have been  tested and  others  are  scheduled  for  testing  soon.
     Overall, this phase is approximately 94% complete as of December 31, 1998.

     Implementation  Phase - Systems  successfully  tested will be  certified as
     Year  2000  compliant.  For any  system  failing  validation  testing,  the
     business impact must be assessed and a contingency plan  implemented.  This
     phase is scheduled for completion by June 30, 1999.

                                       13
<PAGE>

All personal computers ("PCs") and related software  throughout the Company have
been  inventoried  and tested for Year 2000  capability.  The  Company  used two
testing  methods,  BIOS  and  off  line,  for  PC  certification  of  Year  2000
compatibility.  PCs were required to pass both tests to be considered  ready for
Year 2000.  As of September  30, 1998,  all of the  Company's PCs were Year 2000
compatible. The Company's Wide Area Network and various Local Area Networks have
also been upgraded, tested, and determined to be Year 2000 prepared.

Data  processing  for the Company is provided by Fiserv,  the  nation's  largest
third party service bureau  serving  financial  institutions.  Fiserv has stated
that all their  processing  was Year 2000 ready of as June 30, 1998. The Company
successfully  performed test procedures for critical service bureau processes in
December 1998.

Software  purchased  from a Fiserv  affiliate is used for  applications  such as
accounts  payable,  fixed  assets,  and  investment  portfolio  accounting.  The
investment  portfolio  accounting  software  was  Year  2000  compatible  as  of
September  30,  1998.  The  Company  currently  uses  DOS-based  versions of the
application  software for  accounts  payable and fixed assets which are not Year
2000  capable.  The  Fiserv  affiliate  had Year 2000  ready  versions  of these
applications  available  as of  September  30,  1998.  The Company is  currently
converting the accounts  payable and fixed asset  applications  to the Year 2000
ready software and appropriate testing procedures are being performed.

Other third party vendors identified by the Company were sent  questionnaires in
May 1998  regarding  their  preparations  for Year  2000.  Responses  have  been
received and further  updates  will be  requested  in order to monitor  vendors'
status. Validation with vendors is approximately 50% complete as of December 31,
1998.

Critical  data  processing  applications,  in addition to those  provided by the
service  bureau,  have  been  identified.  These  include  applications  such as
electronic  processing  through the  Federal  Reserve  Bank and ATM  processing.
Testing with Federal  Reserve is currently in progress.  Testing  procedures for
ATM applications are in the process of development.  Contingency  plans are also
being developed by each department.  The contingency plans address actions to be
taken to continue  operations  in the event of system  failure due to areas that
cannot be tested in  advance,  such as power and  telephone  service,  which are
vital to business continuation.

For many  financial  institutions,  the Year 2000 readiness of borrowers to whom
the institution has commercial operating loans is of concern.  Lack of Year 2000
preparedness could cause disruptions of borrowers' businesses significant enough
to compromise their ability to repay  indebtedness.  The Company's loans of this
type  represent  less than one half of one percent of the total loan  portfolio,
and are not considered to represent a significant risk of loss.

To assist customers in understanding  Year 2000 issues and to inform them of the
Company's  preparation  activities,  brochures  regarding Year 2000 preparedness
have been  distributed to all customers.  Another mailing is anticipated  during
the fiscal year ending  September 30, 1999. In addition,  the Company has placed
"Year 2000"  bulletin  boards in all the  branches,  which will contain  current
information  on Year 2000  readiness for the Company and the financial  services
industry.

The  Company  believes  that  the Year  2000  issue  will  not pose  significant
operational  problems  and is not  anticipated  to be material to its  financial
position or results of  operations  in any given year. As of September 30, 1998,
the Company estimated that total Year 2000 implementation  costs will not exceed
$200,000 and are expected to be expensed  over a period of 18 months,  affecting
fiscal  years  1998,  1999,  and 2000.  This  estimate  is based on  information
available at December 31, 1998, and may be revised as additional information and
actual costs become  available.  During the quarter ended  December 31, 1998 and
the year ended  September  30, 1998,  $37,000 and $89,000 of Year 2000  expenses
were incurred and expensed, respectively.

                                       14
<PAGE>

Changes in Financial Condition

At December 31,  1998,  the  consolidated  assets of the Company  totaled  $1.05
billion, an increase of $16.4million,  or 1.59%, from $1.03 billion at September
30, 1998.  The increase in total  assets was  primarily  the result of continued
growth in net loans receivable.

Net loans receivable  increased by $27.6 million, or 4.13%, to $695.8 million at
December  31,  1998,  compared to $668.1  million at  September  30,  1998.  The
increase was primarily the result of continued  new loan demand  exceeding  loan
repayments.

Investment securities increased $29.5 million, or 14.29%, from $206.1 million at
September 30, 1998 to $235.6 million at December 31, 1998. This increase was the
result of cash needed for the  anticipated  share  repurchase  being invested in
short  term  commercial  paper  until the funds  were  needed  to  complete  the
transaction in January 1999.

During the three  months  ended  December  31,  1998,  $6.9 million of principal
payments were  received on mortgage  backed and related  securities  ("MBS") and
$9.5 million in available for sale MBS were sold, resulting in a decrease in the
balance of MBS from $47.0  million at  September  30,  1998 to $30.1  million at
December 31, 1998.

Deposit  liabilities  increased $26.5 million,  or 3.84%, from $689.5 million at
September 30, 1998 to $716.0 million at December 31, 1998. Management attributes
the increase to the maintaining of competitive rates in its market areas as well
as the use of an  automated  on-line  personal  computer-based  system to market
deposits  nationally.  Interest  credited on accounts  also  contributed  to the
increase.  The increase in deposits has been experienced  throughout the network
of 34 branches.

Advances  from  borrowers for taxes and  insurance  decreased  $8.5 million from
September 30, 1998 to December 31, 1998. The decrease is the result of using the
reserves to pay the  required  real estate taxes due on the  Association's  loan
receivable portfolio in November.

The Company's total borrowings decreased $3.5 million from September 30, 1998 to
December 31, 1998.  Advances from the FHLB of Seattle  remained  consistent with
$167.0 million at September 30, 1998 and at December 31, 1998,  while short term
borrowings  decreased $3.5 million,  or 29.04%,  from $12.1 million at September
30, 1998 to $8.6 million at December  31,  1998.  Proceeds  from  maturities  of
securities were used to reduce the borrowings.

Total shareholders' equity increased $1.0 million, or 0.71%, from $145.1 million
at September 30, 1998 to $146.1 million at December 31, 1998.  This increase was
primarily the result of $2.5 million in earnings for the first  quarter,  offset
by a $1.4 million decrease in unrealized gains on securities  available for sale
during the three month period from September 30, 1998 to December 31, 1998.

Results of Operations

     Comparison of Three Months Ended December 31, 1998 and 1997

General.  Net income  increased  $307,741,  or 14.34%, from $2.1 million for the
three months ended  December 31, 1997 to $2.5 million for the three months ended
December 31, 1998.  This increase was primarily  attributable  to an increase in
net interest income and  non-interest  income  partially  offset by increases in
interest expense and non-interest expense.

Interest  Income.  Additional  interest  income  generated by the $68.0  million
increase in average interest  earning assets  contributed to an increase of $1.3
million in interest income for the three months ended December 31, 1998 compared
to 1997. Of this increase,  $2.4 million is attributable  to increased  interest
income on loans which was offset by $1.3 million  decrease in interest income on
investment and mortgage backed securities. The average yield on interest earning
assets increased 4 basis points to 7.34% for the three months ended December 31,
1998 compared to 7.30% for the same period ended December 31, 1997.

                                       15

<PAGE>



Interest Expense. Total interest expense increased $601,278 for the three months
ended  December  31,  1998 as  compared  to the same  period  in  1997.  Of that
increase,  $211,075  related  to an  increase  in  interest  expense  on deposit
liabilities.  Average  deposits  increased by $34.1 million  comparing the three
months  ended  December  31,  1997 to 1998,  and the  average  interest  paid on
interest-bearing  deposits  decreased  9 basis  points  from 4.62% for the three
months ended  December 31, 1997 to 4.53% for the same period ended  December 31,
1998. The average  balance of FHLB advances  increased $49.9 million from $117.7
million for the three months ended  December 31, 1997 to $167.0  million for the
same period ended December 31, 1997 resulting in an increase in interest on FHLB
advances of $521,972 for the three months ended  December 31, 1998 compared with
the same period ended December 31, 1997.  The rate paid on borrowings  decreased
by 44 basis points from 5.76% for the quarter  ended  December 31, 1997 to 5.32%
for the same period in 1998.  The decrease  resulted  primarily from obtaining a
very  favorable  rate of 4.77% on $40  million  in long  term FHLB  advances  in
September 1998.

Provision for Loan Losses.  The provision for loan losses was $123,000 and there
were $3,000 of charge  offs  during the three  months  ended  December  31, 1998
compared to a $75,000 provision and no charge offs during the three months ended
December 31, 1997.  The provision was increased in response to portfolio  growth
and continuing  additions of consumer  loans,  which are considered to have more
associated risk than the Company's  traditional portfolio of one- to four-family
residential mortgages.

Non-Interest  Income.  Non-interest  income  increased  $202,753,  or 29.10%, to
$899,420  for the three months  ended  December  31, 1998 from  $696,667 for the
three months ended December 31, 1997. The increase was primarily attributable to
an $86,313 increase in fee  income  related to the increase in deposit  accounts
subject to service charges and $128,193 gain on sale of investment securities.

Non-Interest Expense. Non-interest expense increased $246,601, or 5.11%, to $5.1
million for the three months ended  December 31, 1998,  from $4.8 million in the
comparable  period in 1997.  Occupancy  expense  increased from $520,511 for the
quarter ended  December 31, 1997 to $559,105 for the quarter ended  December 31,
1998 due to the addition of two branches and  expenditures on equipment  related
to  preparing  for Year 2000.  Sale of  mortgage-backed  and related  securities
resulted in a loss of  $112,256  which  partially  offset the gain on sale noted
above.  The ratio of non-interest  expense to average total assets was 1.94% and
1.98% for the three months ended December 31, 1998 and 1997, respectively.

Income Taxes.  The provision for income taxes  increased  $331,418 for the three
months ended  December  31, 1998  compared  with the prior year,  primarily as a
result of a higher state income tax rate for this year.



                                       16

<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, 1998.




                                       17

<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 12, 1999                  By:  /s/ Gerald V. Brown
                                         --------------------------------------
                                         Gerald V. Brown, President and
                                         Chief Executive Officer


Date: February 12, 1999                  By:  /s/ Marshall Jay Alexander
                                         --------------------------------------
                                         Marshall Jay Alexander, Senior Vice 
                                         President and Chief Financial Officer






















                                       18