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, 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  April  21,  1999,   there  were  issued  7,932,676  shares  of  the
Registrant's  Common  Stock.  The  Registrant's  voting  common  stock is traded
over-the-counter  and is listed on the Nasdaq  National  Market under the symbol
"KFBI."

<PAGE>

                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS

Part I.  Financial Information
-------  ----------------------
Item 1.  Financial Statements                                            Page
                                                                        -------
         Consolidated Balance Sheets
         (As of March 31, 1999 and September 30, 1998)                        3

         Consolidated Statements of Earnings (For the three months
         and six months ended March 31, 1999 and 1998)                        4

         Consolidated Statement of Shareholders' Equity
         (For the years ended September 30, 1998 and 1997 and for
         the six months ended March 31, 1999)                                 5

         Consolidated Statements of Cash Flows (For the six
         months ended March 31, 1999 and 1998)                            6 - 7

         Notes to Consolidated Financial Statements                      8 - 11

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                            12 - 17

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

Item 1.  Legal Proceedings                                                   18

Item 2.  Changes in Securities                                               18

Item 3.  Defaults Upon Senior Securities                                     18

Item 4.  Submission of Matters to a Vote of Security Holders                 18

Item 5.  Other Information                                                   18

Item 6.  Exhibits and Reports on Form 8-K                                    18

Signatures                                                                   19











                                        2
<PAGE>
<TABLE>
<CAPTION>

                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 1999 AND SEPTEMBER 30, 1998
                                   (Unaudited)


                                                                          March 31, 1999                     September 30, 1998
ASSETS                                                                -------------------                    ------------------

<S>                                                                        <C>                                   <C>        
Cash and due from banks                                                       $23,231,327                           $25,644,460
Interest bearing deposits with banks                                           11,515,185                            11,496,026
Federal funds sold and securities purchased under agreements to resell         18,866,681                            29,844,783
                                                                       ------------------                    ------------------
   Total cash and cash equivalents                                             53,613,193                            66,985,269

Investment securities available for sale, at fair value
  (amortized cost: $168,797,552 and $199,251,123)                             169,953,050                           203,224,184
Investment securities held to maturity, at amortized cost (fair                             
  value: $915,786 and $2,928,324)                                                 887,238                             2,888,759
Mortgage backed and related securities available for sale, at fair                          
  value (amortized cost: $22,853,866 and $42,741,863)                          23,104,453                            43,335,857
Mortgage backed and related securities held to maturity, at amortized
  cost (fair value: $2,972,581 and $3,696,444)                                  2,956,964                             3,661,683
Loans receivable, net                                                         720,907,810                           668,146,380
Real estate owned and repossessed assets                                            4,287                                    --
Premises and equipment, net                                                    12,052,038                            12,347,467
Stock in Federal Home Loan Bank of Seattle, at cost                            10,569,700                            10,172,900
Accrued interest receivable                                                     6,634,048                             7,471,717
Core deposit intangible                                                        10,604,679                            11,431,018
Other assets                                                                    1,953,709                             1,637,164
                                                                       ------------------                    ------------------
   Total assets                                                            $1,013,241,169                        $1,031,302,398
                                                                       ==================                    ==================

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
  Deposit liabilities                                                        $724,177,185                          $689,541,345
  Accrued interest on deposit liabilities                                       1,200,589                             1,291,784
  Advances from borrowers for taxes and insurance                               3,958,335                             9,420,791
  Advances from Federal Home Loan Bank of Seattle                             167,000,000                           167,000,000
  Short term borrowings                                                                --                            12,112,500
  Accrued interest on borrowings                                                  120,362                               213,957
  Pension liabilities                                                             844,690                               779,392
  Deferred income taxes                                                         1,801,774                             3,655,944
  Other liabilities                                                             5,451,003                             2,205,730
                                                                       ------------------                    ------------------
    Total liabilities                                                         904,553,938                           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,
   March 31, 1999 - 7,932,676 issued, 6,916,105 outstanding
   September 30, 1998 - 9,916,766 issued, 8,898,972 outstanding                    79,327                                99,168
  Additional paid-in capital                                                   43,884,644                            82,486,183
  Retained earnings-substantially restricted                                   74,242,472                            71,051,445
  Unearned shares issued to ESOP                                               (6,361,225)                           (6,850,550)
  Unearned shares issued to MRDP                                               (4,029,761)                           (4,536,865)
  Net unrealized gain on securities available for sale, net of tax                871,774                             2,831,574
                                                                       ------------------                    ------------------
    Total shareholders' equity                                                108,687,231                           145,080,955
                                                                       ------------------                    ------------------
    Total liabilities and shareholders' equity                             $1,013,241,169                        $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               Six               Six
                                                            Months Ended      Months Ended      Months Ended      Months Ended
                                                               March 31,         March 31,         March 31,         March 31,
                                                                    1999              1998              1999              1998
                                                          --------------    --------------    --------------    --------------
INTEREST INCOME
<S>                                                          <C>               <C>               <C>               <C>        
  Loans receivable                                           $14,064,649       $12,062,942       $27,904,038       $23,479,371
  Mortgage backed and related securities                         391,092         1,080,062           952,302         2,187,810
  Investment securities                                        2,863,380         3,704,876         6,292,645         7,896,311
  Federal funds sold                                             214,756           191,311           422,316           339,960
  Interest bearing deposits                                      152,623           140,695           392,772           221,722
                                                          --------------    --------------    --------------    --------------
    Total interest income                                     17,686,500        17,179,886        35,964,073        34,125,174
                                                          --------------    --------------    --------------    --------------

INTEREST EXPENSE
  Deposit liabilities                                          7,263,000         7,149,174        14,681,561        14,356,659
  FHLB advances                                                2,135,328         1,748,242         4,346,724         3,437,666
  Other                                                           62,775           225,546           220,434           514,975
                                                          --------------    --------------    --------------    --------------
    Total interest expense                                     9,461,103         9,122,962        19,248,719        18,309,300
                                                          --------------    --------------    --------------    --------------
    Net interest income                                        8,225,397         8,056,924        16,715,354        15,815,874

Provision for loan losses                                        303,000            91,000           426,000           166,000
                                                          --------------    --------------    --------------    --------------
    Net interest income after provision for
      loan losses                                              7,922,397         7,965,924        16,289,354        15,649,874
                                                          --------------    --------------    --------------    --------------

NON-INTEREST INCOME
  Fees and service charges                                       686,215           550,136         1,377,892         1,155,500
  Gain on sale of investments                                    179,135                --           307,328                --
  Gain on sale of real estate owned                               26,179                --            26,179                --
  Other income                                                    54,000            26,359           133,550           117,662
                                                          --------------    --------------    --------------    --------------
    Total non-interest income                                    945,529           576,495         1,844,949         1,273,162
                                                          --------------    --------------    --------------    --------------
NON-INTEREST EXPENSE
  Compensation, employee benefits and related expense          2,549,616         2,417,806         4,963,502         4,897,339
  Occupancy expense                                              561,453           515,859         1,120,557         1,036,370
  Data processing expense                                        242,978           241,186           482,783           473,698
  Insurance premium expense                                       77,662           105,859           147,638           173,199
  Loss on sale of investments                                         --                --           112,256                --
  Loss on sale of real estate owned                                5,398                --             5,398                --
  Amortization of core deposit intangible                        413,169           413,169           826,339           826,338
  Other expense                                                1,213,458         1,194,041         2,480,338         2,309,452
                                                          --------------    --------------    --------------    --------------
    Total non-interest expense                                 5,063,734         4,887,920        10,138,811         9,716,396
                                                          --------------    --------------    --------------    --------------

Earnings before income taxes                                   3,804,192         3,654,499         7,995,492         7,206,640

Provision for income tax                                       1,508,741         1,446,726         3,246,226         2,852,793
                                                          --------------    --------------    --------------    --------------

Net earnings                                                  $2,295,451        $2,207,773        $4,749,266        $4,353,847
                                                          ==============    ==============    ==============    ==============

Earnings per common share - basic                                  $0.32             $0.24             $0.59             $0.47
Earnings per common share - fully diluted                          $0.31             $0.23             $0.57             $0.45
Weighted average common shares outstanding - basic             7,261,474         9,272,315         8,095,744         9,259,981
Weighted average common shares outstanding -  with dilution    7,478,127         9,754,449         8,337,116         9,735,105

<FN>


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

                                                             4
<PAGE>
<TABLE>
<CAPTION>

                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
 FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1998 AND THE SIX MONTHS ENDED MARCH 31, 1999
                                   (Unaudited)



                                                                                 Unearned      Unearned    Unrealized
                         Common      Common    Additional                          shares        shares          gain          Total
                          Stock      Shares       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 (loss) on
securities
available for sale .        --          --             --             --            --            --       1,512,041      1,512,041

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

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

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

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

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

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

Stock repurchased
and retire .......      (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 ...          --          --             --       (1,558,239)         --            --            --       (1,558,239)

Net unrealized
gain (loss) on
securities
available for sale .        --          --             --             --            --            --      (1,959,800)    (1,959,800)

Stock repurchased
and retire .......    (1,984,090)    (19,841)   (38,960,892)          --            --            --            --      (38,980,733)

ESOP contribution ..        --          --          359,353           --         489,325          --            --          848,678

MRDP contribution ..       1,223        --             --             --            --         507,104          --          507,104

Net earnings .....          --          --             --        4,749,266          --            --            --        4,749,266
                    ------------  ----------   ------------   ------------   -----------   -----------   ------------   ------------
Balance at
March 31, 1999 ...     6,916,105   $  79,327   $ 43,884,644   $ 74,242,472   $(6,361,225)  $(4,029,761)  $    871,774   $108,687,231
                    ============   =========   ============   ============   ===========   ===========   ============   ============
<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, 1999 AND 1998
                                                               (Unaudited)

                                                                        Six             Six
                                                               Months Ended    Months Ended
                                                                  March 31,       March 31,
                                                                       1999            1998
                                                             --------------  --------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                          <C>             <C>       
    Net earnings ..........................................  $   4,749,266   $   4,353,847

ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
    Depreciation and amortization .........................      1,447,131       1,398,475
    Provision for loan losses .............................        426,000         166,000
    Compensation expense related to ESOP benefit ..........        848,678       1,077,534
    Compensation expense related to MRDP Trust ............        507,104         542,537
    Net amortization of premiums (discounts)  paid on
      investment and mortgage backed and related securities        (65,700)       (200,526)
    Increase in deferred loan fees, net of amortization ...        434,825         568,818
    Accretion of discounts on purchased loans .............          2,602          10,790
    Net (gain) loss on sale of real estate owned and
      premises and equipment ..............................        (20,781)           --
    Net (gain) loss on sale of investment and mortgage
      backed and related securities .......................       (195,072)           --
    FHLB stock dividend ...................................       (396,800)       (283,400)
CHANGES IN ASSETS AND LIABILITIES
    Accrued interest receivable ...........................        837,669         307,549
    Other assets ..........................................       (396,545)        292,392
    Accrued interest on deposit liabilities ...............        (91,195)       (122,828)
    Accrued interest on borrowings ........................        (93,595)       (236,959)
    Pension liabilities ...................................         65,298          63,298
    Deferred  income taxes ................................       (653,002)        (65,865)
    Other liabilities .....................................        926,974         560,871
                                                             -------------   -------------
Net cash provided by operating activities .................      8,332,857       8,432,533
                                                             -------------   -------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from maturity of investment securities
      held to maturity ....................................     82,130,000      20,000,000
    Proceeds from maturity of investment securities
      available for sale ..................................     29,072,000      53,680,000
    Principal repayments received on mortgage
       backed and related securities held to maturity .....        693,758         802,454
    Principal repayments received on mortgage
       backed and related securities available for sale ...     10,104,457       8,691,824
    Principal repayments received on loans ................     86,664,019      50,064,627
    Loan originations .....................................   (135,767,224)   (101,113,902)
    Loans purchased .......................................     (4,764,023)     (3,894,787)
    Purchase of investment securities held
      to maturity .........................................    (79,711,523)           --
    Purchase of investment securities available
      for sale ............................................     (6,331,027)    (21,570,845)
    Purchase of mortgage backed and related
      securities available for sale .......................           --       (10,040,575)
    Proceeds from sale of investment securities
      available for sale ..................................     10,302,314            --
    Proceeds from sale of mortgage backed and related
      securities available for sale .......................      9,454,776            --
    Proceeds from sale of real estate owned and
      premises and equipment ..............................        258,865            --
    Purchases of premises and equipment ...................       (245,363)       (562,109)
                                                             -------------   -------------
Net cash provided by (used in) investing activities .......      1,861,029      (3,943,313)
                                                             -------------   -------------
</TABLE>


                                                                    6
<PAGE>
<TABLE>
<CAPTION>

                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND 1998
                                   (Unaudited)
                                   (Continued)

                                                                       Six             Six
                                                              Months Ended    Months Ended
                                                                 March 31,       March 31,
                                                                      1999            1998
                                                            --------------   -------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Increase  in deposit liabilities,                                                          
<S>                                                          <C>             <C>       
      net of withdrawals ..................................  $  34,635,840   $   6,657,202
    Proceeds from FHLB advances ...........................      5,000,000      79,000,000
    Repayments of FHLB advances ...........................     (5,000,000)    (68,500,000)
    Proceeds from short term borrowings ...................      8,595,000      54,104,000
    Repayments of short term borrowings ...................    (20,707,500)    (57,097,500)
    Stock repurchase and retirement .......................    (38,980,733)           --
    Advances from borrowers for tax and insurance .........     (5,462,456)     (5,205,965)
    Dividends paid ........................................     (1,646,113)     (1,668,725)
                                                             -------------   -------------
Net cash provided by (used in) financing activities .......    (23,565,962)      7,289,012
                                                             -------------   -------------
Net (decrease) increase in cash and cash
  equivalents .............................................    (13,372,076)     11,778,232

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

                                                             -------------   -------------
Cash and cash equivalents at end of period ................  $  53,613,193   $  43,821,428
                                                             =============   =============
SUPPLEMENTAL SCHEDULE OF INTEREST AND
INCOME
  TAXES PAID
    Interest paid .........................................  $  19,433,509   $  18,669,088
    Income taxes paid .....................................      3,001,000       2,724,000

SUPPLEMENTAL SCHEDULE OF NONCASH
  INVESTING ACTIVITIES
    Net unrealized gain (loss) on securities
      available for sale ..................................  ($  1,959,800)  $     404,917
    Dividends declared and accrued in other
      liabilities .........................................        951,920         886,510





<FN>

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

                                                                    7
<PAGE>

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

1.       BASIS OF PRESENTATION

In the opinion of Management,  the accompanying unaudited consolidated financial
statements contain all adjustments  necessary for a fair presentation of Klamath
First Bancorp,  Inc.'s (the "Company")  financial condition as of March 31, 1999
and September 30, 1998,  the results of operations  for the three and six months
ended March 31, 1999 and 1998 and the cash flows for the six months  ended March
31, 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 six  months  ended  March  31,  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 March 31, 1999,  the  Company's  total  comprehensive
income was $1.8  million  compared to $2.2  million for the three  months  ended
March 31, 1998. Total comprehensive  income for the three months ended March 31,
1999 was comprised of net income of $2.3 million and other comprehensive loss of
$526,025,  net of tax.  Total  comprehensive  income for the three  months ended
March  31,  1998  was  comprised  of  net  income  of  $2.2  million  and  other
comprehensive income of $41,631, net of tax.

For the six months  ended March 31,  1999,  the  Company's  total  comprehensive
income was $2.8 million  compared to $4.8 million for the six months ended March
31, 1998. Total comprehensive income for the six months ended March 31, 1999 was
comprised  of net income of $4.7  million and other  comprehensive  loss of $1.9
million,  net of tax. Total comprehensive  income for the six months ended March
31, 1998 was  comprised  of net income of $4.4  million and other  comprehensive
income of $404,917, net of tax.
 


                                                         8
<PAGE>

3.  ALLOWANCE FOR LOAN LOSSES



Activity in allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
                           Six Months Ended                          Year Ended
                                  March 31,                       September 30,
                                       1999                                1998
                              --------------                      --------------
<S>                              <C>                                 <C>       
Balance, beginning of period     $1,949,677                          $1,296,451
Charge-offs                          (3,000)                            (20,774)
Additions                           426,000                             674,000
                              --------------                      --------------

Balance, end of period           $2,372,677                          $1,949,677
                                   ========                            ========
</TABLE>

4.       ADVANCES FROM FEDERAL HOME LOAN BANK

Borrowings  at March 31, 1999  consisted  of four short term  advances  totaling
$45.0  million and eight long term  advances  totaling  $122.0  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>


                                     March 31, 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 .  $ 45,000,000  4.85%-5.12%        4.93%    $30,000,000    5.54%-5.56%          5.55%

After one but within
five years ..........    40,000,000  5.05%-5.70%        5.35%     55,000,000    5.39%-5.74%          5.56%

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

5.       SHORT TERM BORROWINGS

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

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 $39.0 million.  The effect of
the  transaction  is  reflected  in a reduction  in cash and  investments  and a
reduction in equity and with corresponding  impact on the performance ratios for
the quarter ended March 31, 1999.

                                                         9
<PAGE>

7.       EARNINGS PER SHARE

Earnings  per share  ("EPS")  is  computed  in  accordance  with  SFAS No.  128,
"Earnings  per Share," which was adopted by the Company as of December 31, 1997.
EPS for all prior  periods have been  restated to reflect the  adoption.  Shares
held by the Company's  Employee Stock Ownership Plan ("ESOP") that are committed
for release are considered common stock equivalents and are included in weighted
average  shares  outstanding  (denominator)  for the  calculation  of basic  and
diluted EPS.  Diluted EPS is computed  using the treasury  stock method,  giving
effect to potential  additional  common shares that were outstanding  during the
period. Potential dilutive common shares include shares awarded but not released
under the Company's  Management  Recognition and Development Plan ("MRDP"),  and
stock options granted under the Stock Option Plan. Following is a summary of the
effect of dilutive securities on weighted average number of shares (denominator)
for the basic and diluted EPS calculations.  There are no resulting  adjustments
to net earnings.
<TABLE>
<CAPTION>
                                                    For the Three  Months Ended
                                               ------------------------------------
                                                       March  31,         March 31,
                                                             1999              1998
                                               ------------------    --------------
Weighted average common
<S>                                                     <C>               <C>      
shares outstanding - basic                              7,261,474         9,272,315
                                               ------------------    --------------
Effect of Dilutive Securities on Number of Shares:
MRDP shares                                                30,181            84,806
Stock options                                             186,472           397,328
                                               ------------------    --------------
Total Dilutive Securities                                 216,653           482,134
                                               ------------------    --------------
Weighted average common shares
 outstanding - with dilution                            7,478,127         9,754,449
                                               ==================    ==============


                                                      For the Six  Months Ended
                                               -------------------------------------
                                                       March  31,         March 31,
                                                             1999              1998
                                               ------------------    ---------------
Weighted average common
shares outstanding - basic                              8,095,744         9,259,981
                                               ------------------    --------------
Effect of Dilutive Securities on Number of Shares:
MRDP shares                                                29,386            80,652
Stock options                                             211,986           394,472
                                               ------------------    --------------
Total Dilutive Securities                                 241,372           475,124
                                               ------------------    --------------
Weighted average common shares
 outstanding - with dilution                            8,337,116         9,735,105
                                               ==================    ==============
</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 March 31, 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 March 31, 1999:         ------------    ----------    ---------------  ----------   ------------  ---------
<S>                           <C>                  <C>      <C>                 <C>       <C>             <C>  
Total Capital: ......         $ 89,601,101         16.9%    $    42,354,416     8.0%      $ 52,943,020    10.0%
 (To Risk Weighted Assets)
Tier I Capital: .....           87,228,424         16.5%              N/A       N/A         31,765,812     6.0%
 (To Risk Weighted Assets)
Tier I Capital: .....           87,228,424          8.8%         29,759,431     3.0%        49,599,051     5.0%
 (To Total Assets)
Tangible Capital: ...           87,228,424          8.8%         14,879,715     1.5%           N/A         N/A
 (To Tangible Assets)
</TABLE>
                                                                 10
<PAGE>

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

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

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



                                                        11
<PAGE>


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


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

General

The Company, an Oregon corporation,  became the unitary savings and loan holding
company for the Association upon the  Association's  conversion from a federally
chartered  mutual to a federally  chartered  stock savings and loan  association
("Conversion")  on October 4, 1995.  At March 31,  1999,  the  Company had total
consolidated  assets of $1.0 billion and  consolidated  shareholders'  equity of
$108.7  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 our existing  conservative
underwriting standards outside of the current branch market areas.

Net  interest  income,  which is the  difference  between  interest and dividend
income on interest-earning  assets,  primarily loans and investment  securities,
and interest expense on interest-bearing  deposits and borrowings,  is the major
source of profit for the Company.  Because the Company depends  primarily on net
interest  income for its earnings,  the focus of the Company's  management is to
create and  implement  strategies  that will provide  stable,  positive  spreads
between the yield on  interest-earning  assets and the cost of  interest-bearing
liabilities. Such strategies include the Association's expansion of its consumer
and commercial loan products.  Consumer and commercial  loans  increased  40.18%
from $9.7  million at March 31, 1998 to $13.7  million at March 31,  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.



                                                        12
<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

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

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

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

     Assessment Phase - Assess the size and complexity of the problem and detail
     the  magnitude of effort  necessary to address Year 2000 issues,  including
     hardware, software, networks, automated teller machines, etc. This step was
     approximately 99% complete by March 31, 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
     will  continue  through June 30,  1999,  with the most  critical  functions
     tested  first.  This  allows time to correct  any  discovered  deficiencies
     before the end of 1999.  In-house  systems and third party service  bureaus
     are 100%  tested as of March 31,  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
     approximately 94% complete as of March 31, 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 is scheduled for completion by June 30, 1999.


                                                        13
<PAGE>

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

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

Software  purchased  from a Fiserv  affiliate is used for  applications  such as
accounts  payable,  fixed  assets,  and  investment  portfolio  accounting.  The
investment  portfolio  accounting  software  was  Year  2000  compatible  as  of
September  30,  1998.  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 are being monitored for Year
2000 readiness.  Validation with critical vendors was approximately 50% complete
as of March 31, 1999. Subsequent to the March quarter end, additional results of
vendor  testing were  received,  bringing the  completion of this phase to a 95%
level.

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 are also being  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 is scheduled for completion by 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 fiscal  year  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.

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 March 31, 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 March 31,  1999,  and may be  revised  as  additional
information and actual costs become available. During the six months ended March
31, 1999 and the year ended September 30, 1998, $58,000 and $89,000 of Year 2000
expenses were incurred and expensed, respectively.

                                                        14
<PAGE>


Changes in Financial Condition

At March 31,  1999,  the  consolidated  assets of the Company  totaled  $1,013.2
million,  a  decrease  of $18.1  million,  or 1.75%,  from  $1,031.3  million at
September  30, 1998.  The decrease in total assets was primarily a result of the
Company's  repurchase  of 20% of the  outstanding  common stock in January 1999,
reducing cash and investments by $39.0 million.

Net loans receivable  increased by $52.8 million, or 7.90%, to $720.9 million at
March 31, 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 six
months ended March 31, 1999.

Investment securities decreased $35.3 million, or 17.11%, from $206.1 million at
September  30, 1998 to $170.8  million at March 31, 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 six months ended March 31, 1999, $10.8 million of principal  payments
were received on mortgage backed and related securities ("MBS") and $9.5 million
of MBS were sold,  reducing  the balance of MBS from $47.0  million at September
30, 1998 to $26.0 million at March 31, 1999.

Deposit  liabilities  increased $34.7 million,  or 5.02%, from $689.5 million at
September 30, 1998 to $724.2  million at March 31, 1999.  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 34 branches.

Advances  from  borrowers for taxes and  insurance  decreased  $5.5 million from
September  30, 1998 to March 31,  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  remained  consistent  at $167.0  million for
September  30, 1998 and March 31, 1999.  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  $36.4 million,  or 25.09%,  from $145.1
million at September 30, 1998 to $108.7  million at March 31, 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 $2.0 million decrease
in unrealized gains on securities available for sale during the six month period
from September 30, 1998 to March 31, 1999. These decreases were partially offset
by $4.7 million in earnings for the year to date.

Results of Operations

         Comparison of Six Months Ended March 31, 1999 and 1998

General.  Net income increased by $395,419,  or 9.08%, from $4.4 million for the
six months  ended March 31, 1998 to $4.7  million for the six months ended March
31,  1999.  Increases  in net  interest  income  and  non-interest  income  were
partially offset by increases in non-interest expense.

                                       15
<PAGE>
 
Interest  Income.  Additional  interest  income  generated by the $53.0  million
increase in average interest  earning assets  contributed to an increase of $1.8
million in interest  income for the six months ended March 31, 1999  compared to
1998.  Interest income on loans  receivable  increased $4.4 million,  or 18.84%,
from $23.5  million for the six months ended March 31, 1998 to $27.9 million for
the same  period  of 1999.  This  increase  was a result of the  $123.2  million
increase  in average  loans  receivable.  The  increase in interest on loans was
offset by a $2.8 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 3 basis  points to 7.32% for the six months
ended March 31, 1999 compared to 7.35% for the same period ended March 31, 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 2.58% to 2.72% and
interest rate margin (net interest  income divided by average  interest  earning
assets) remained stable at 3.40% comparing the six month periods.

Interest Expense.  Total interest expense increased $939,419,  or 5.13%, for the
six months  ended  March 31, 1999  compared to the same period in 1998.  Of that
increase,  $324,902  related  to an  increase  in  interest  expense  on deposit
liabilities.  This increase was the combined result of a $32.5 million  increase
in the  average  deposit  balance  offset by a 10 basis point  reduction  in the
average rate paid on deposits.  The average  balance of FHLB advances  increased
$46.3  million  from $120.8  million for the six months  ended March 31, 1998 to
$167.1 million for the same period ended March 31, 1999 resulting in an increase
in interest on FHLB advances of $909,058 for the six months ended March 31, 1999
compared with the same period ended March 31, 1998.

Provision for Loan Losses.  The provision for loan losses was $426,000 and there
were $3,000 of charge offs during the six months  ended March 31, 1999  compared
to a $166,000 provision and no charge offs during the six months ended March 31,
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.  Also, 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 as well as six construction  loans from two
contractors   that  have  passed  their  maturity  dates.  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.  Subsequent to
quarter end,  the six  construction  loans were paid off or brought  current and
extended.

Non-Interest Income.  Non-interest income increased $571,787, or 44.91%, to $1.8
million for the six months  ended  March 31, 1999 from $1.3  million for the six
months  ended  March 31,  1998.  The  increase  was  primarily  attributable  to
increases in fee income related to the increase in deposit  accounts  subject to
service charges and $307,328 gain on sale of investment securities.

Non-Interest  Expense.  Non-interest  expense increased  $422,415,  or 4.35%, to
$10.1 million for the six months ended March 31, 1999, from $9.7 million for the
comparable period in 1998. Occupancy expense increased from $1.0 million for the
six months  ended March 31, 1998 to $1.1 million for the same period in 1999 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.  The ratio of non-interest  expense to average total assets was 1.97% and
1.99% for the six months ended March 31, 1999 and 1998, respectively.

                                       16
<PAGE>

Income  Taxes.  The provision  for income taxes  increased  $393,433 for the six
months ended March 31, 1999 compared with the prior year, primarily as result of
a higher state income tax rate for this year.

         Comparison of Three Months Ended March 31, 1999 and 1998

General. Net income increased $87,678, or 3.97%, from $2.2 million for the three
months ended March 31, 1998 to $2.3 million for the three months ended March 31,
1999.  Increases in net interest income and  non-interest  income were partially
offset by increases in non-interest expense.
 
Interest  Income.  Additional  interest  income  generated by the $37.5  million
increase  in average  interest  earning  assets  contributed  to an  increase of
$506,614 in interest  income for the three months ended March 31, 1999  compared
to 1998. Of this increase,  $2.0 million is attributable  to increased  interest
income  on loans  which  was  partially  offset by a $1.5  million  decrease  in
interest on investment and mortgage backed and related  securities.  The average
yield on interest earning assets decreased 8 basis points to 7.31% for the three
months  ended March 31, 1999  compared to 7.39% for the same period  ended March
31, 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 2.67% to 2.81%, however, interest rate margin (net interest income
divided  by  average  interest  earning  assets)  declined  from  3.47% to 3.40%
comparing the three month periods.

Interest Expense. Total interest expense increased $338,141 for the three months
ended March 31, 1999  compared  to the same  period in 1998.  Of that  increase,
$113,826  related to an  increase in  interest  expense on deposit  liabilities.
Although average deposits increased by $37.9 million comparing March 31, 1998 to
1999, the average interest paid on interest-bearing  deposits decreased 18 basis
points  from 4.53% for the three  months  ended  March 31, 1998 to 4.35% for the
same period ended March 31, 1999. The average balance of FHLB advances increased
from $123.9  million for the three months ended March 31, 1998 to $167.0 million
for the same period ended March 31, 1999 resulting in an increase in interest on
FHLB  advances of $387,086 for the three  months  ended March 31, 1999  compared
with the same period ended March 31, 1998.

Provision for Loan Losses.  The provision for loan losses was $303,000 and there
were no charge offs during the three months  ended March 31, 1999  compared to a
$91,000  provision  and no charge offs during the three  months  ended March 31,
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 increased  $369,034,  or 64.01%,  to
$945,529 for the three  months ended March 31, 1999 from  $576,495 for the three
months  ended March 31,  1998.  The increase  was  primarily  attributable  to a
$136,079  increase in fee income  related to the  increase  in deposit  accounts
subject to service charges and $179,135 gain on sale of investment securities.

Non-Interest Expense. Non-interest expense increased $175,814, or 3.60%, to $5.1
million for the three  months  ended March 31,  1999,  from $4.9 million for the
comparable  period in 1998. Of this increase,  $131,810 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 $515,859 for the three months ended March 31,
1998 to $561,453  for the three  months ended March 31, 1999 due to the addition
of the two branches.  The ratio of non-interest  expense to average total assets
was  1.99%  and  2.00% for the  three  months  ended  March  31,  1999 and 1998,
respectively.

Income Taxes.  The provision  for income taxes  increased  $62,015 for the three
months  ended March 31, 1999  compared  with the prior year.  The  increase is a
result of a higher state income tax rate for the current year.

                                       17
<PAGE>

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

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


Item 2.  Changes in Securities

         Not applicable.


Item 3.  Defaults Upon Senior Securities

         Not applicable.


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

          The Company held an annual  meeting on January 27, 1999.  The election
          of three  directors was brought before the security  holders for vote.
          The  following   three   directors  were  nominated  and  elected  for
          three-year terms:

                                            Vote For               Vote Withheld
         Gerald V. Brown                    8,686,072                     25,814
         J. Gillis Hannigan                 8,683,852                     28,034
         Dianne E. Spires                   8,684,766                     27,120

          The  following  directors  continue  in office  for  their  respective
          remaining terms:  Rodney N. Murray (two-year term),  Bernard Z. Agrons
          (two-year term),  Timothy A. Bailey  (one-year term),  James D. Bocchi
          (one-year term), and William C. Dalton (one-year term).

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

Item 5.  Other Information

         Not applicable.

Item 6.  Exhibits and Reports on Form 8-K

         a)  Not applicable.

         b) No Current  Reports on Form 8-K were filed during the quarter ended
         March 31, 1999.

 


                                       18
<PAGE>

                                                    SIGNATURES


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

                                                     KLAMATH FIRST BANCORP, INC.

Date:    May 14, 1999                      By:      /s/ Gerald V. Brown
                                                  ---------------------------
                                                  Gerald V. Brown, President and
                                                  Chief Executive Officer

 
Date:    May 14, 1999                      By:      /s/ Marshall Jay Alexander
                                                   ---------------------------
                                                   Marshall Jay Alexander, 
                                                   Senior Vice President
                                                   and Chief Financial Officer

 



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