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 March 31, 1997

                                             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 April 30, 1997, there were issued and outstanding 9,081,113 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 March 31, 1997 and September 30, 1996)                    3

         Consolidated Statements of Earnings (For the three months
         and six months ended March 31, 1997 and 1996)                   4

         Consolidated Statement of Shareholders' Equity
         (For the year ended September 30, 1996 and for
         the six months ended March 31, 1997)                            5

         Consolidated Statements of Cash Flows (For the six
         months ended March 31, 1997 and 1996)                          6 - 7

         Notes to Consolidated Financial Statements                     8 - 9

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                            10 - 15

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

Item 1.  Legal Proceedings                                              16

Item 2.  Changes in Securities                                          16

Item 3.  Defaults Upon Senior Securities                                16

Item 4.  Submission of Matters to a Vote of Security Holders            16

Item 5.  Other Information                                              16

Item 6.  Exhibits and Reports on Form 8-K                               16

Signatures                                                              17










                                       2
                                                         

<PAGE>


<TABLE>

                                        KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                       CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                         AS OF MARCH 31, 1997 AND SEPTEMBER 30, 1996
                                                         (Unaudited)
                                                                   March 31, 1997      September 30, 1996
ASSETS                                                         ------------------      ------------------
<CAPTION>


<S>                                                                 <C>                     <C>       
Cash and due from banks                                               $3,049,566              $6,841,554
Federal funds sold                                                    11,129,133               9,338,079
                                                               ------------------      ------------------
   Total cash and cash equivalents                                    14,178,699              16,179,633

Investment securities available for sale, at fair value               62,351,142              75,986,611
  (amortized cost: $63,679,680 and $77,071,211)
Investment securities held to maturity, at amortized cost 
  (fair value: $9,794,754 and $9,860,165)                              9,767,669               9,827,193
Mortgage backed and related securities available for sale, at 
  fair value (amortized cost: $64,441,655 and $74,249,350)            64,769,931              74,109,321
Mortgage backed and related securities held to maturity, at 
  amortized cost (fair value: $6,219,258 and $6,736,007)               6,211,074               6,783,001
Loans receivable, net                                                508,357,123             473,555,988
Real estate owned                                                             --                  69,483
Premises and equipment, net                                            5,266,552               4,964,262
Stock in Federal Home Loan Bank of Seattle, at cost                    5,368,700               4,773,800
Accrued interest receivable, net                                       5,036,159               5,037,285
Other assets                                                           2,523,423                 682,814
                                                               ------------------      ------------------
   Total assets                                                     $683,830,472            $671,969,391
                                                               ==================      ==================

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
  Deposit liabilities                                               $414,831,375            $399,673,180
  Accrued interest on savings deposits                                   862,078                 712,408
  Advances from borrowers for taxes and insurance                      3,222,140               7,831,127
  Advances from Federal Home Loan Bank of Seattle                    101,000,000              90,000,000
  Short term borrowings                                               18,721,250              14,904,400
  Accrued interest on borrowings                                         598,781                 323,163
  Pension liability                                                      735,762                 668,088
  Deferred federal and state income taxes                              1,043,357                 735,596
  Other liabilities                                                    3,063,446               3,710,455
                                                               ------------------      ------------------
    Total liabilities                                                544,078,189             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,
  March 31, 1997 - 10,451,223 issued, 9,081,113 outstanding; 
  September 30, 1996 - 11,612,470 issued, 
  10,242,360 shares outstanding                                          104,512                 116,124
  Additional paid-in-capital                                          92,541,983             110,762,678
  Retained earnings-substantially restricted                          62,069,497              59,082,479
  Unearned shares issued to ESOP                                      (8,318,525)             (8,807,850)
  Unearned shares issued to MRDP                                      (6,025,022)             (6,694,470)
  Net unrealized loss on securities available for sale                  (620,162)             (1,047,987)
                                                               ------------------      ------------------
    Total shareholders' equity                                       139,752,283             153,410,974
                                                               ------------------      ------------------
    Total liabilities and shareholders' equity                      $683,830,472            $671,969,391
                                                               ==================      ==================

      See notes to consolidated financial statements.
</TABLE>

                                                             3

<PAGE>
<TABLE>


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


                                          Three Months Ended Three Months Ended   Six Months Ended    Six Months Ended
                                                   March 31,          March 31,          March 31,           March 31,
                                                        1997               1996               1997                1996
                                              --------------     --------------     --------------      --------------
INTEREST INCOME
<CAPTION>
<S>                                              <C>                <C>               <C>                 <C>        
  Loans receivable                               $9,866,855         $8,645,846        $19,473,185         $16,904,150
  Mortgage backed and related securities          1,125,772            465,656          2,395,039             730,511
  Investment securities                           1,243,295          1,759,474          2,666,185           3,181,255
  Federal funds sold                                164,090            180,492            448,344           1,022,671
  Interest bearing deposits                           9,530             86,636             29,412             218,067
                                              --------------     --------------     --------------      --------------
    Total interest income                        12,409,542         11,138,104         25,012,165          22,056,654
                                              --------------     --------------     --------------      --------------

INTEREST EXPENSE
  Deposit liabilities                             5,151,533          5,024,369         10,297,463          10,120,225
  FHLB advances                                   1,398,352            582,378          2,939,749           1,009,517
  Other                                             247,984             18,759            476,726              62,871
                                              --------------     --------------     --------------      --------------
    Total interest expense                        6,797,869          5,625,506         13,713,938          11,192,613
                                              --------------     --------------     --------------      --------------
    Net interest income                           5,611,673          5,512,598         11,298,227          10,864,041

Provision for loan losses                           240,000             30,000            270,000              60,000
                                              --------------     --------------     --------------      --------------

    Net interest income after provision for
      loan losses                                 5,371,673          5,482,598         11,028,227          10,804,041
                                              --------------     --------------     --------------      --------------

NON-INTEREST INCOME
  Fees and service charges                           76,812             58,601            148,470             119,474
  Gain on sale of investments                            --                 --              2,143                  --
  Gain on sale of real estate owned                   1,649                 --             27,946                  --
  Other income                                       23,275             39,201             35,687              57,798
                                              --------------     --------------     --------------      --------------
    Total non-interest income                       101,736             97,802            214,246             177,272
                                              --------------     --------------     --------------      --------------
NON-INTEREST EXPENSE
  Compensation, employee benefits and             1,652,645          955,357            3,231,612           1,936,986
  related expense  
  Occupancy expense                                 239,896            254,627            474,381             485,947
  Data processing expense                            94,932             89,706            216,011             181,138
  Insurance premium expense                          15,678            238,430            245,107             463,072
  Loss on sale of investments                            --                 --             14,530                  --
  Loss on sale of real estate owned                      --                 --                 --               4,690
  Other expense                                     439,214            390,232            864,659             696,368
                                              --------------     --------------     --------------      --------------
    Total non-interest expense                    2,442,365          1,928,352          5,046,300           3,768,201
                                              --------------     --------------     --------------      --------------

Earnings before income taxes                      3,031,044          3,652,048          6,196,173           7,213,112

Provision for income tax                            549,767          1,245,082          1,801,809           2,565,007
                                              --------------     --------------     --------------      --------------

Net earnings                                     $2,481,277         $2,406,966         $4,394,364          $4,648,105
                                              ==============     ==============     ==============      ==============

Earnings per common share (based on weighted
  average shares outstanding)                          $.27               $.21               $.45                $.41
Weighted average number of shares outstanding     9,226,876         11,254,475          9,738,879          11,254,475

      See notes to consolidated financial statements.
</TABLE>


                                                             4

<PAGE>

<TABLE>


                                        KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                       CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                        FOR THE YEAR ENDED SEPTEMBER 30, 1996 AND THE SIX MONTHS ENDED MARCH 31, 1997
                                                         (Unaudited)

                                                   Additional                   Unearned    Unrealized       Unearned         Total
                     Common Stock  Common Stock       paid-in     Retained   ESOP shares   gain (loss)  shares issued  shareholders'
                           Shares        Amount       capital     earnings       at cost on securities  to MRDP Trust        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                  --            --           --   (1,407,346)           --            --             --    (1,407,346)

Unrealized gain 
on securities
available for sale              --            --           --           --            --       427,825             --       427,825

Stock retirement        (1,161,247)      (11,612) (18,489,667)          --            --            --             --   (18,501,279)

ESOP contribution               --            --      268,972           --       489,325            --             --       758,297

MRDP contribution               --            --           --           --            --            --        669,448       669,448

Net earnings                    --            --           --    4,394,364            --            --             --     4,394,364
                    -------------- ------------- ------------ ------------ ------------- ------------- -------------- -------------
Balance at 
March 31, 1997          10,451,223      $104,512  $92,541,983  $62,069,497   ($8,318,525)    ($620,162)   ($6,025,022) $139,752,283
                    ============== ============= ============ ============ ============= ============== ============= =============

      See notes to consolidated financial statements.

</TABLE>









                                                                    5

<PAGE>

<TABLE>


                                              KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
                                                               (Unaudited)

                                                                Six Months Ended        Six Months Ended
                                                                       March 31,               March 31,
                                                                            1997                    1996
<CAPTION>
                                                                  --------------          --------------
<S>                                                                 <C>                    <C>          
CASH FLOWS FROM OPERATING ACTIVITIES
   Net earnings                                                      $4,394,364              $4,648,105
                                                                  --------------          --------------
ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
   Depreciation                                                         179,994                 206,616
   Provision for loan losses                                            270,000                  60,000
   Compensation expense related to ESOP benefit                         758,298                 640,722
   Compensation expense related to MRDP Trust                           669,448                      --
   Net amortization of premiums (discounts)  paid on
     investment and mortgage backed and related securities              275,611                 (53,854)
   Increase in deferred loan fees, net of amortization                  343,334                 271,832
   Accretion of discounts on purchased loans                               (163)                   (159)
   Net (gain) loss on sale of real estate owned and
     premises and equipment                                              (3,234)                  4,690
   Net (gain) loss on sale of investment and mortgage
     backed and related securities                                       12,387                      --
   FHLB stock dividend                                                 (244,600)               (164,800)
CHANGES IN ASSETS AND LIABILITIES
   Accrued interest receivable                                            1,126              (1,134,672)
   Other assets                                                      (1,840,609)               (487,442)
   Accrued interest on deposit liabilities                              149,670                (277,236)
   Accrued interest on borrowings                                       275,618                      --
   Pension liabilities                                                   67,674                  60,674
   Deferred federal and state income taxes                              511,220                 519,232
   Other liabilities                                                 (1,707,253)             (2,230,770)
                                                                  --------------          --------------
Total adjustments                                                      (281,479)             (2,585,167)
                                                                  --------------          --------------
Net cash provided by operating activities                             4,112,885               2,062,938
                                                                  --------------          --------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from maturity of investment securities
     held to maturity                                                28,949,466              66,082,000
   Proceeds from maturity of investment securities
     available for sale                                               2,000,000                      --
   Principal repayments received on mortgage
      backed and related securities                                  10,588,829               3,182,619
   Principal repayments received on loans                            24,836,041              32,066,766
   Loan originations                                                (60,250,348)            (62,235,350)
   Purchase of investment securities held
     to maturity                                                    (28,930,495)            (14,741,331)
   Purchase of investment securities available
     for sale                                                        (3,413,607)           (102,018,163)
   Purchase of mortgage backed and related
     securities held to maturity                                             --              (2,581,632)
   Purchase of mortgage backed and related
     securities available for sale                                   (5,151,261)            (44,280,984)
   Purchase of FHLB stock                                            (2,776,200)                     --
   Proceeds from sale of FHLB stock                                   2,425,900                      --
   Proceeds from sale of investment securities
     available for sale                                              16,066,044                      --
   Proceeds from sale of mortgage backed and related
     securities available for sale                                    4,712,347                      --
   Proceeds from sale of real estate owned and
     premises and equipment                                              72,717                  20,667
   Purchases of premises and equipment                                 (482,284)                (96,380)
                                                                  --------------          --------------
Net cash used in investing activities                               (11,352,851)           (124,601,788)
                                                                  --------------          --------------

</TABLE>


                                                                    6

<PAGE>

<TABLE>


                                              KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
                                                               (Unaudited)
                                                               (continued)

                                                                Six Months Ended        Six Months Ended
                                                                       March 31,               March 31,
                                                                            1997                    1996
<CAPTION>
                                                                ----------------          --------------
CASH FLOWS FROM FINANCING ACTIVITIES
   Increase/(decrease) in deposit
<S>                                                                 <C>                     <C>       
    liabilities, net of withdrawals                                 $15,158,195              $5,815,494
   Proceeds from FHLB advances                                       93,000,000              20,000,000
   Repayments of FHLB advances                                      (82,000,000)                     --
   Proceeds from short term borrowings                               26,780,250                      --
   Repayments of short term borrowings                              (22,963,400)                     --
   Repayment from stock over subscription                                    --             (65,685,300)
   Stock retirement                                                 (18,501,280)                     --
   Advances from borrowers for tax and insurance                     (4,608,987)             (4,830,861)
   Dividends paid                                                    (1,625,746)               (611,655)
                                                                  --------------          --------------
Net cash provided by financing activities                             5,239,032             (45,312,322)
                                                                  --------------          --------------
Net (decrease) increase in cash and cash
  equivalents                                                        (2,000,934)           (167,851,172)

Cash and cash equivalents at beginning
  of quarter                                                         16,179,633             175,994,270

Cash and cash equivalents at end of quarter                         $14,178,699              $8,143,098

                                                                  ==============          ==============
SUPPLEMENTAL SCHEDULE OF INTEREST AND INCOME
  TAXES PAID
   Interest paid                                                    $13,288,649             $11,469,849
   Income taxes paid                                                    893,500               2,469,173

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 (loss) on securities
     available for sale                                                 427,825                (985,552)
   Dividends declared and accrued in other
     liabilities                                                        783,842                 795,153

      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  necessary  for a fair  presentation  of Klamath  First
Bancorp,  Inc.'s (the "Company")  financial  condition as of March 31, 1997, and
September 30, 1996,  the results of operations  for the three months ended March
31, 1997 and 1996 and for the six months  ended March 31, 1997 and 1996 and cash
flows for the six months ended March 31, 1997 and 1996. 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 and six months  ended March 31,  1997 are not  necessarily
indicative of the results which may be expected for the entire fiscal year.

2.  ALLOWANCE FOR LOAN LOSSES
<TABLE>

                                                March 31,     September 30,
                                                     1997              1996
                                           --------------    --------------
<S>                                           <C>                 <C>     
Balance, beginning of year                      $927,820          $807,820
Charge-offs                                           --                --
Additions                                        270,000           120,000
                                           --------------    --------------
Balance, end of period                        $1,197,820          $927,820
                                           ==============    ==============
</TABLE>

Additions  to the  allowance  for loan losses were  increased  during the period
ended  March 31,  1997 in  response  to the  purchase  of $6.0  million of loans
secured by multi-family  residential property which are higher yielding and more
risky  than  the  Company's   traditional   portfolio  of  one-  to  four-family
residential mortgages.

3.  ADVANCES FROM FEDERAL HOME LOAN BANK

Borrowings at March 31, 1997  consisted of eight short term  advances  totalling
$76.0  million and four long term  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>

                                             March 31, 1997                       September 30, 1996
                               ------------   ----------- --------------- ----------- --------------  -------------
                                                 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             $76,000,000   5.42%-5.78%          5.54%  $65,000,000    5.40%-5.64%          5.53%

After two but within
four years                       25,000,000   5.55%-5.61%          5.59%   25,000,000    5.53%-5.74%          5.66%
                               ------------                               -----------
                               $101,000,000                               $90,000,000
                               ============                               ===========
</TABLE>

4.  SHORT TERM BORROWINGS

Securities  sold under  agreements to repurchase  totalled $18.7 million with an
interest rate of 5.65%. All of the agreements are due within 90 days.

                                        8

<PAGE>




5.  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 March 31, 1997:

<TABLE>
                                                                                        Categorized as "Well
                                                                                          Capitalized" Under
                                                                  For Capital              Prompt Corrective
                                            Actual          Adequacy Purposes               Action Provision
                                       -----------  ------  -----------------   ------     -----------------    ------
<CAPTION>
                                            Amount   Ratio             Amount    Ratio                Amount     Ratio
As of March 31, 1997:
<S>                                    <C>           <C>           <C>             <C>            <C>             <C>  
 Total Capital:                        116,002,649   38.1%         24,333,320      8.0%           30,416,650      10.0%
  (To Risk Weighted Assets)
 Tier I Capital:                       114,804,829   37.7%                N/A                     18,249,990       6.0%
  (To Risk Weighted Assets)
 Tier I Capital:                       114,804,829   17.9%         19,224,309      3.0%           32,040,514       5.0%
  (To Total Assets)
 Tangible Capital:                     114,804,829   17.9%          9,612,154      1.5%                  N/A
  (To Total Assets)
</TABLE>

6.  SHAREHOLDERS' EQUITY

During the quarter ended December 31, 1996, the Company  received  approval from
the Office of Thrift  Supervision to repurchase 10% of its  outstanding  shares.
This  repurchase was begun on December 31, 1996,  with the repurchase of 240,000
shares.  The remaining  921,247  shares were  repurchased  in January 1997.  The
shares were repurchased at an average price of $15.93.

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. Weighted average shares outstanding for the six month period ending
March 31, 1997 and 1996 were 9,738,879 and 11,254,475, respectively.

8.  BRANCH ACQUISITION

During the quarter ended March 31, 1997,  the Company  entered into a definitive
agreement to purchase 25 branches  from Wells Fargo Bank,  N.A. The  transaction
includes  purchase of deposits  and branch  facilities  located in rural  Oregon
communities  and is scheduled to close by July 18, 1997,  subject to  regulatory
approval.  The  transaction  will be accounted for as a purchase under generally
accepted accounting principles.

                                        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, 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 March 31,  1997,  the  Company had total
consolidated assets of $683.8 million and consolidated  shareholders'  equity of
$139.8  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 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 has recently begun
purchasing  Oregon-based   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.  While these types of loans  represent only 1.4% of
net loans at March 31, 1997, they accounted for 11.9% of loan production for the
six months ended March 31, 1997.


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 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 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, 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").

                                       10

<PAGE>


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 areas of the  Association  are the
counties of Klamath, Jackson and Deschutes in Southern and Central Oregon.

Branch Acquisition

The Association has entered into a definitive  agreement to purchase 25 branches
in rural Oregon communities from Wells Fargo Bank, N.A. The transaction includes
purchase of deposits and branch  facilities and is expected to close by July 18,
1997,  subject  to  regulatory  approval.   This  acquisition  will  expand  the
Association's  market  area to include 33 branches  in 22 Oregon  counties.  The
acquired  offices are located in  communities  which are  compatible  with,  and
complement, the Association's current markets and philosophy.

The purchase price is based on 6.51% of average  deposits at the branches during
the thirty days prior to closing,  plus the book value of fixed assets.  At this
time the exact deposit  premium cannot be determined,  however,  deposits of the
subject  branches  totalled  $250.4  million as of March 31, 1997. In accordance
with generally accepted accounting principles, the fixed assets acquired will be
recorded at fair value,  estimated to be approximately $4.9 million in excess of
the book value/purchase price. This increase in fixed asset value will be offset
by a reduction in the deposit  premium  recorded.  Excess  deposited  funds will
initially  be invested in  securities.  With the  increase in the  Association's
deposits  and assets as a result of the  acquisition,  total  deposits and total
assets of the Company are expected to increase by approximately 60.3% and 36.6%,
respectively.

Recently Issued Accounting Pronouncements

In October 1995,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Accounting  Standards ("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 the 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 value based
method had been used.  The  company  will  continue  to apply  Opinion No. 25 in
accounting for stock-based  compensation  plans and will provide the disclosures
required by SFAS No. 123.

In June 1996, FASB issued SFAS No. 125,  "Accounting for Transfers and Servicing
of Financial Assets
                                       11

<PAGE>



and  Extinguishments  of  Liabilities,"  which  was  amended  by SFAS  No.  127,
"Deferral of the  Effective  Date of Certain  Provisions  of FASB  Statement No.
125," issued in December 1996. These Statements provide accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities.   The  standards  are  based  on   consistent   application   of  a
financial-components approach that focuses on control. Under the approach, after
a transfer of financial assets, an entity recognizes the financial and servicing
assets it controls and the liabilities it has incurred,  derecognizes  financial
assets when control has been  surrendered,  and  derecognizes  liabilities  when
extinguished.  These Statements provide consistent  standards for distinguishing
transfers of  financial  assets that are sales from  transfers  that are secured
borrowings.

The Company  plans to implement  SFAS No.125 in  compliance  with the  effective
dates as amended by SFAS No. 127. The Company does not expect  implementation to
have a material impact on its financial position or results of operations.

In February 1997, FASB issued SFAS No. 128, "Earnings per Share." This Statement
establishes  standards for computing  and  presenting  earnings per share (EPS),
simplifying  the standards for computation of earnings per share and making them
comparable  to  international  EPS  standards.  This  Statement is effective for
financial  statements  issued for periods  ending after  December 15, 1997,  and
earlier  application  is not  permitted.  Management  has not yet  evaluated the
impact that adopton of this Statement will have.

Changes in Financial Condition

At March 31,  1997,  the  consolidated  assets of the  Company  totalled  $683.8
million,  an  increase  of $11.8  million,  or 1.77%,  from  $672.0  million  at
September 30, 1996.  The increase in total assets was a result of an increase in
net loans  receivable  of $34.8  million and a $594,900  increase in FHLB stock.
These  increases  were offset by sales and  repayments  of  mortgage  backed and
related  securities  of $9.9  million  and sales and  maturities  of  investment
securities of $13.7 million.

Net loans receivable  increased by $34.8 million, or 7.35%, to $508.4 million at
March 31, 1997,  compared to $473.6  million at September 30, 1996. The increase
was primarily the result of continued new loan demand exceeding loan repayments,
augmented by the Company's  purchase of $6.0 million in higher yielding loans on
multi-family residential properties in Oregon during March 1997.

Investment  securities  decreased $13.7 million, or 16.0%, from $85.8 million at
September  30, 1996 to $72.1  million at March 31, 1997.  This  decrease was the
result of $30.9  million  in  securities  maturing  during  the period and $16.1
million  of  securities  that were  sold.  These  decreases  were  offset by the
purchase  of $32.3  million in  securities.  Per the  Company's  business  plan,
proceeds from investment runoff have been used to fund loan growth.

During the six months ended March 31, 1997, $10.6 million of principal  payments
were received on mortgage backed and related securities ("MBS") and $4.7 million
in  available  for sale MBS were sold.  In  addition,  $5.2  million in MBS were
purchased,  which  resulted in the balance of $71.0 million at March 31, 1997, a
decrease of $9.9 million, or 12.3%, from $80.9 million at September 30, 1996.

Savings  deposits  increased  $15.1  million,  or 3.8%,  from $399.7  million at
September 30, 1996 to $414.8 million at March 31, 1997 Management attributes the
increase to the maintaining of competitive  rates in our 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.

Advances  from  borrowers for taxes and  insurance  decreased  $4.6 million from
September  30, 1996 to March 31, 1997.  The  decrease is the combined  result of
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  offset by the  accrual of
payments received for taxes and insurance during the past six months.

                                       12

<PAGE>




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 March 31, 1997.  Six million
dollars of the  increase  was used to fund loan growth and $5.0 million was used
to purchase adjustable rate mortgage backed securities.

Total shareholders' equity decreased $13.7 million, or 8.9%, from $153.4 million
at September 30, 1996 to $139.8 million at March 31, 1997. This net decrease was
the combined  result of the  repurchase  of 1,161,247  shares of stock for $18.5
million  and the  declaration  of $1.4  million in  dividends  for the first two
quarters,  partially  offset by $4.4  million in  earnings  during the six month
period from September 30, 1996 to March 31, 1997.

Results of Operations

         Comparison of Six Months Ended March 31, 1997 and 1996

General.  Net interest income  increased  $434,186,  or 4.0%,  comparing the six
month  period  ending  March 31, 1997 to the same period  ending March 31, 1996.
Interest income increased $3.0 million while interest expense  increased by only
$2.5  million  comparing  the six month  period ended March 31, 1997 to the same
period  ended March 31,  1996.  Non-interest  income also  increased by $36,974,
while the provision for loan losses increased by $210,000,  non-interest expense
increased by $1.3 million,  and income taxes decreased by $763,198 comparing the
same two periods.  This resulted in net income decreasing by $253,741, or 5.46%,
from $4.6  million for the six months  ended March 31, 1996 to $4.4  million for
the six months ended March 31, 1997.

Interest  Income.  The increase of $3.0 million in interest income was generated
by an additional  $73.1 million in average  interest  earning assets for the six
months  ended  March 31,  1997  compared  to the same  period in 1996.  Balances
previously invested in federal funds sold have been redeployed to investments in
mortgage backed and related securities and loans receivable in the current year,
resulting in a $1.7 million  increase in interest  income on mortgage backed and
related  securities  and $2.6  million  increase in income on loans  receivable.
These  increases  were  partially  offset by a  $515,070  decrease  in income on
investment securities related to a decrease in the average balance of securities
held.

The average yield on interest  earning assets  increased 8 basis points to 7.44%
for the six months  ended March 31,  1997 from 7.36% for the same  period  ended
March 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  $177,238 for
the six months  ended  March 31,  1997 as  compared  to the same period in 1996.
Although total deposits grew by $24.6 million  comparing March 31, 1996 to 1997,
the average interest paid on interest-bearing  deposits declined 15 basis points
from 5.27% for the six months  ended March 31, 1996 to 5.12% for the same period
ended March 31, 1997.

Provision for Loan Losses.  The provision for loan losses was $270,000 and there
were no charge  offs during the six months  ended  March 31, 1997  compared to a
$60,000 provision and no charge offs during the six months ended March 31, 1996.
The provision was increased  during the quarter ended March 31, 1997 in response
to portfolio  growth and the purchase of $6.0 million of  higher-yielding  loans
collateralized by multi-family residential property which have higher associated
risk than the existing portfolio of one- to four-family  residential  mortgages.
Based on the Company's business strategies,  management  anticipates  increasing
the proportion of the loan portfolio dedicated to these  higher-yielding  loans.
At March  31,  1997,  the  allowance  for loan  losses  was  equal to  176.7% of
non-performing  loans  compared to 485.9% at September 30, 1996. The decrease in
the  coverage  ratio  at  March  31,  1997  was the  result  of an  increase  in
non-performing  loans from  $191,000 at September  30, 1996 to $678,000 at March
31, 1997.
                                       13

<PAGE>

Non-Interest  Income.  Non-interest  income  increased  $36,974,  or  20.9%,  to
$214,246  for the six months  ended  March 31,  1997 from  $177,272  for the six

months ended March 31, 1996.  The increase  was  attributable  to increased  fee
income as well as gains on sale of real estate owned and investments. Additional
fee income resulted from aggressive  internal  marketing  efforts to improve fee
income from checking accounts, ATM's, and mortgage life insurance sales.

Non-Interest Expense.  Non-interest expense increased $1.3 million, or 33.9%, to
$5.0 million for the six months ended March 31, 1997,  from $3.8 million for the
comparable period in 1996. Of this increase, $1.3 million was attributable to an
increase in compensation  and benefit  expense in 1997,  reflecting the accruals
for Employee Stock Ownership Plan  contributions and the Management  Recognition
and Development Plan. The additional expense associated with benefit plans which
were not in place in the  prior  year  will  continue  to  impact  prior  period
comparisons  for the  remaining  quarters of the year ended  September 30, 1997.
Increases in other  expense of $168,291  were offset by a $217,965  reduction in
deposit  insurance  premiums  resulting from reduced  assessment rates beginning
January 1, 1997 and further  reduced by a credit for  overpayment of premiums in
1996.  The ratio of  non-interest  expense to average  total assets was 1.5% and
1.2% for the six months ended March 31, 1997 and 1996, respectively.

Income  Taxes.  The provision  for income taxes  decreased  $763,198 for the six
months ended March 31, 1997  compared with the same period ended March 31, 1996,
primarily as a result of recognition  of the tax benefit  related to the capital
loss on sale of the U.S. Federal  securities  mutual bond fund. At September 30,
1996,  when the  capital  loss was  recognized  for book  purposes,  a valuation
allowance  was created to offset the deferred tax asset  because the Company was
not assured of being able to realize a capital gain and the related tax benefit.
During the  quarter  ended  March 31,  1997,  the  Company,  through the sale of
certain  investments,  realized a capital  gain for tax  purposes  that  assures
realization of the tax benefit and thus reduced the valuation allowance to zero.

         Comparison of Three Months Ended March 31, 1997 and 1996

General.  Net income increased $74,311, or 3.1%, from $2.4 million for the three
months ended March 31, 1996 to $2.5 million for the three months ended March 31,
1997. This increase was attributable to an increase in net interest income and a
decrease in the  provision for income taxes offset by increases in the provision
for loan  losses and  non-interest  expense  related to employee  benefit  plans
adopted at conversion.

Interest  Income.  Additional  interest  income  generated by the $69.7  million
increase in average interest  earning assets  contributed to an increase of $1.3
million in interest income for the three months ended March 31, 1997 compared to
1996.  Of this  increase,  $0.7 million is  attributable  to increased  interest
income on mortgage  backed and related  securities and $1.2 million to increased
loans  receivable.  These  increases  were  offset by a decrease  in interest on
investment securities of $0.5 million.

The average yield on interest  earning assets  remained  consistent at 7.45% for
the three  months  ended  March 31,  1997  compared to 7.46% for the same period
ended March 31, 1996.

Interest Expense.  Interest expense on savings deposits  increased  $127,164 for
the three  months  ended  March 31, 1997 as compared to the same period in 1996.
Although average deposits increased by $20.4 million comparing March 31, 1996 to
1997, the average interest paid on interest-bearing  deposits decreased 14 basis
points  from 5.21% for the three  months  ended  March 31, 1996 to 5.07% for the
same period ended March 31, 1997.

Provision for Loan Losses.  The provision for loan losses was $240,000 and there
were not any charge offs during the three months  ended March 31, 1997  compared
to a $30,000  provision  and no charge offs during the three  months ended March
31, 1996. The provision was increased during the quarter ended March 31, 1997 in
response to portfolio growth and the purchase of $6.0 million of higher-yielding
loans  collateralized  by  multi-family  residential  property which have higher
associated risk than the existing  portfolio of one- to four-family  residential
mortgages.

                                       14

<PAGE>




Non-Interest Income.  Non-interest income increased $3,934, or 4.0%, to $101,736
for the three  months  ended  March 31, 1997 from  $97,802 for the three  months
ended March 31,  1996.  The  increase was  primarily  attributable  to a $18,211
increase  in  fee  income  partially  offset  by a  decrease  in  other  income.
Additional fee income resulted from  aggressive  internal  marketing  efforts to
improve fee income from checking  accounts,  ATM's,  and mortgage life insurance
sales.

Non-Interest Expense. Non-interest expense increased $514,013, or 26.7%, to $2.4
million for the three  months  ended March 31,  1997,  from $1.9  million in the
comparable  period in 1996. Of this increase,  $697,288 was  attributable  to an
increase in compensation and benefit expense in 1997,  primarily  reflecting the
accruals for Employee  Stock  Ownership  Plan  contributions  and the Management
Recognition  and  Development  Plan.  This  increase was  partially  offset by a
$222,752   reduction  in  deposit  insurance  premiums  resulting  from  reduced
assessment  rates beginning  January 1, 1997 and further reduced by a credit for
overpayment  of premiums in 1996. The ratio of  non-interest  expense to average
total  assets was 1.5% and 1.3% for the three  months  ended  March 31, 1997 and
1996, respectively.

Income Taxes.  The provision for income taxes  decreased  $695,315 for the three
months ended March 31, 1997 compared with the prior year,  primarily as a result
of  recognition of the tax benefit  related to loss on sale of the U.S.  Federal
securities  mutual bond fund, as noted in the  discussion of income taxes in the
six month comparison, above.



                                       15

<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

         The Company held an annual meeting on January 22, 1997. The election of
         three  directors was brought before the security  holders for vote. The
         following  three  directors  were  nominated and elected for three-year
         terms:  

                                    Vote For      Vote Withheld
                                   ___________  _________________
               Timothy A. Bailey    9,866,231         12,783  
               James D. Bocchi      9,864,581         14,433 
               William C. Dalton    9,845,206         33,808


         The following other directors  continue in office for their  respective
         remaining terms:  Rodney N. Murray  (one-year term),  Bernard Z. Agrons
         (one-year  term),  Gerald V. Brown (two-year  term), J. Gillis Hannigan
         (two-year term), and Adolph Zamsky (two-year term).

         No  additional  items were on the agenda of the annual  meeting  and no
         items were brought to a vote during the meeting.


Item 5.  Other Information

         Not applicable.


Item 6.  Exhibits and Reports on Form 8-K

         a)  Not applicable.

         b) A report on Form 8-K dated March 5, 1997 was filed on March 19, 1997
         relating to the  Company's  entrance into a definitive  agreement  with
         Wells Fargo Bank,  N.A. to purchase 25 branch  offices in rural  Oregon
         communities.




                                       16

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


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




































                                       17

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