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 June 30, 1999

                                       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 July  21,  1999,  there  were  outstanding  6,964,227  shares  of the
Registrant's  Common  Stock.  The  Registrant's  voting  common  stock is traded
over-the-counter  and is listed on the Nasdaq  National  Market under the symbol
"KFBI."

<PAGE>

                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS

Part I.        Financial Information
-------        ----------------------
Item 1.        Financial Statements                                         Page
                                                                         -------
               Consolidated Balance Sheets
               (As of June 30, 1999 and September 30, 1998)                    3

               Consolidated Statements of Earnings (For the three months
               and nine months ended June 30, 1999 and 1998)                   4

               Consolidated Statements of Shareholders' Equity
               (For the years ended September 30, 1998 and 1997 and for
               the nine months ended June 30, 1999)                            5

               Consolidated Statements of Cash Flows (For the nine
               months ended June 30, 1999 and 1998)                        6 - 7

               Notes to Consolidated Financial Statements                 8 - 12

Item 2.        Management's Discussion and Analysis of Financial
               Condition and Results of Operations                       13 - 18

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

Item 1.        Legal Proceedings                                              19

Item 2.        Changes in Securities                                          19

Item 3.        Defaults Upon Senior Securities                                19

Item 4.        Submission of Matters to a Vote of Security Holders            19

Item 5.        Other Information                                              19

Item 6.        Exhibits and Reports on Form 8-K                               19

Signatures                                                                    20











                                        2
<PAGE>
<TABLE>
<CAPTION>

                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                   AS OF JUNE 30, 1999 AND SEPTEMBER 30, 1998
                                   (Unaudited)


                                                                             June 30, 1999    September 30, 1998
ASSETS                                                                     -----------------  ------------------

<S>                                                                         <C>                <C>
Cash and due from banks .................................................   $    23,694,978    $    25,644,460
Interest bearing deposits with banks ....................................         8,648,716         11,496,026
Federal funds sold and securities purchased under agreements to resell ..        17,140,774         29,844,783
                                                                            ---------------    ---------------
   Total cash and cash equivalents ......................................        49,484,468         66,985,269

Investment securities available for sale, at fair value
  (amortized cost: $174,869,632 and $199,251,123) .......................       173,754,165        203,224,184
Investment securities held to maturity, at amortized cost (fair
  value: $787,416 and $2,928,324) .......................................           770,120          2,888,759
Mortgage backed and related securities available for sale, at fair
  value (amortized cost: $38,909,526 and $42,741,863) ...................        38,621,556         43,335,857
Mortgage backed and related securities held to maturity, at amortized
  cost (fair value: $2,744,416 and $3,696,444) ..........................         2,742,929          3,661,683
Loans receivable, net ...................................................       727,255,499        668,146,380
Real estate owned and repossessed assets ................................           273,535               --
Premises and equipment, net .............................................        11,830,730         12,347,467
Stock in Federal Home Loan Bank of Seattle, at cost .....................        10,760,700         10,172,900
Accrued interest receivable .............................................         7,430,882          7,471,717
Core deposit intangible .................................................        10,191,510         11,431,018
Other assets ............................................................         2,337,374          1,637,164
                                                                            ---------------    ---------------
   Total assets .........................................................   $ 1,035,453,468    $ 1,031,302,398
                                                                            ===============    ===============

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
  Deposit liabilities ...................................................   $   726,829,006    $   689,541,345
  Accrued interest on deposit liabilities ...............................         1,271,376          1,291,784
  Advances from borrowers for taxes and insurance .......................         6,948,624          9,420,791
  Advances from Federal Home Loan Bank of Seattle .......................       187,000,000        167,000,000
  Short term borrowings .................................................              --           12,112,500
  Accrued interest on borrowings ........................................            35,895            213,957
  Pension liabilities ...................................................           877,339            779,392
  Deferred federal and state income taxes ...............................           695,797          3,655,944
  Other liabilities .....................................................         3,274,876          2,205,730
                                                                            ---------------    ---------------
    Total liabilities ...................................................       926,932,913        886,221,443
                                                                            ---------------    ---------------

SHAREHOLDERS' EQUITY

  Preferred stock, $.01 par value, 500,000 shares authorized; none issued              --                 --
  Common stock, $.01 par value, 35,000,000 shares authorized,
   June 30, 1999 - 7,908,377 issued, 6,964,227 outstanding
   September 30, 1998 - 9,916,766 issued, 8,898,972 outstanding .........            79,084             99,168
  Additional paid-in capital ............................................        43,688,961         82,486,183
  Retained earnings-substantially restricted ............................        75,266,031         71,051,445
  Unearned shares issued to ESOP ........................................        (6,116,563)        (6,850,550)
  Unearned shares issued to MRDP ........................................        (3,526,827)        (4,536,865)
  Net unrealized loss on securities available for sale, net of tax ......          (870,131)         2,831,574
                                                                            ---------------    ---------------
    Total shareholders' equity ..........................................       108,520,555        145,080,955
                                                                            ---------------    ---------------
    Total liabilities and shareholders' equity ..........................   $ 1,035,453,468    $ 1,031,302,398
                                                                            ===============    ===============

<FN>

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

                                        3
<PAGE>
<TABLE>
<CAPTION>

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

                                                                    Three         Three          Nine          Nine
                                                             Months Ended  Months Ended  Months Ended  Months Ended
                                                                 June 30,      June 30,      June 30,      June 30,
                                                                     1999          1998          1999          1998
                                                            --------------  ------------  ------------ --------------
INTEREST INCOME
<S>                                                           <C>           <C>           <C>           <C>
  Loans receivable ........................................   $14,287,654   $12,805,756   $42,191,692   $36,285,128
  Mortgage backed and related securities ..................       394,188       815,350     1,346,490     3,003,161
  Investment securities ...................................     2,680,817     3,610,547     8,973,462    11,506,858
  Federal funds sold ......................................       260,157       223,879       682,473       563,839
  Interest bearing deposits ...............................       178,988       254,666       571,760       476,387
                                                              -----------   -----------   -----------   -----------
    Total interest income .................................    17,801,804    17,710,198    53,765,877    51,835,373
                                                              -----------   -----------   -----------   -----------

INTEREST EXPENSE
  Deposit liabilities .....................................     7,213,918     7,261,297    21,895,479    21,617,957
  FHLB advances ...........................................     2,193,605     2,210,515     6,540,329     5,648,181
  Other ...................................................        33,030       238,422       253,464       753,397
                                                              -----------   -----------   -----------   -----------
    Total interest expense ................................     9,440,553     9,710,234    28,689,272    28,019,535
                                                              -----------   -----------   -----------   -----------
    Net interest income ...................................     8,361,251     7,999,964    25,076,605    23,815,838

Provision for loan losses .................................       243,000       198,000       669,000       364,000
                                                              -----------   -----------   -----------   -----------
    Net interest income after provision for
      loan losses .........................................     8,118,251     7,801,964    24,407,605    23,451,838
                                                              -----------   -----------   -----------   -----------

NON-INTEREST INCOME
  Fees and service charges ................................       749,074       591,528     2,126,966     1,747,028
  Gain on sale of investments .............................        22,106       189,661       329,435       189,661
  Gain on sale of real estate owned .......................          --            --          26,179          --
  Other income ............................................        55,662        42,180       189,212       159,842
                                                              -----------   -----------   -----------   -----------
    Total non-interest income .............................       826,842       823,369     2,671,792     2,096,531
                                                              -----------   -----------   -----------   -----------
NON-INTEREST EXPENSE
  Compensation, employee benefits and related expense .....     2,648,891     2,361,607     7,612,394     7,258,946
  Occupancy expense .......................................       543,532       508,317     1,664,089     1,544,687
  Data processing expense .................................       214,317       246,640       697,100       720,339
  Insurance premium expense ...............................        74,509        43,007       222,147       216,205
  Loss on sale of investments .............................          --            --         112,256          --
  Loss on sale of real estate owned .......................          --            --           5,398          --
  Amortization of core deposit intangible .................       413,169       413,169     1,239,508     1,239,508
  Other expense ...........................................     1,868,350     1,259,609     4,348,688     3,569,060
                                                              -----------   -----------   -----------   -----------
    Total non-interest expense ............................     5,762,768     4,832,349    15,901,580    14,548,745
                                                              -----------   -----------   -----------   -----------

Earnings before income taxes ..............................     3,182,325     3,792,984    11,177,817    10,999,624

Provision for income tax ..................................     1,291,968     1,302,438     4,538,194     4,155,231
                                                              -----------   -----------   -----------   -----------
Net earnings ..............................................   $ 1,890,357   $ 2,490,546   $ 6,639,623   $ 6,844,393
                                                              ===========   ===========   ===========   ===========

Earnings per common share - basic .........................   $      0.27   $      0.28   $      0.86   $      0.74
Earnings per common share - fully diluted .................   $      0.26   $      0.26   $      0.83   $      0.71
Weighted average common shares outstanding - basic ........     7,020,994     9,056,453     7,737,494     9,192,138
Weighted average common shares outstanding -  with dilution     7,164,093     9,441,551     7,952,159     9,637,698



<FN>


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

                                        4
<PAGE>
<TABLE>
<CAPTION>
                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1998 AND
                      THE NINE MONTHS ENDED JUNE 30, 1999
                                   (Unaudited)

                                                                                 Unearned       Unearned   Unrealized
                           Common      Common      Additional                      shares         shares         gain          Total
                            Stock       Stock         paid-in      Retained        issued         issued    (loss) on  shareholders'
                           Shares      Amount         capital      earnings       to ESOP        to MRDP   securities         equity
                      -----------    --------    ------------   -----------  ------------   ------------ ------------  -------------
Balance at
<S>                    <C>           <C>         <C>            <C>          <C>            <C>          <C>            <C>
October 1, 1996        10,242,360    $116,124    $110,762,678   $59,082,479  ($8,807,850)   ($6,694,470) ($1,047,987)   $153,410,974

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

Net unrealized
gain on securities
available for sale           --          --             --             --           --             --      1,512,041      1,512,041

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

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

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

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

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

Net unrealized
gain on securities
available for sale           --          --             --             --           --             --      2,367,520      2,367,520

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

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

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


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

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

Cash dividends ....          --          --             --       (2,425,037)        --             --           --       (2,425,037)

Net unrealized
loss on
securities
available for sale           --          --             --             --           --             --     (3,701,705)    (3,701,705)

Stock repurchased
and retired .......    (2,008,389)    (20,084)   (39,314,056)          --           --             --           --      (39,334,140)

ESOP contribution .          --          --          500,140           --        733,987           --           --        1,234,127

MRDP contribution .        73,644        --           16,694           --           --        1,010,038         --        1,026,732

Net earnings ......          --          --             --        6,639,623         --             --           --        6,639,623
                       ----------    --------    -----------    -----------  -----------    -----------  -----------    -----------
Balance at
June 30, 1999 .....     6,964,227    $ 79,084    $43,688,961    $75,266,031  ($6,116,563)   ($3,526,827) ($  870,131)  $108,520,555
                       ==========    ========    ===========    ===========  ===========    ===========  ===========    ===========
<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 NINE MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (Unaudited)

                                                                            Nine             Nine
                                                                    Months Ended     Months Ended
                                                                        June 30,         June 30,
                                                                            1999             1998
                                                                   --------------   --------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                 <C>              <C>
    Net earnings ................................................   $   6,639,623    $   6,844,393

ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
    Depreciation and amortization ...............................       2,170,315        2,099,424
    Provision for loan losses ...................................         669,000          364,000
    Compensation expense related to ESOP benefit ................       1,234,127        1,583,544
    Compensation expense related to MRDP Trust ..................       1,026,732        1,082,292
    Net amortization of premiums (discounts)  paid on
      investment and mortgage backed and related securities .....          42,134         (118,332)
    Increase in deferred loan fees, net of amortization .........         498,388          957,607
    Accretion of discounts on purchased loans ...................             900           14,673
    Net gain on sale of real estate owned and
      premises and equipment ....................................         (20,781)            --
    Net gain on sale of investment and mortgage
      backed and related securities .............................        (217,179)        (189,661)
    FHLB stock dividend .........................................        (587,800)        (444,100)
CHANGES IN ASSETS AND LIABILITIES
    Accrued interest receivable .................................          40,835       (1,010,779)
    Other assets ................................................        (820,210)         (20,824)
    Accrued interest on deposit liabilities .....................         (20,408)         (30,621)
    Accrued interest on borrowings ..............................        (178,062)        (219,231)
    Pension liabilities .........................................          97,947           95,947
    Deferred  income taxes ......................................        (691,360)          37,210
    Other liabilities ...........................................       1,242,143          926,963
                                                                    -------------    -------------
Net cash provided by operating activities .......................      11,126,344       11,972,505
                                                                    -------------    -------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from maturity of investment securities
      held to maturity ..........................................      82,245,000       20,000,000
    Proceeds from maturity of investment securities
      available for sale ........................................      34,072,000       77,180,000
    Principal repayments received on mortgage
       backed and related securities held to maturity ...........         904,705        1,345,395
    Principal repayments received on mortgage
       backed and related securities available for sale .........      12,816,215       17,092,223
    Principal repayments received on loans ......................     127,964,628       85,300,991
    Loan originations ...........................................    (184,108,981)    (170,838,668)
    Loans purchased .............................................      (4,764,023)      (5,094,787)
    Loans sold ..................................................         119,350             --
    Purchase of investment securities held
      to maturity ...............................................     (79,711,523)            --
    Purchase of investment securities available
      for sale ..................................................     (21,361,687)     (41,817,595)
    Purchase of mortgage backed and related
      securities available for sale .............................     (18,827,640)     (10,040,575)
    Purchase of FHLB stock ......................................              --       (1,316,200)
    Proceeds from sale of investment securities
      available for sale ........................................      11,834,420        9,014,539
    Proceeds from sale of mortgage backed and related
      securities available for sale .............................       9,454,776        9,656,938
    Proceeds from sale of real estate owned and
      premises and equipment ....................................         258,865             --
    Purchases of premises and equipment .........................        (294,070)      (1,275,012)
                                                                    -------------    -------------
Net cash used in investing activities ...........................     (29,397,965)     (10,792,751)
                                                                    -------------    -------------

</TABLE>

                                        6
<PAGE>
<TABLE>
<CAPTION>
                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (Unaudited)
                                   (Continued)
                                                                             Nine             Nine
                                                                     Months Ended     Months Ended
                                                                         June 30,         June 30,
                                                                             1999             1998
                                                                   ---------------  ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
<S>                                                                 <C>              <C>
    Increase  in deposit liabilities,
      net of withdrawals ........................................   $  37,287,661    $   5,285,384
    Proceeds from FHLB advances .................................     165,000,000      139,000,000
    Repayments of FHLB advances .................................    (145,000,000)    (108,000,000)
    Proceeds from short term borrowings .........................       8,595,000       70,156,821
    Repayments of short term borrowings .........................     (20,707,500)     (73,209,321)
    Stock repurchase and retirement .............................     (39,334,140)     (11,561,483)
    Stock options exercised .....................................              --          411,035
    Advances from borrowers for tax and insurance ...............      (2,472,167)      (2,251,925)
    Dividends paid ..............................................      (2,598,034)      (2,555,235)
                                                                    -------------    -------------
Net cash provided by financing activities .......................         770,820       17,275,276
                                                                    -------------    -------------
Net (decrease) increase in cash and cash
  equivalents ...................................................     (17,500,801)      18,455,030

Cash and cash equivalents at beginning
  of period .....................................................      66,985,269       32,043,196

                                                                    -------------    -------------
Cash and cash equivalents at end of period ......................   $  49,484,468    $  50,498,226
                                                                    =============    =============
SUPPLEMENTAL SCHEDULE OF INTEREST AND
INCOME TAXES PAID
    Interest paid ...............................................   $  28,887,742    $  28,171,707
    Income taxes paid ...........................................       4,656,000        4,195,275

SUPPLEMENTAL SCHEDULE OF NONCASH
  INVESTING ACTIVITIES
    Net unrealized gain (loss) on securities
      available for sale ........................................   ($  3,701,705)   $     628,956
    Dividends declared and accrued in other
      liabilities ...............................................         949,005          892,509

</TABLE>












    See notes to consolidated financial statements


                                        7
<PAGE>

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

1.   BASIS OF PRESENTATION

The accompanying  unaudited  consolidated  financial statements of Klamath First
Bancorp, Inc. (the "Company") include all the accounts of Klamath First Bancorp,
Inc. and the consolidated accounts of its wholly-owned subsidiary, Klamath First
Federal  Savings  and  Loan   Association   (the   "Association").   Significant
intercompany   balances   and   transactions   have  been   eliminated   in  the
consolidation.   In  the  opinion  of  Management,  the  accompanying  unaudited
consolidated  financial statements contain all adjustments  necessary for a fair
presentation  of the  Company's  financial  condition  as of June  30,  1999 and
September 30, 1998,  results of  operations  for the three and nine months ended
June 30,  1999 and 1998 and cash flows for the nine  months  ended June 30, 1999
and  1998.  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 nine  months  ended  June  30,  1999 are not
necessarily  indicative  of the  results  which may be  expected  for the entire
fiscal year.

2.   COMPREHENSIVE INCOME

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

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

For the three months  ended June 30, 1999,  the  Company's  total  comprehensive
income was $148,452 compared to $2.7 million for the three months ended June 30,
1998.  Total  comprehensive  income for the three months ended June 30, 1999 was
comprised  of net income of $1.9  million and other  comprehensive  loss of $1.7
million,  net of tax. Total comprehensive income for the three months ended June
30, 1998 was  comprised  of net income of $2.5  million and other  comprehensive
income of $224,039, net of tax.

For the nine months  ended June 30,  1999,  the  Company's  total  comprehensive
income was $2.9 million  compared to $7.5 million for the nine months ended June
30, 1998. Total comprehensive income for the nine months ended June 30, 1999 was
comprised  of net income of $6.6  million and other  comprehensive  loss of $3.7
million,  net of tax. Total comprehensive  income for the nine months ended June
30, 1998 was  comprised  of net income of $6.8  million and other  comprehensive
income of $628,956, net of tax.



                                        8
<PAGE>

3.  ALLOWANCE FOR LOAN LOSSES

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

                            Nine Months Ended             Year Ended
                                     June 30,          September 30,
                                         1999                   1998
                                --------------         --------------
<S>                                <C>                    <C>
Balance, beginning of period       $1,949,677             $1,296,451
Charge-offs                            (3,000)               (20,774)
Additions                             669,000                674,000
                                --------------         --------------
Balance, end of period             $2,615,677             $1,949,677
                                ==============         ==============
</TABLE>

4.    ADVANCES FROM FEDERAL HOME LOAN BANK

Borrowings at June 30, 1999 consisted of nine long term advances totaling $187.0
million  from the Federal Home Loan Bank of Seattle  ("FHLB").  The advances are
collateralized  in  aggregate  by  certain  mortgages  or  deeds  of  trust  and
securities of the U.S. Government and agencies thereof.

Scheduled maturities of advances from the FHLB were as follows:

<TABLE>
<CAPTION>

                                         June 30, 1999                                September 30, 1998
                        -----------------------------------------------   -----------------------------------------------
                                          Range of             Weighted                     Range of             Weighted
                                          interest              average                     interest              average
                              Amount         rates        interest rate        Amount          rates        interest rate
                        -------------  -----------      ---------------   ------------   -----------      ---------------
<S>                     <C>            <C>                      <C>       <C>            <C>                        <C>
Due within one year .            $--          --                --        $ 30,000,000   5.54%-5.56%                5.55%

After one but within
five years ..........     40,000,000   4.97%-5.70%                 5.32%    55,000,000   5.39%-5.74%                5.56%

After five but within
ten years ...........    147,000,000   4.77%-5.87%                 5.33%    82,000,000   4.77%-5.24%                4.96%
                        ------------                                      ------------
                        $187,000,000                                      $167,000,000
                        ============                                      ============
</TABLE>

5.    SHORT TERM BORROWINGS

Securities  sold under  agreements  to  repurchase at September 30, 1998 matured
during the quarter ended March 31, 1999 and were not renewed.

6.    SHAREHOLDERS' EQUITY

In  September  1998,  the  Board  of  Directors  authorized  the  repurchase  of
approximately  20  percent  of  the  Company's  outstanding  common  stock.  The
repurchase was completed  through a "Modified Dutch Auction  Tender." Under this
procedure, the Company's shareholders were given the opportunity to sell part or
all of their  shares to the Company at a price of not less than $18.00 per share
and not more than  $20.00 per share.  Results  of the offer  were  finalized  on
January 15,  1999 when the Company  announced  purchase of  1,984,090  shares at
$19.50 per  share.  This  represents  approximately  85.9  percent of the shares
tendered at $19.50 per share or below,  and 64.7 percent of all shares tendered.
The cost of the shares purchased was approximately $39.3 million.  The effect of
the  transaction  is  reflected  in a reduction  in cash and  investments  and a
reduction in equity with a corresponding  impact on the  performance  ratios for
the quarter ended June 30, 1999.


                                        9
<PAGE>

7.    EARNINGS PER SHARE ("EPS")

Shares held by the Company's  Employee  Stock  Ownership  Plan ("ESOP") that are
committed for release are considered  common stock  equivalents and are included
in weighted  average shares  outstanding  (denominator)  for the  calculation of
basic and diluted EPS.  Diluted EPS is computed using the treasury stock method,
giving effect to potential additional common shares that were outstanding during
the period.  Potential  dilutive  common shares  include  shares awarded but not
vested 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 Nine Months Ended
                                                                ----------------------------------
                                                                   June 30, 1999     June 30, 1998
                                                                -----------------    -------------

Effect of Dilutive Securities on Number of Shares
(Denominator):
<S>                                                                       <C>              <C>
MRDP shares .....................................................          24,715           66,256
Stock options ...................................................         189,950          379,304
                                                                    -------------    -------------
Total Dilutive Securities .......................................         214,665          445,560
                                                                    =============    =============

                                                                       For the Three Months Ended
                                                                   -------------------------------
                                                                    June 30, 1998    June 30, 1999
                                                                    -------------    -------------
Effect of Dilutive Securities on Number of Shares
(Denominator):
MRDP shares .....................................................           1,634           37,651
Stock options ...................................................         141,465          347,447
                                                                    -------------    -------------
Total Dilutive Securities .......................................         143,099          385,098
                                                                    =============    =============

</TABLE>

8.   REGULATORY CAPITAL

The following table  illustrates the compliance by Klamath First Federal Savings
and Loan Association (the  "Association") with currently  applicable  regulatory
capital requirements at June 30, 1999:

<TABLE>
<CAPTION>

                                                                         Categorized as "Well
                                                                           Capitalized" Under
                                                           For Capital      Prompt Corrective
                                     Actual          Adequacy Purposes       Action Provision
                            ---------------------- -------------------- ---------------------

                                 Amount     Ratio      Amount    Ratio      Amount     Ratio
As of June 30, 1999:        ------------   ------- -----------  ------- -----------   -------
<S>                          <C>             <C>   <C>             <C>  <C>             <C>
Total Capital: ...........   $92,460,511     17.4% $42,635,584     8.0% $53,264,480     10.0%
 (To Risk Weighted Assets)
Tier I Capital: ..........    89,844,834     16.9%         N/A     N/A   31,976,688      6.0%
 (To Risk Weighted Assets)
Tier I Capital: ..........    89,844,834      8.8%  30,547,675     3.0%  50,912,791      5.0%
 (To Total Assets)
Tangible Capital: ........    89,844,834      8.8%  15,273,837     1.5%         N/A      N/A
 (To Tangible Assets)

</TABLE>



                                       10
<PAGE>

9.   RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1998, SFAS No. 133,  "Accounting for Derivative  Instruments and Hedging
Activities,"  was  issued.  SFAS No.133  established  accounting  and  reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts  (collectively referred to as derivatives),  and for
hedging  activities.  It requires that an entity  recognize all  derivatives  as
either assets or liabilities in the statement of financial  position and measure
those instruments at fair value. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment, (b)
a hedge of the exposure to variable cash flows of a forecasted  transaction,  or
(c) a hedge of the foreign  currency  exposure of a net  investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. This Statement is effective
for fiscal years  beginning  after June 15, 2000.  The  Statement  should not be
applied retroactively to financial statements of prior periods.

The Company has  determined  that it currently has no  instruments  or contracts
that meet the scope of SFAS No. 133. Accordingly, the adoption of this statement
in 2001 is not expected to have a material impact on the financial statements of
the Company.

10.  RECENTLY ISSUED REGULATORY GUIDANCE

In December  1998,  the Office of Thrift  Supervision  released two final policy
statements:  Thrift Bulletin 13a ("TB 13a") and a rule on financial derivatives.
The financial  derivatives  rule allows  institutions  to engage in transactions
with  derivatives  to the extent that such  transactions  are  authorized  under
applicable  law and are  otherwise  safe  and  sound.  In  addition,  the use of
financial  derivatives  should generally be limited to transactions which reduce
risk  exposure.  As  noted  above,  the  Company  does  not  currently  hold any
derivative instruments.

Thrift  Bulletin 13a provides  guidance on the management of interest rate risk,
investment  securities,  and  derivatives  activities  as  well as  providing  a
description of how the  "Sensitivity  to Market Risk" rating will be determined.
"Sensitivity  to Market Risk"  represents the "S" component of the CAMELS rating
which is used by regulators in their  evaluation of financial  institutions.  TB
13a also provides implementation guidance for the Federal Financial Institutions
Examination   Council's  ("FFIEC")  1998  Supervisory  Statement  on  Investment
Securities  and  End-user  Derivative  Activities.  TB 13a  replaces a number of
Thrift Bulletins including TB 13,  "Responsibilities of Directors and Management
with Regard to Interest  Rate  Risk," TBs 13-1 and 13-2,  "Implementation  of TB
13," TB 52, "Supervisory Statement of Policy on Securities Activities," TB 52-1,
"Mismatched Floating Rate CMOs," and TB 65 "Structured Notes."

The  Office of Thrift  Supervision  ("OTS")  has  established  detailed  minimum
guidelines  for two areas of interest  rate risk  management.  These  guidelines
establish  minimum  expectations  for (1) the  establishment  and maintenance of
board-approved  risk limits and (2) an  institution's  ability to measure  their
interest rate risk exposure.

Each thrift's board of directors is responsible  for the  establishment  of risk
limits for the  institution.  The  interest  rate risk  limits are  expected  to
include limits on the change in net portfolio value ("NPV") as well as limits on

                                       11
<PAGE>

earnings sensitivity.

The NPV limits should specify the minimum NPV ratio  (calculated by dividing the
NPV, previously referred to as the market value of portfolio equity ("MVPE"), by
the present  value of the  institution's  assets for a given rate  scenario) the
board is willing to allow under  interest rate shifts of 100, 200, and 300 basis
points up and down. Both the NPV limits and the actual NPV forecast calculations
will play a role in  determining  a thrift's  Sensitivity  to Market  Risk.  The
prudence of the limits and the compliance with  board-prescribed  limits will be
factors  in the  determination  as to  whether  or not  the  institution's  risk
management  is  sufficient.   In  addition,  the  NPV  ratio  permitted  by  the
institution's  policies  under an adverse 200 basis point rate shift scenario is
combined with the  institution's  current interest rate sensitivity to determine
the institution's "Level of Interest Rate Risk." The level of interest rate risk
is then  utilized in  conjunction  with an  assessment  of the  "Quality of Risk
Management Practices" to determine the "S" component of the CAMELS rating.

The Company's board of directors had established  risk limits under the previous
guidance in TB 13. These guidelines have been revised and approved to bring them
into compliance with TB 13a.

As part of TB 13a, the OTS developed a matrix for  determining a thrift's "Level
of Interest  Rate Risk" based on post-shock  NPV and interest rate  sensitivity.
The matrix categorizes institutions as having minimal, moderate,  significant or
high levels of interest  rate risk.  Based on these  guidelines in TB 13a, as of
June 30, 1999 the  Association  is  considered to be in the  "significant  risk"
category.  The  board  of  directors  has  adopted  a plan  for  management  and
improvement of the Company's interest rate risk position.

Because the Company is well capitalized, the excess equity provides a buffer for
interest  rate  risk.  In other  words,  the high  level of  equity  can  absorb
considerable change in NPV due to interest rate changes.

                                       12
<PAGE>


Item 2. 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 June 30,  1999,  the  Company  had total
consolidated  assets of $1.0 billion and  consolidated  shareholders'  equity of
$108.5  million.  The Company is currently not engaged in any business  activity
other than holding the stock of the  Association.  Accordingly,  the information
set forth in this  report,  including  financial  statements  and related  data,
relates primarily to the Association.

As a traditional, community-oriented,  savings and loan, the Association focuses
on  personalized   customer  service  within  its  principal  market  area.  The
Association's  primary market  activity is attracting  deposits from the general
public  and using  those  and  other  available  sources  of funds to  originate
permanent  residential  one- to four-family  real estate loans within its market
area and, to a lesser  extent,  loans on  commercial  property and  multi-family
dwellings.  To supplement  internal growth generated through its branch network,
the  Association   also  purchases   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 its existing  conservative
underwriting standards outside of the current branch market areas.

Subsequent to June 30, 1999,  the Company  announced that it will begin offering
investment  services through a new subsidiary of the Association,  Klamath First
Financial Services.  The new subsidiary will offer general securities trading as
well as financial  and  retirement  planning to customers of the Company and the
public at large.

Net  interest  income,  which is the  difference  between  interest and dividend
income on interest-earning  assets,  primarily loans and investment  securities,
and interest expense on interest-bearing  deposits and borrowings,  is the major
source of profit for the Company.  Because the Company depends  primarily on net
interest  income for its earnings,  the focus of the Company's  management is to
create and  implement  strategies  that will provide  stable,  positive  spreads
between the yield on  interest-earning  assets and the cost of  interest-bearing
liabilities. Such strategies include the Association's expansion of its consumer
and commercial loan products.  Consumer and commercial  loans  increased  45.63%
from $10.3  million at June 30,  1998 to $15.0  million at June 30,  1999.  To a
lesser  degree,  the  net  earnings  of the  Company  rely on the  level  of its
non-interest income. The Company is aggressively  pursuing strategies to improve
its service charge and fee income, and control its non-interest  expense,  which
includes employee  compensation and benefits,  occupancy and equipment  expense,
deposit insurance premiums, and miscellaneous other expenses. The acquisition of
25 branches from Wells Fargo in 1997 contributed to improvement of the Company's
non-interest  income by  providing a larger  customer  base to generate  service
charge and fee income.

                                       13
<PAGE>

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-five  office  facilities,  with  the main office
located in Klamath Falls,  Oregon.  The primary market areas of the  Association
are the state of Oregon and adjoining areas of California and Washington.

Year 2000 Readiness

The Company's  computer systems and  infrastructure are ready for the Year 2000.
The following  information explains the process that Klamath First Bancorp, Inc.
used to achieve Year 2000 readiness.

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

Process.  The FFIEC  issued  guidelines  for Year  2000  project  management  by
financial  institutions,  which were followed by the Company.  These  guidelines
identified the following five steps for Year 2000 conversion programs:

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

     Assessment Phase - Assess the size and complexity of the problem and detail
     the  magnitude of effort  necessary to address Year 2000 issues,  including
     hardware, software, networks, automated teller machines, etc. This step was
     approximately  99% complete by June 30, 1999 and assessment will be ongoing
     until the Year 2000.

     Renovation Phase - This phase includes  hardware and software  upgrades and
     system  replacements.  This step was 100% complete for in-house  systems at
     December 31, 1998. This phase also encompasses ongoing discussions with and
     monitoring of outside servicers and third-party software providers.

     Validation/Testing  Phase - This process  includes  testing of hardware and
     software  components.  Testing is completed by performing  extensive  tests
     with the computer  dates changed to January 1,2, and 3, 2000.  Such testing
     continued  through June 30, 1999, with the most critical  functions  tested
     first. This allows time to correct any discovered  deficiencies  before the
     end of 1999.  In-house  systems  and third party  service  bureaus are 100%
     tested as of June 30, 1999. The Company is either testing or reviewing test
     documents of additional third party vendors that are deemed critical to the
     operations of the Company. Overall, the validation phase is considered 100%
     complete as of June 30, 1999.

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


                                       14
<PAGE>

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

Data  processing  for the Company is provided by Fiserv,  the  nation's  largest
third party service bureau  serving  financial  institutions.  Fiserv has stated
that all their  processing  was Year 2000 ready of as June 30, 1998. The Company
successfully  performed test procedures for critical service bureau processes in
December 1998 and in April 1999.

Software  purchased  from a Fiserv  affiliate is used for  applications  such as
accounts  payable,  fixed  assets,  and  investment  portfolio  accounting.  The
investment  portfolio  accounting  software  was  Year  2000  compatible  as  of
September  30,  1998.  During the  quarter  ended  March 31,  1999,  the Company
converted  the accounts  payable and fixed asset  applications  to the Year 2000
ready software provided by the Fiserv affiliate.

Other third party vendors identified by the Company were monitored for Year 2000
readiness.  Validation  with  critical  vendors was 100% complete as of June 30,
1999.

Critical  data  processing  applications,  in addition to those  provided by the
service  bureau,  have  been  identified.  These  include  applications  such as
electronic  processing  through the  Federal  Reserve  Bank and ATM  processing.
Testing with Federal Reserve has been successfully  completed.  All ATM machines
have been upgraded and are now ready for Year 2000.

Contingency plans were developed by the committee. The contingency plans address
actions to be taken to continue operations in the event of system failure due to
areas that cannot be tested in  advance,  such as power and  telephone  service,
which are vital to business continuation. Contingency planning was 100% complete
as of June 30, 1999.

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

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

Conclusion.  The  Company  believes  that  the  Year  2000  issue  will not pose
significant  operational  problems and is not  anticipated to be material to its
financial  position or results of  operations  in any given year. As of June 30,
1999, the Company  estimated that total Year 2000  implementation  costs will be
approximately  $200,000  and are  expected  to be  expensed  over a period of 18
months,  affecting  fiscal years 1998, 1999, and 2000. This estimate is based on
information  available  at June  30,  1999,  and may be  revised  as  additional
information and actual costs become available. During the nine months ended June
30, 1999 and the year ended September 30, 1998, $80,000 and $89,000 of Year 2000
expenses were incurred and expensed, respectively.



                                       15

<PAGE>

Changes in Financial Condition

At June 30,  1999,  the  consolidated  assets of the  Company  totaled  $1,035.5
million,  an  increase  of $4.2  million,  or 0.40%,  from  $1,031.3  million at
September 30, 1998. The increase in total assets was primarily a result of $59.2
million  growth in loans which  offset the  Company's  repurchase  of 20% of the
outstanding  common stock in January 1999, which reduced cash and investments by
$39.0 million.

Net loans receivable  increased by $59.2 million, or 8.85%, to $727.3 million at
June 30, 1999,  compared to $668.1  million at September 30, 1998.  The increase
was primarily the result of continued new loan demand exceeding loan repayments,
augmented by the Company's  purchase of $4.8 million in higher yielding loans on
multi-family  residential  and  commercial  properties in Oregon during the nine
months ended June 30, 1999.

Investment securities decreased $31.6 million, or 15.33%, from $206.1 million at
September  30, 1998 to $174.5  million at June 30, 1999.  This  decrease was the
result of scheduled  maturities,  primarily  maturities of short term commercial
paper.  The  proceeds  from  these  maturities  were  used  to  fund  the  stock
repurchase.

During the nine months ended June 30, 1999, $13.7 million of principal  payments
were received on mortgage backed and related securities ("MBS") and $9.5 million
of MBS were sold, thus reducing the balance of MBS. This reduction was partially
offset by the purchase of $18.8 million in Collateralized  Mortgage  Obligations
resulting  in a net decrease in total MBS from $47.0  million at  September  30,
1998 to $41.4 million at June 30, 1999.

Deposit  liabilities  increased $37.3 million,  or 5.41%, from $689.5 million at
September 30, 1998 to $726.8 million at June 30, 1999. Management attributes the
increase to the maintaining of competitive  rates in its market areas as well as
the  use of an  automated  on-line  personal  computer-based  system  to  market
deposits  nationally.  The increase in deposits has been experienced  throughout
the network of 34 full service branches.

Advances  from  borrowers for taxes and  insurance  decreased  $2.5 million from
September  30, 1998 to June 30,  1999.  The  decrease is the result of using the
reserves to pay the  required  real estate taxes due on the  Association's  loan
receivable  portfolio in November  partially  offset by collection of taxes from
borrowers.

Advances from the FHLB of Seattle increased from $167.0 million at September 30,
1998 to $187.0  million at June 30,  1999.  The  increase  was used to fund loan
growth. During the quarter ended June 30, 1999, the Company converted adjustable
rate  borrowings  to fixed rate three- to  five-year  maturity  borrowings  as a
strategic move to improve interest rate risk. Short term borrowings at September
30, 1998  consisted of $12.1  million in reverse  repurchase  agreements.  These
agreements  matured  during the quarter ended March 31, 1999,  and they were not
renewed.

Total  shareholders'  equity  decreased  $36.6 million,  or 25.20%,  from $145.1
million at September 30, 1998 to $108.5  million at June 30, 1999.  The decrease
is primarily attributable to $39.0 million paid out for the 20% stock repurchase
completed in January 1999.  Equity was also decreased by a $3.7 million decrease
in  unrealized  gains on  securities  available  for sale  during the nine month
period from September 30, 1998 to June 30, 1999.  These decreases were partially
offset by $6.6 million in earnings for the year to date.

Results of Operations

     Comparison of Nine Months Ended June 30, 1999 and 1998

General.  Net interest  income  increased by $1.3 million from $23.8 million for
the nine  months  ended June 30,  1998 to $25.1  million  for the same period in
1999.  This increase was the combined  result of an increase in interest  income
and a decrease in interest expense. Net income decreased by $204,770,  or 2.99%,
from $6.8  million for the nine months  ended June 30, 1998 to $6.6  million for
the nine months ended June 30, 1999.

                                       16
<PAGE>

Increases  in net  interest  income  and  non-interest  income  were  offset  by
increases in the provision for loan losses and non-interest expense.

Interest  Income.  Additional  interest  income  generated by the $41.6  million
increase in average interest  earning assets  contributed to an increase of $1.3
million in interest  income for the nine months ended June 30, 1999  compared to
1998.  Interest income on loans  receivable  increased $5.9 million,  or 16.28%,
from $36.3  million for the nine months ended June 30, 1998 to $42.2 million for
the same  period  of 1999.  This  increase  was a result of the  $116.7  million
increase  in average  loans  receivable.  The  increase in interest on loans was
offset by a $4.2 million  decrease in interest on investment and mortgage backed
securities.  Short term  investments  matured and interest bearing deposits were
liquidated in January 1999 to fund the $39.0 million stock repurchase,  reducing
average investment  balances,  thus generating less income. The average yield on
interest  earning  assets  decreased 5 basis points to 7.29% for the nine months
ended June 30, 1999  compared to 7.34% for the same period  ended June 30, 1998.
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 2.57% to 2.75% and
interest rate margin (net interest  income divided by average  interest  earning
assets) improved slightly from 3.37% to 3.40% comparing the nine month periods.

Interest Expense.  Total interest expense increased $669,737,  or 2.39%, for the
nine  months  ended June 30, 1999  compared to the same period in 1998.  Of that
increase,  $277,522  related  to an  increase  in  interest  expense  on deposit
liabilities.  This increase was the combined result of a $35.5 million  increase
in the  average  deposit  balance  offset by a 19 basis point  reduction  in the
average rate paid on deposits.  The average  balance of FHLB advances  increased
$34.7  million  from $133.8  million for the nine months  ended June 30, 1998 to
$168.5  million for the same period ended June 30, 1999 resulting in an increase
in interest on FHLB advances of $892,148 for the nine months ended June 30, 1999
compared with the same period ended June 30, 1998.

Provision for Loan Losses.  The provision for loan losses was $669,000 and there
were $3,000 of charge offs during the nine months  ended June 30, 1999  compared
to a $364,000  provision and $20,774 of charge offs during the nine months ended
June 30,  1998.  As the  Company  has grown  over the last  twelve  months,  the
composition  of the loan  portfolio has changed with  increases in  construction
loans and  commercial  and consumer  loans,  which are  considered  to have more
associated risk than the Company's traditional portfolio of one- to four- family
residential  mortgages.  Because of the Company's history of relatively low loan
loss experience,  it has historically maintained an allowance for loan losses at
a lower  percentage  of total loans as  compared  with other  institutions  with
higher risk loan portfolios and higher loss experience.  The increased provision
for loan losses  reflects such changes in the composition of the loan portfolio,
although the Company's  recent  experience has not indicated a deterioration  in
loan  quality.  The balance of  non-performing  loans has  increased  during the
current  fiscal  year,  primarily  as a result of the addition of a $1.6 million
secured  commercial real estate loan and a $1.5 million land  development  loan.
The Company is not  anticipating  any material  loss on these loans at this time
and sees these as isolated problem assets, not a market or underwriting trend.

Non-Interest Income.  Non-interest income increased $575,261, or 27.44%, to $2.7
million for the nine months  ended June 30, 1999 from $2.1  million for the nine
months ended June 30, 1998. The increase was primarily attributable to increases
in fee income  related to the  increase in deposit  accounts  subject to service
charges and $329,435 gain on sale of investment securities.

Non-Interest Expense.  Non-interest expense increased $1.4 million, or 9.30%, to
$15.9  million for the nine months ended June 30, 1999,  from $14.5  million for
the comparable  period in 1998.  Compensation,  employee  benefits,  and related
expense  increased  $353,448,  or 4.87%,  from $7.3  million for the nine months
ended  June 30,  1998 to $7.6  million  for the same  period in 1999.  Occupancy
expense  increased  from $1.5 million for the nine months ended June 30, 1998 to
$1.7 million for the same period in 1999. Both of these increases are due to the
addition of two branches and expenditures on equipment  related to preparing for
the Year 2000. Sale of mortgage backed and related securities resulted in a loss
of $112,256 which partially  offset the gain on sale noted above.  Other expense
increased $779,628, from $3.6 million for the nine months ended June 30, 1998 to
$4.3  million for the nine months ended June 30,  1999.  The increase  primarily
resulted from losses identified in the third quarter related to the Wells  Fargo

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<PAGE>

branch integration.  Management does not anticipate any additional costs related
to the branch integration  process. The ratio of non-interest expense to average
total  assets was 2.06% and 1.96% for the nine  months  ended June 30,  1999 and
1998, respectively.

Income  Taxes.  The  provision  for income  taxes was $4.5  million for the nine
months  ended  June 30,  1999,  representing  an  effective  tax rate of 40.60%,
compared with $4.2 million for the nine months ended June 30, 1998, representing
an effective tax rate of 37.78%.  The effective  rate for 1998 was unusually low
reflecting the impact of a one year reduction in the state tax rate for Oregon.

     Comparison of Three Months Ended June 30, 1999 and 1998

General. Net interest income increased $361,287, or 4.52%, from $8.0 million for
the three  months ended June 30, 1998 to $8.4 million for the three months ended
June 30,  1999.  Increases  in net  interest  income were offset by increases in
non-interest  expense,  resulting in a $600,189 decrease in net income from $2.5
million for the quarter ended June 30, 1998 to $1.9 million for the same quarter
of 1999.

Interest  Income.  Additional  interest  income  generated by the $18.9  million
increase  in average  interest  earning  assets  contributed  to an  increase of
$91,606 in interest  income for the three months ended June 30, 1999 compared to
1998. The average yield on interest  earning assets decreased 10 basis points to
7.23% for the three  months  ended June 30, 1999  compared to 7.33% for the same
period ended June 30, 1998.  Average yield decreased  because 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  2.55% to 2.80%,  and  interest  rate  margin  (net
interest income divided by average  interest earning assets) improved from 3.31%
to 3.39% comparing the three month periods.

Interest Expense. Total interest expense decreased $269,681 for the three months
ended June 30,  1999  compared  to the same  period in 1998.  Of that  decrease,
$47,379  related  to a decrease  in  interest  expense  on deposit  liabilities.
Although average deposits  increased by $44.4 million comparing June 30, 1998 to
1999, the average interest paid on interest-bearing  deposits decreased 32 basis
points from 4.57% for the three months ended June 30, 1998 to 4.25% for the same
period ended June 30, 1999. The average balance of other borrowings,  consisting
of reverse  repurchase  agreements,  decreased  from $14.1 million for the three
months  ended June 30,  1998 to zero for the same  period  ended  June 30,  1999
resulting  in a decrease  in interest on other  borrowings  of $205,392  for the
three  months ended June 30, 1999  compared  with the same period ended June 30,
1998.  The slight  increase  in interest  income  coupled  with the  decrease in
interest expense resulted in the noted  improvements in interest rate spread and
margin.

Provision for Loan Losses.  The provision for loan losses was $243,000 and there
were no charge offs during the three  months  ended June 30, 1999  compared to a
$198,000 provision and $20,774 of charge offs during the three months ended June
30,  1998.  As noted  above,  the  provision  for loan losses was  increased  in
response  to changes in the  composition  of the loan  portfolio,  although  the
Company's recent experience has not indicated a deterioration in loan quality.

Non-Interest  Income.  Non-interest  income was  consistent for the three months
ended June 30, 1999 and 1998. For the third quarter of 1998, non-interest income
consisted of $591,528 in fees and service charges and $189,661 of  non-recurring
gains on sale of  investments.  For the third quarter of 1999,  fees and service
charges  increased  by 26.63% to  $749,074,  with only  $22,106 of  non-interest
income arising from gains on sale of investments.

Non-Interest  Expense.  Non-interest  expense increased $930,419,  or 19.25%, to
$5.8 million for the three months ended June 30, 1999, from $4.8 million for the
comparable  period in 1998. Of this increase,  $287,284 was  attributable  to an
increase in  compensation  and benefit expense in 1999,  reflecting  addition of
staff  related to the addition of two branches  during the past year.  Occupancy
expense  increased  slightly  from  $508,317 for the three months ended June 30,

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<PAGE>

1998 to $543,532 for the three months ended June 30, 1999 due to the addition of
the two branches.  Other expense increased  $608,741,  from $1.3 million for the
three months ended June 30, 1998 to $1.9 million for the three months ended June
30, 1999. The increase  primarily  resulted from losses  identified in the third
quarter  related to the Wells  Fargo  branch  integration.  Management  does not
anticipate any additional costs related to the branch integration  process.  The
ratio of  non-interest  expense to average  total assets was 2.24% and 1.90% for
the three months ended June 30, 1999 and 1998, respectively.

Income  Taxes.  The  provision  for income  taxes was $1.3 million for the three
months  ended  June 30,  1999,  representing  an  effective  tax rate of 40.60%,
compared   with  $1.3  million  for  the  three  months  ended  June  30,  1998,
representing  an effective tax rate of 34.34%.  The effective  rate for 1998 was
unusually  low  reflecting  the impact of a one year  reduction in the state tax
rate for Oregon.

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<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
          June 30, 1999.




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<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:  August 13, 1999                     By:  /s/ Gerald V. Brown
                                                --------------------------------
                                                Gerald V. Brown, President and
                                                Chief Executive Officer


Date:  August 13, 1999                     By:  /s/ Marshall Jay Alexander
                                                --------------------------------
                                                Marshall Jay Alexander,
                                                Senior Vice President and
                                                Chief Financial Officer













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