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, 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  April  21,  1998,  there  were  issued  10,429,534  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, 1998 and September 30, 1997)                    3

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

            Consolidated Statement of Shareholders' Equity
            (For the years ended September 30, 1997 and 1996 and for
            the six months ended March 31, 1998)                             5

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

            Notes to Consolidated Financial Statements                  8 - 10

Item 2.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations                        11 - 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>
<CAPTION>
                                          KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                                        CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                          AS OF MARCH 31, 1998 AND SEPTEMBER 30, 1997
                                                         (Unaudited)


                                                                                March 31, 1998            September 30, 1997
ASSETS                                                                          --------------            ------------------
<S>                                                                               <C>                           <C>         
Cash and due from banks ..................................................        $ 20,277,001                  $ 24,503,768
Interest earning deposits with banks .....................................           3,528,842                     1,431,087
Federal funds sold and securities purchased under agreements to resell ...          20,015,585                     6,108,341
                                                                                  ------------                  ------------
   Total cash and cash equivalents .......................................          43,821,428                    32,043,196

Investment securities available for sale, at fair value
  (amortized cost: $229,962,044 and $261,869,234) ........................         230,882,894                   261,846,320
Investment securities held to maturity, at amortized cost (fair
  value: $3,077,695 and $22,968,997) .....................................           3,040,606                    22,937,314
Mortgage backed and related securities available for sale, at fair
  value (amortized cost: $65,354,606 and $64,097,246) ....................          65,835,322                    64,868,633
Mortgage backed and related securities held to maturity, at amortized
  cost (fair value: $4,671,473 and $5,518,648) ...........................           4,631,161                     5,446,957
Loans receivable, net ....................................................         605,662,050                   551,463,590
Real estate owned ........................................................                --                            --
Premises and equipment, net ..............................................          11,741,097                    11,671,124
Stock in Federal Home Loan Bank of Seattle, at cost ......................           7,433,800                     7,150,400
Accrued interest receivable ..............................................           7,318,615                     7,626,164
Core deposit intangible ..................................................          12,257,356                    13,083,695
Other assets .............................................................           1,568,263                     1,940,655
                                                                                  ------------                  ------------
   Total assets ..........................................................        $994,192,592                  $980,078,048
                                                                                  ============                  ============

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
  Deposit liabilities ....................................................        $680,635,103                  $673,977,901
  Accrued interest on deposits ...........................................           1,092,917                     1,215,745
  Advances from borrowers for taxes and insurance ........................           3,709,521                     8,915,486
  Advances from Federal Home Loan Bank of Seattle ........................         139,500,000                   129,000,000
  Short term borrowings ..................................................          14,084,000                    17,077,500
  Accrued interest on borrowings .........................................             275,757                       512,716
  Pension liabilities ....................................................             790,438                       727,140
  Deferred federal and state income taxes ................................           2,093,883                     1,911,573
  Other liabilities ......................................................           2,761,381                     2,277,544
                                                                                  ------------                  ------------
    Total liabilities ....................................................         844,943,000                   835,615,605
                                                                                  ------------                  ------------

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, 1998 -- 10,429,534 issued, 9,235,582 outstanding;
    September 30, 1997 -- 10,429,534 issued, 9,235,582 outstanding .......             104,295                       104,295
  Additional paid-in-capital .............................................          93,189,848                    92,601,639
  Retained earnings-substantially restricted .............................          67,507,156                    64,744,995
  Unearned shares issued to ESOP .........................................          (7,339,875)                   (7,829,200)
  Unearned shares issued to MRDP .........................................          (5,080,803)                   (5,623,340)
  Net unrealized gain on securities available for sale, net of tax .......             868,971                       464,054
                                                                                  ------------                  ------------
    Total shareholders' equity ...........................................         149,249,592                   144,462,443
                                                                                  ------------                  ------------
    Total liabilities and shareholders' equity ...........................        $994,192,592                  $980,078,048
                                                                                  ============                  ============
<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     Three Months       Six Months       Six Months
                                                                         Ended            Ended            Ended            Ended
                                                                     March 31,        March 31,        March 31,        March 31,
                                                                          1998             1997             1998             1997
                                                                --------------   --------------   --------------   --------------
INTEREST INCOME
<S>                                                             <C>              <C>              <C>              <C>           
   Loans receivable .........................................   $   12,062,942   $    9,866,855   $   23,479,371   $   19,473,185
   Mortgage backed and related securities ...................        1,080,062        1,125,772        2,187,810        2,395,039
   Investment securities ....................................        3,704,876        1,243,295        7,896,311        2,666,185
   Federal funds sold and securities purchased
      under agreements to resell ............................          191,311          164,090          339,960          448,344
   Interest earning deposits ................................          140,695            9,530          221,722           29,412
                                                                --------------   --------------   --------------   --------------
     Total interest income ..................................       17,179,886       12,409,542       34,125,174       25,012,165
                                                                --------------   --------------   --------------   --------------

 INTEREST EXPENSE
   Deposit liabilities ......................................        7,149,174        5,151,533       14,356,659       10,297,463
   Advances from FHLB of Seattle ............................        1,748,242        1,398,352        3,437,666        2,939,749
   Other ....................................................          225,546          247,984          514,975          476,726
                                                                --------------   --------------   --------------   --------------
     Total interest expense .................................        9,122,962        6,797,869       18,309,300       13,713,938
                                                                --------------   --------------   --------------   --------------
     Net interest income ....................................        8,056,924        5,611,673       15,815,874       11,298,227

 Provision for loan losses ..................................           91,000          240,000          166,000          270,000

                                                                --------------   --------------   --------------   --------------
     Net interest income after provision for
       loan losses ..........................................        7,965,924        5,371,673       15,649,874       11,028,227
                                                                --------------   --------------   --------------   --------------

 NON-INTEREST INCOME
   Fees and service charges .................................          550,136           76,812        1,155,500          148,470
   Gain on sale of investments ..............................             --               --               --              2,143
   Gain on sale of real estate owned ........................             --              1,649             --             27,946
   Other income .............................................           26,359           23,275          117,662           35,687
                                                                --------------   --------------   --------------   --------------
     Total non-interest income ..............................          576,495          101,736        1,273,162          214,246
                                                                --------------   --------------   --------------   --------------
 NON-INTEREST EXPENSE
 Compensation, employee benefits and related expense ........        2,417,806        1,652,645        4,897,339        3,231,612
   Occupancy expense ........................................          515,859          173,144        1,036,370          341,915
   Data processing expense ..................................          241,186           94,932          473,698          216,011
   Insurance premium expense ................................          105,859           15,678          173,199          245,107
   Loss on sale of investments ..............................             --               --               --             14,530
   Amortization of core deposit intangible ..................          413,169             --            826,338             --
   Other expense ............................................        1,194,041          505,966        2,309,452          997,125
                                                                --------------   --------------   --------------   --------------
     Total non-interest expense .............................        4,887,920        2,442,365        9,716,396        5,046,300
                                                                --------------   --------------   --------------   --------------

 Earnings before income taxes ...............................        3,654,499        3,031,044        7,206,640        6,196,173

 Provision for income tax ...................................        1,446,726          549,767        2,852,793        1,801,809
                                                                --------------   --------------   --------------   --------------

 Net earnings ...............................................   $    2,207,773   $    2,481,277   $    4,353,847   $    4,394,364
                                                                ==============   ==============   ==============   ==============

 Basic earnings per share ...................................           $ 0.24           $ 0.27           $ 0.47           $ 0.45
 Earnings per share - assuming full dilution ................           $ 0.23           $ 0.26           $ 0.45           $ 0.44
 Weighted average number of shares outstanding ..............        9,235,582        9,226,876        9,235,582        9,738,879
 Weighted average number of shares - assuming full dilution..        9,754,449        9,508,260        9,735,524        9,952,218

<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, 1996 AND 1997 AND THE SIX MONTHS ENDED MARCH 31, 1998
                                                             (Unaudited)



                                                                                   Unearned     Unearned   Unrealized       
                                   Common   Common    Additional                   Unearned       shares   gain (loss)        Total
                                    Stock    Stock       paid-in     Retained   ESOP shares    issued to           on  shareholders'
                                   Shares   Amount       capital     earnings       at cost    MRDP Trust  securities        equity
                               ---------- --------  ------------  -----------   ----------- -------------  ----------  ------------
<S>                            <C>        <C>       <C>           <C>           <C>            <C>         <C>         <C>         
Balance at October 1, 1995 ..  11,254,475 $122,331  $119,230,653  $55,811,362   $(9,786,500)        $--     $(692,781) $164,685,065

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


ESOP contribution ...........      97,865     --         417,652         --         978,650          --          --       1,396,302

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

Unearned shares issued to MRDP
  Trust .....................    (489,325)    --            --           --            --      (6,694,470)       --      (6,694,470)

Stock repurchased and  retired   (620,655)  (6,207)   (8,885,627)        --            --            --          --      (8,891,834)

Net earnings ................        --       --            --      6,109,797          --            --          --       6,109,797
                               ----------  -------   -----------   ----------    ----------    ----------   ---------   -----------
Balance at September 30, 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)

Unrealized gain 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 ..............        --       --            --     (1,591,686)         --            --          --      (1,591,686)

Unrealized gain on securities
  available for sale ........        --       --            --           --            --            --       404,917       404,917

ESOP contribution ...........        --       --         588,209         --         489,325          --          --       1,077,534

MRDP contribution ...........        --       --            --           --            --         542,537        --         542,537

Net earnings ................        --       --            --      4,353,847          --            --          --       4,353,847
                               ----------  -------   -----------   ----------    ----------    ----------   ---------   -----------
Balance at March 31, 1998 ...   9,235,582 $104,295   $93,189,848  $67,507,156   $(7,339,875)  $(5,080,803)  $ 868,971  $149,249,592
                               ==========  =======   ===========   ==========    ==========    ==========   =========   ===========
<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 SIX MONTHS ENDED MARCH 31, 1998 AND 1997
                                                             (Unaudited)


                                                                              Six Months Ended              Six Months Ended
                                                                                     March 31,                     March 31,
                                                                                          1998                          1997
                                                                                  ------------                   -----------
<S>                                                                               <C>                            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
    Net earnings .........................................................        $  4,353,847                   $ 4,394,364

ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
    Depreciation and amortization ........................................           1,398,475                       179,994
    Provision for loan losses ............................................             166,000                       270,000
    Compensation expense related to ESOP benefit .........................           1,077,534                       758,298
    Compensation expense related to MRDP Trust ...........................             542,537                       669,448
    Net amortization of premiums (discounts)  paid on
      investment and mortgage backed and related securities ..............            (200,526)                      275,611
    Increase in deferred loan fees, net of amortization ..................             568,818                       343,334
    Accretion of discounts on purchased loans ............................              10,790                          (163)
    Net (gain) loss on sale of real estate owned and
      premises and equipment .............................................                --                          (3,234)
    Net (gain) loss on sale of investment and mortgage
      backed and related securities ......................................                --                          12,387
    FHLB stock dividend ..................................................            (283,400)                     (244,600)
CHANGES IN ASSETS AND LIABILITIES
    Accrued interest receivable ..........................................             307,549                         1,126
    Other assets .........................................................             292,392                    (1,840,609)
    Accrued interest on deposit liabilities ..............................            (122,828)                      149,670
    Accrued interest on borrowings .......................................            (236,959)                      275,618
    Pension liabilities ..................................................              63,298                        67,674
    Deferred federal and state income taxes ..............................             (65,865)                      511,220
    Other liabilities ....................................................             560,871                    (1,707,253)
                                                                                  ------------                  ------------
Net cash provided by operating activities ................................           8,432,533                     4,112,885
                                                                                  ------------                  ------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from maturity of investment securities
      held to maturity ...................................................          20,000,000                    28,949,466
    Proceeds from maturity of investment securities
      available for sale .................................................          53,680,000                     2,000,000
    Principal repayments received on mortgage
       backed and related securities held to maturity ....................             802,454                       561,983
    Principal repayments received on mortgage
       backed and related securities available for sale ..................           8,691,824                    10,026,846

    Principal repayments received on loans ...............................          50,064,627                    24,836,041
    Loan originations ....................................................        (101,113,902)                  (60,250,348)
    Loans purchased ......................................................          (3,894,787)                         --
    Purchase of investment securities held
      to maturity ........................................................                --                     (28,930,495)
    Purchase of investment securities available
      for sale ...........................................................         (21,570,845)                   (3,413,607)
    Purchase of mortgage backed and related
      securities available for sale ......................................         (10,040,575)                   (5,151,261)
    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
    Purchases of premises and equipment ..................................            (562,109)                     (482,284)
                                                                                  ------------                  ------------
Net cash used in investing activities ....................................          (3,943,313)                  (11,352,851)
                                                                                  ------------                  ------------
</TABLE>







                                                                  6

<PAGE>
<TABLE>
<CAPTION>



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

                                                                              Six Months Ended              Six Months Ended
                                                                                     March 31,                     March 31,
                                                                                          1998                          1997
                                                                                  ------------                   -----------
<S>                                                                               <C>                           <C>         
CASH FLOWS FROM FINANCING ACTIVITIES
    Increase in deposit liabilities
     deposits, net of withdrawals ........................................        $  6,657,202                  $ 15,158,195
    Proceeds from FHLB advances ..........................................          79,000,000                    93,000,000
    Repayments of FHLB advances ..........................................         (68,500,000)                  (82,000,000)
    Proceeds from short term borrowings ..................................          54,104,000                    26,780,250
    Repayments of short term borrowings ..................................         (57,097,500)                  (22,963,400)
    Stock retirement .....................................................                --                     (18,501,280)
    Advances from borrowers for tax and insurance ........................          (5,205,965)                   (4,608,987)
    Dividends paid .......................................................          (1,668,725)                   (1,625,746)
                                                                                  ------------                  ------------
Net cash provided by financing activities ................................           7,289,012                     5,239,032
                                                                                  ------------                  ------------
Net (decrease) increase in cash and cash
  equivalents ............................................................          11,778,232                    (2,000,934)

Cash and cash equivalents at beginning
  of period ..............................................................          32,043,196                    16,179,633
                                                                                  ------------                  ------------
Cash and cash equivalents at end of period ...............................        $ 43,821,428                  $ 14,178,699
                                                                                  ============                  ============
SUPPLEMENTAL SCHEDULE OF INTEREST AND
INCOME
  TAXES PAID
    Interest paid ........................................................        $ 18,669,088                  $ 13,288,649
    Income taxes paid ....................................................           2,724,000                       893,500

SUPPLEMENTAL SCHEDULE OF NONCASH
  INVESTING ACTIVITIES
    Net unrealized gain on securities
      available for sale .................................................        $    404,917                  $    427,825
    Dividends declared and accrued in other
      liabilities ........................................................             886,510                       783,842

<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 statements
contain all  adjustments  necessary  for a fair  presentation  of Klamath  First
Bancorp,  Inc.'s (the "Company")  financial  condition as of March 31, 1998, the
results of  operations  for the three and six months  ended  March 31,  1998 and
1997,  and the cash  flows for the six  months  ended  March 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.  These consolidated  financial statements should 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 and six months ended March 31, 1998 are not necessarily indicative
of the results which may be expected for the entire fiscal year.

2. ALLOWANCE FOR LOAN LOSSES



Activity in allowance for loan losses is summarized as follows:

<TABLE>
<CAPTION>
                                             March 31,    September 30,
                                                  1998             1997
<S>                                        <C>              <C>        
Balance, beginning of year .............   $ 1,296,451      $   927,820
Charge-offs ............................          --             (1,369)
Additions ..............................       166,000          370,000
                                           -----------      -----------
Balance, end of period .................   $ 1,462,451      $ 1,296,451
                                           ===========      ===========
</TABLE>


3. ADVANCES FROM FEDERAL HOME LOAN BANK

Borrowings at March 31, 1998 consisted of ten short term advances totaling $85.0
million and five long term advances totaling $54.5 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.

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



                                              March 31, 1998                             September 30, 1997
                                  -----------   ----------    -------------    -----------   ----------   -------------
                                                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 ..........   $54,500,000   5.53%-5.83%            5.64%   $59,000,000   5.57%-6.70%           5.66%

After one but within
five years ...................    85,000,000   5.06%-5.74%            5.46%    70,000,000   5.39%-5.84%           5.59%
                                 -----------                                  -----------  
                                $139,500,000                                 $129,000,000
                                 ===========                                  ===========


</TABLE>








                                                                  8

<PAGE>



4. SHORT TERM BORROWINGS

Securities  sold under  agreements to  repurchase  totaled $14.1 million with an
interest rate of 5.70%. All of the agreements are due within 60 days.

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, 1998:

<TABLE>
<CAPTION>
                                                                                  Categorized as "Well
                                                             For Capital            Capitalized" Under
                                                                Adequacy             Prompt Corrective
                                    Actual                      Purposes              Action Provision
                                ----------  -----           ------------  -----           ------------  -----
                                    Amount  Ratio                 Amount  Ratio                 Amount  Ratio
As of March 31, 1998:
<S>                           <C>            <C>            <C>             <C>           <C>            <C>  
 Total Capital: ...........   $105,189,285   22.9%          $ 36,808,088    8.0%          $ 46,010,110   10.0%
  (To Risk Weighted Assets)
 Tier I Capital: ..........    103,726,834   22.5%                   N/A    N/A             27,606,066    6.0%
  (To Risk Weighted Assets)
 Tier I Capital: ..........    103,726,834   11.1%            28,149,116    3.0%            46,915,193    5.0%
  (To Total Assets)
 Tangible Capital: ........    103,726,834   11.1%            14,074,558    1.5%                   N/A    N/A
  (To Tangible Assets)
</TABLE>


6. EARNINGS PER SHARE

Earnings per share ("EPS") is computed in accordance with Statement of Financial
Accounting Standards ("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.  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
held by the Company's  Employee Stock Ownership Plan ("ESOP") that are committed
for release,  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 Six Months Ended
                                                           March 31, 1998              March 31, 1997
                                                          ---------------             ---------------
Effect of Dilutive Securities on Number of Shares
(Denominator):
<S>                                                               <C>                         <C>    
MRDP shares ...........................................            80,652                      40,660
ESOP shares ...........................................            24,399                      24,399
Stock options .........................................           394,891                     148,280
                                                          ---------------             ---------------
Total Dilutive Securities .............................           499,942                     213,339
                                                          ===============             ===============
</TABLE>
<TABLE>
<CAPTION>

                                                                  For the Three Months Ended
                                                           March 31, 1998              March 31, 1997
                                                          ---------------             ---------------
Effect of Dilutive Securities on Number of Shares
(Denominator):
<S>                                                               <C>                         <C>    
MRDP shares ...........................................            84,806                      56,381
ESOP shares ...........................................            36,733                      36,733
Stock options .........................................           397,328                     188,270
                                                          ---------------             ---------------
Total Dilutive Securities .............................           518,867                     281,384
                                                          ===============             ===============
</TABLE>

                                                      9
<PAGE>


7. BRANCH ACQUISITION

On March 5, 1997, the Company entered into a definitive agreement to purchase 25
branches from Wells Fargo Bank, N.A. The transaction closed as scheduled on July
18, 1997.  The  transaction  was  accounted  for as a purchase  under  generally
accepted   accounting   principles.   The  purchase   included   assumption   of
approximately  $241.3  million in deposit  liabilities  and  purchase  of branch
facilities and other assets of  approximately  $6.3 million.  As a result of the
transaction, the Company recorded $13.4 million in core deposit intangible which
is being  amortized over 8.1 years.  The acquired  branches are located in rural
Oregon  communities,  extending  the  Association's  market to 33  offices in 22
counties throughout the state.

8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes requirements for
disclosure of  comprehensive  income and becomes  effective for years  beginning
after December 15, 1997.  Reclassification  of earlier financial  statements for
comparative  purposes is required.  In June 1997,  the FASB also issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No.131 redefines how operating  segments are determined and requires  disclosure
of certain financial and descriptive  information about the Company's  operating
segments.  This  statement  supercedes  SFAS No. 14,  "Financial  Reporting  for
Segments of Business  Enterprises." The new standard becomes effective for years
beginning  after  December 15, 1997, and requires that  comparative  information
from  earlier  periods  be  restated  to  conform  to the  requirements  of this
standard. The adoption of these statements is not expected to be material to the
Company.

9. SUBSEQUENT EVENT

On April 21, 1998,  the Company  announced a 5% stock  repurchase  program.  The
repurchase program has received  regulatory approval and allows for the purchase
of 521,477 of the Company's  outstanding shares. The shares will be purchased at
prevailing market prices from time to time depending on market  conditions.  The
repurchase,  which began after Friday,  April 24, 1998, is anticipated to end by
September 30, 1998.











































                                       10

<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,  1998,  the  Company had total
consolidated assets of $994.2 million and consolidated  shareholders'  equity of
$149.2  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  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
mortgage  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  introduction  of  a
variable rate home equity lending  program that has an interest rate tied to the
Wall Street Journal  published prime rate with an additional  margin of 2.0% and
expansion  of  non-interest   bearing  checking   accounts  through  the  branch
acquisition and new deposit  products.  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,  core
deposit premium  amortization,  and  miscellaneous  other  expenses,  as well as
federal and state income tax  expense.  The Wells Fargo  branch  acquisition  is
contributing 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").

The Association is a member of the Federal Home Loan Bank of Seattle, conducting
its  business  through  thirty-three  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.







                                       11

<PAGE>



Year 2000 Compliance

As with other  organizations,  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 will not work properly with
dates beyond 1999. Early in 1997 the Company  established a committee to address
"Year 2000" issues related to data  processing.  The committee 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  Internal  Assessment
checklist provided by Sheshunoff Information Systems, Inc. to complement the OTS
checklist.  Data processing for the Company is provided by a third party service
bureau.  Software  purchased  from  a  service  bureau  affiliate  is  used  for
applications  such as accounts payable,  investment  portfolio  accounting,  and
fixed assets. The service bureau has stated that all their processing, including
application  software used for fixed assets,  accounts  payable,  and investment
portfolio  accounting,  will be Year  2000  capable  by June  30,1998.  Both the
Company and the service bureau will then commence testing procedures.

All personal computers ("PCs") and related software  throughout the Company have
been inventoried and tested for Year 2000  capability.  The company is using two
testing methods for certification of Year 2000 compatibility. PCs must pass both
tests to be considered  ready for Year 2000.  As of March 31, 1998,  over 90% of
the Company's PCs and software are Year 2000 compatible. Those PCs identified as
non-Year  2000  compatible  will be  replaced  by the end of 1998.  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.

Branch Acquisition

The  Association   completed  the  purchase  of  25  branches  in  rural  Oregon
communities  from Wells  Fargo  Bank,  N.A. on July 18,  1997.  The  transaction
included  purchase of  approximately  $241.3 million in deposits and purchase of
branch facilities including  buildings,  improvements and furniture and fixtures
with a book value of $2.0 million.  This acquisition  expanded the Association's
market area to include 32 branches and one loan center in 22 Oregon counties. In
twelve  of the  locations,  the  newly  acquired  branch  is the only  financial
institution  in the community.  The acquired  offices are located in communities
which are compatible with, and complement, the Association's current markets and
philosophy.  While no loans were  acquired in the  transaction,  the addition of
these  branches  creates  new markets for the  Association's  lending  products,
including the expanded consumer and commercial product  offerings.  Based on the
latest branch profitability analysis, all the branches are now profitable.

The purchase of deposit  liabilities  increased  total  Association  deposits by
approximately  $241.3 million and increased the number of deposit  accounts from
40,000  to  82,000.  Approximately  23,000  of the  purchased  accounts,  $140.9
million,   were  demand  deposits  carrying  a  lower  interest  cost  than  the
Association's  previous  deposit mix. As a result the Association  experienced a
reduction in cost of funds.  The  acquisition  also resulted in the recording of
$13.4  million of core deposit  intangible,  which is being  amortized  over 8.1
years.  The impact of the branch  acquisition  is evident in  comparison  of the
results of  operations  for the three and six months  ended  March 31,  1998 and
1997, as discussed under non-interest income and non-interest expense.


























                                       12

<PAGE>



Changes in Financial Condition

At March 31,  1998,  the  consolidated  assets  of the  Company  totaled  $994.2
million,  an  increase  of $14.1  million,  or 1.44%,  from  $980.1  million  at
September  30, 1997.  The increase in total assets was  primarily  the result of
loan  growth  which was  funded by  maturities  of  investments  and  additional
borrowing from the FHLB of Seattle.

Net loans receivable  increased by $54.2 million, or 9.83%, to $605.7 million at
March 31, 1998,  compared to $551.5  million at September 30, 1997. The increase
was primarily the result of continued new loan demand exceeding loan repayments,
augmented by the Company's  purchase of $5.1 million in higher yielding loans on
multi-family  residential  and  commercial  properties  in Oregon during the six
months ended March 31, 1998.

Investment securities decreased $50.9 million, or 17.86%, from $284.8 million at
September  30, 1997 to $233.9  million at March 31, 1998.  This decrease was the
result of scheduled  maturities plus $40.2 million in securities  called. A call
provision  grants the issuer of a security the option of buying back all or part
of the issue prior to maturity.

During the six months ended March 31, 1998,  $9.5 million of principal  payments
were  received  on  mortgage  backed and  related  securities  ("MBS") and $10.0
million in  available  for sale MBS were  purchased,  leaving the balance of MBS
consistent from September 30, 1997 to March 31, 1998.

Deposit  liabilities  increased $6.6 million,  or 0.99%,  from $674.0 million at
September 30, 1997 to $680.6  million at March 31, 1998.  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.  The increase in deposits has been experienced  throughout the network
of 32 branches.

Advances  from  borrowers for taxes and  insurance  decreased  $5.2 million from
September  30, 1997 to March 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 December  partially  offset by collection of taxes from
borrowers.

Advances from the FHLB of Seattle increased $10.5 million, or 8.14%, from $129.0
million at September 30, 1997 to $139.5 million at March 31, 1998. Proceeds from
borrowings were used to fund loan originations.

Total shareholders' equity increased $4.7 million, or 3.31%, from $144.5 million
at September 30, 1997 to $149.2 million at March 31, 1998. This increase was the
combined  result of $4.4 million in earnings for the year to date,  augmented by
$405,917 in  unrealized  gains on  securities  available for sale during the six
month period from September 30, 1997 to March 31, 1998.

Results of Operations

     Comparison of Six Months Ended March 31, 1998 and 1997

General. Income before taxes increased $1.0 million, or 16.3%, from $6.2 million
for the six months  ended  March 31,  1997 to $7.2  million  for the same period
ended March 31, 1998.  Due to an increase in the  effective  tax rate from 29.1%
for the six months  ended March 31, 1997 to 39.6% for the six months ended March
31, 1998, net income remained  consistent at $4.4 million for the comparable six
month periods.  See further  discussion  under "Income Taxes."  Increases in net
interest income and  non-interest  income were partially  offset by increases in
non-interest expense.



















                                       13
<PAGE>

Interest  Income.  Additional  interest  income  generated by the $256.3 million
increase in average interest  earning assets  contributed to an increase of $9.1
million in interest  income for the six months ended March 31, 1998  compared to
1997.  Of this  increase,  $5.2 million is  attributable  to increased  interest
income on investment  securities  and $4.0 million to increased  income on loans
receivable, partially offset by a decrease in interest income on mortgage backed
and related securities. The average yield on interest earning assets decreased 9
basis points to 7.35% for the six months ended March 31, 1998  compared to 7.44%
for the same period  ended  March 31,  1997.  Average  yield  decreased  because
investments,  which  have  a  lower  yield  than  loans,  represented  a  larger
proportion  of earning  assets for the six months  ended March 31, 1998 than for
the same period ended March 31, 1997.  Investments  increased as a proportion of
earning  assets after  proceeds  from the branch  acquisition  were  invested in
securities until the funds can be rolled into loans.  Changes in the yield curve
during the last year,  which has shifted  downward more than 100 basis points at
the long  end and has  flattened  at the  short  end,  also  contributed  to the
decrease in yield on earning  assets.  In spite of the lower yields  experienced
for the period, interest rate spread (the difference between the rates earned on
interest  earning  assets and the rates paid on  interest  bearing  liabilities)
improved  from 2.22% to 2.58% and  interest  rate  margin (net  interest  income
divided  by  average  interest  earning  assets)  improved  from  3.36% to 3.40%
comparing the six month periods.

Interest Expense. Interest expense on deposit liabilities increased $4.0 million
for the six months ended March 31, 1998  compared to the same period in 1997 due
to deposit  balances  added  through  the  branch  acquisition.  Although  total
deposits  increased  by $265.8  million  comparing  March 31, 1997 to 1998,  the
average  interest paid on  interest-bearing  deposits  decreased 56 basis points
from 5.10% for the six months  ended March 31, 1997 to 4.54% for the same period
ended March 31, 1998. Both the increase in deposit  balances and the decrease in
the rate paid on deposits are  primarily a result of the deposits  acquired with
the Wells Fargo branch  acquisition which consisted of 17% non-interest  bearing
deposit  accounts.  The average  balance of FHLB advances  increased from $105.5
million for the six months  ended March 31, 1997 to $120.8  million for the same
period  ended  March 31,  1998  resulting  in an  increase  in  interest on FHLB
advances of $497,917 for the six months ended March 31, 1998  compared  with the
same period ended March 31, 1997.

Provision for Loan Losses.  The provision for loan losses was $166,000 and there
were no charge  offs during the six months  ended  March 31, 1998  compared to a
$270,000  provision  and no charge  offs  during the six months  ended March 31,
1997.  During the quarter  ended March 31, 1997,  the provision was increased in
response to  portfolio  growth and  purchases of loans  secured by  multi-family
residential  property and commercial  real estate,  which are considered to have
more  associated  risk  than  the  Company's  traditional  portfolio  of one- to
four-family  residential  mortgages.  The  Association  continues  to add to the
provision  as the loan  portfolio  grows,  but has  experienced  no increases in
delinquencies or problem loans.

Non-Interest  Income.  Non-interest income increased $1.1 million, or 494.3%, to
$1.3 million for the six months  ended March 31, 1998 from  $214,246 for the six
months ended March 31, 1997. The increase was  attributable  to increases in fee
income related to the increase in deposit accounts subject to service charges.

Non-Interest Expense.  Non-interest expense increased $4.7 million, or 92.5%, to
$9.7 million for the six months ended March 31, 1998,  from $5.0 million for the
comparable period in 1997. Of this increase, $1.7 million was attributable to an
increase in  compensation  and benefit expense in 1998,  reflecting  addition of
staff  related to the Wells Fargo  acquisition  and an increase in  compensation
expense for the ESOP due to  increases  in the average  stock  price.  Occupancy
expense  increased  from  $341,915  for the six months  ended  March 31, 1997 to
$1,036,370 for the six months ended March 31, 1998 due to the addition of the 25
acquired  branches.  The branch  acquisition  also impacted  other expense which
increased  $1.3  million  for the six months  ended March 31, 1998 from the same
period of 1997. Increases were primarily seen in postage and courier, telephone,
and supply  expenses which were up $354,000 year to date.  Expansion of checking
accounts and their related servicing,  debit card service,  and ATM machines and
card servicing resulted in a $473,000 increase in the related expenses which are
also included in other  expense.  These  increases  were  partially  offset by a
$71,908  reduction  in  deposit  insurance   premiums   resulting  from  reduced
assessment rates beginning January 1, 1997. The ratio of non-interest expense to
average total assets was 1.99% and 1.48% for the six months ended March 31, 1998
and 1997, respectively.

Income Taxes.  The provision for income taxes increased $1.1 million for the six
months  ended March 31, 1998  compared  with the prior year.  During the quarter
ended March 31, 1997, the Company  recognized a tax benefit of $648,837  related
to loss on sale of the U.S.  federal  securities  bond fund in the  fiscal  year
ended  September 30, 1996.  Recognition of the benefit reduced the effective tax
rate for the six months ended March 31, 1997.



                                       14
<PAGE>

     Comparison of Three Months Ended March 31, 1998 and 1997

General.  Earnings before taxes increased $623,455,  or 20.6%, from $3.0 million
for the quarter ended March 31, 1997 to $3.7 million for this quarter 1998.  Net
income  decreased  $273,504,  or 11.0%,  from $2.5  million for the three months
ended March 31, 1997 to $2.2  million for the three months ended March 31, 1998.
Increases in net interest income and  non-interest  income were partially offset
by increases in non-interest  expense.  These changes are all resultant from the
branch  acquisition  in July 1997  which  doubled  the number of  employees  and
tripled the number of branches for the  Association.  Also, net earnings for the
three  months  ended  March 31,  1997  included  a reduced  income  tax  expense
reflecting the recognition of a one time tax benefit.

Interest  Income.  Additional  interest  income  generated by the $263.2 million
increase in average interest  earning assets  contributed to an increase of $4.8
million in interest income for the three months ended March 31, 1998 compared to
1997.  Of this  increase,  $2.5 million is  attributable  to increased  interest
income on investment  securities  and $2.2 million to increased  income on loans
receivable.  The average  yield on  interest  earning  assets  decreased 6 basis
points to 7.39% for the three months ended March 31, 1998  compared to 7.45% for
the same period ended March 31, 1997.  Average  yield  decreased for the reasons
noted  previously,  because  investments,  which have a lower  yield than loans,
represented  a larger  proportion  of earning  assets for the three months ended
March 31, 1998 than for the same period ended March 31, 1997 and overall  yields
are lower due to the downward  shift in the yield  curve.  In spite of the lower
yields experienced for the period,  interest rate spread (the difference between
the rates  earned on  interest  earning  assets and the rates  paid on  interest
bearing liabilities)  improved from 2.28% to 2.67% and interest rate margin (net
interest income divided by average  interest earning assets) improved from 3.37%
to 3.47% comparing the three month periods.

Interest Expense. Interest expense on deposit liabilities increased $2.0 million
for the three months  ended March 31, 1998  compared to the same period in 1997.
Although total deposits  increased by $265.8 million comparing March 31, 1997 to
1998, the average interest paid on interest-bearing  deposits decreased 54 basis
points  from 5.07% for the three  months  ended  March 31, 1997 to 4.53% for the
same period ended March 31, 1998. Both the increase in deposit  balances and the
decrease in the rate paid on  deposits  are  primarily a result of the  deposits
acquired  with  the  Wells  Fargo  branch  acquisition  which  consisted  of 17%
non-interest  bearing  deposit  accounts.  The average  balance of FHLB advances
increased  from  $101.0  million  for the three  months  ended March 31, 1997 to
$123.9 million for the same period ended March 31, 1998 resulting in an increase
in interest on FHLB  advances of $349,890  for the three  months ended March 31,
1998 compared with the same period ended March 31, 1997.

Provision  for Loan Losses.  The provision for loan losses was $91,000 and there
were no charge offs during the three months  ended March 31, 1998  compared to a
$240,000  provision  and no charge offs during the three  months ended March 31,
1997.  During the quarter  ended March 31, 1997,  the provision was increased in
response to  portfolio  growth and  purchases of loans  secured by  multi-family
residential  property and commercial  real estate,  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  $474,759,  or 466.7%,  to
$576,495 for the three  months ended March 31, 1998 from  $101,736 for the three
months  ended March 31,  1997.  The increase  was  primarily  attributable  to a
$473,324  increase in fee income  related to the  increase  in deposit  accounts
subject to service charges.

Non-Interest Expense. Non-interest expense increased $2.5 million, or 100.1%, to
$4.9 million for the three  months  ended March 31, 1998,  from $2.4 million for
the comparable period in 1997. Of this increase, $765,161 was attributable to an
increase in  compensation  and benefit expense in 1998,  reflecting  addition of
staff  related to the Wells Fargo  acquisition  and an increase in  compensation
expense for the ESOP due to  increases  in the average  stock  price.  Occupancy
expense  increased  from  $173,144  for the three months ended March 31, 1997 to
$515,859 for the three months ended March 31, 1998 due to the addition of the 25
acquired branches.  Other expense increased $688,075 from $505,966 for the three
months  ended March 31, 1997 to $1.2 million for the same period ended March 31,
1998.  Again, the impact of the branch  acquisition is apparent with postage and
courier, telephone, and supply expenses increasing $183,187 and expenses related
to ATMs, debit cards, and checking accounts  increasing  $211,448.  The ratio of
non-interest  expense to average  total assets was 2.00% and 1.45% for the three
months ended March 31, 1998 and 1997, respectively.

Income Taxes.  The provision for income taxes  increased  $896,959 for the three
months  ended March 31, 1998  compared  with the prior year.  During the quarter
ended March 31, 1997, the Company  recognized a tax benefit of $648,837  related
to loss on sale of the U.S.  federal  securities  bond fund in the  fiscal  year
ended  September 30, 1996.  Recognition of the benefit reduced the effective tax
rate for the three months ended March 31, 1997.

                                       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

          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
          March 31, 1998.












































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                                   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, 1998                 By: /s/ Gerald V. Brown
                                   ---------------------------
                                   Gerald V. Brown, President and
                                   Chief Executive Officer


Date: May 14, 1998                 By: /s/ Marshall Jay Alexander
                                   ---------------------------
                                   Marshall Jay Alexander, Vice President
                                   and Chief Financial Officer





























































                                       17

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