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, 2003

                                       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)                                                I.D. 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 .

     Indicate by check mark whether the Registrant is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2).      YES X    NO

     As  of  July 31,  2003,   there  were  issued  6,980,635  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 SUBSIDIARIES

                                TABLE OF CONTENTS

Part I.  Financial Information
-------  ----------------------
Item 1.  Unaudited Financial Statements                                   Page
                                                                       -------
         Condensed Consolidated Balance Sheets
         (As of June 30, 2003 and September 30, 2002)                        3

         Condensed Consolidated Statements of Earnings
         (For the three months and nine months ended June 30, 2003
          and 2002)                                                          4

         Condensed Consolidated Statements of
         Shareholders' Equity (For the year ended September 30, 2002
         and for the nine months ended June 30, 2003)                        5

         Condensed Consolidated Statements of Cash Flows
         (For the nine months ended June 30, 2003 and 2002)              6 - 7

         Notes to Condensed Consolidated Financial Statements           8 - 14

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                           15 - 21

Item 3.  Quantitative and Qualitative Disclosures about Market Risk    21 - 22

Item 4.  Controls and Procedures                                            22

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

Item 1.  Legal Proceedings                                                  23

Item 2.  Changes in Securities                                              23

Item 3.  Defaults Upon Senior Securities                                    23

Item 4.  Submission of Matters to a Vote of Security Holders                23

Item 5.  Other Information                                                  23

Item 6.  Exhibits and Reports on Form 8-K                                   23

Signatures                                                                  24











                                        2
<PAGE>


                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                   AS OF JUNE 30, 2003 AND SEPTEMBER 30, 2002
                                   (Unaudited)
<TABLE>
<CAPTION>



                                                                             June 30, 2003  September 30, 2002
ASSETS ..................................................................   --------------- ------------------

<S>                                                                         <C>                <C>
Cash and due from banks .................................................   $    36,114,808    $    38,444,500
Interest bearing deposits with banks ....................................         7,836,815          5,762,373
Federal funds sold and securities purchased under agreements to resell ..        15,037,318          1,584,540
                                                                            ---------------    ---------------
   Total cash and cash equivalents ......................................        58,988,941         45,791,413

Investment securities available for sale, at fair value
  (amortized cost: $138,551,669 and $119,940,845) .......................       141,347,393        119,542,052
Mortgage backed and related securities available for sale, at fair
  value (amortized cost: $584,903,979 and $640,304,722) .................       591,057,674        650,796,164
Loans receivable, net ...................................................       555,286,779        607,464,660
Real estate owned and repossessed assets ................................           538,517            758,663
Premises and equipment, net .............................................        23,495,936         23,410,847
Stock in Federal Home Loan Bank of Seattle, at cost .....................        14,151,600         13,510,400
Accrued interest receivable .............................................         6,821,214          8,177,014
Deferred income taxes ...................................................           832,316               --
Bank-owned life insurance ...............................................        15,343,680               --
Core deposit intangible, net.............................................        14,689,794         17,426,074
Goodwill ................................................................        22,872,915         22,872,915
Other assets ............................................................         4,460,373          3,745,151
                                                                            ---------------    ---------------
   Total assets .........................................................   $ 1,449,887,132    $ 1,513,495,353
                                                                            ===============    ===============

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
  Deposit liabilities ...................................................   $ 1,081,010,099    $ 1,142,005,997
  Accrued interest on deposit liabilities ...............................           667,684            721,810
  Advances from borrowers for taxes and insurance .......................         2,404,532          5,105,955
  Advances from Federal Home Loan Bank of Seattle .......................       208,000,000        205,250,000
  Short term borrowings .................................................                --          1,700,000
  Accrued interest on borrowings ........................................           874,895            820,975
  Pension liabilities ...................................................           801,201            842,272
  Deferred income taxes .................................................                --          1,466,556
  Other liabilities .....................................................         7,346,892          8,438,245
                                                                            ---------------    ---------------
    Total liabilities ...................................................     1,301,105,303      1,366,351,810
                                                                            ---------------    ---------------
 Mandatorily redeemable preferred securities issued by subsidiary .......        27,304,957         27,205,507
                                                                            ---------------    ---------------
 Commitments and contingent liabilities

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, 2003 - 6,980,635 issued, 6,633,655 outstanding
   September 30, 2002 - 6,744,040 issued, 6,366,546 outstanding .........            69,806             67,440
  Additional paid-in capital ............................................        33,831,688         30,282,059
  Retained earnings-substantially restricted ............................        86,183,123         87,265,334
  Unearned shares issued to ESOP ........................................        (2,201,142)        (2,935,130)
  Unearned shares issued to MRDP ........................................          (829,352)          (999,111)
  Accumulated other comprehensive income, net of tax ....................         4,422,749          6,257,444
                                                                            ---------------    ---------------
    Total shareholders' equity ..........................................       121,476,872        119,938,036
                                                                            ---------------    ---------------
    Total liabilities and shareholders' equity ..........................   $ 1,449,887,132    $ 1,513,495,353
                                                                            ===============    ===============

<FN>

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

                                        3
<PAGE>


                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                       Three            Three           Nine           Nine
                                                                Months Ended     Months Ended   Months Ended   Months Ended
                                                                    June 30,         June 30,       June 30,       June 30,
                                                                        2003             2002           2003           2002
                                                               --------------    ------------   ------------   ------------
INTEREST INCOME
<S>                                                             <C>              <C>            <C>            <C>
Loans receivable .............................................   $ 10,438,010    $ 12,618,019   $ 33,151,836   $ 39,907,688
Mortgage backed and related securities .......................      5,211,697       6,742,373     16,254,475     19,683,948
Investment securities ........................................      1,599,654       2,024,664      4,643,795      6,272,989
Federal funds sold ...........................................         31,390          63,912        107,341        367,474
Interest bearing deposits ....................................         66,336          81,474        187,858        214,789
                                                                 ------------    ------------   ------------   ------------
Total interest income ........................................     17,347,087      21,530,442     54,345,305     66,446,888
                                                                 ------------    ------------   ------------   ------------

INTEREST EXPENSE
Deposit liabilities ..........................................      4,144,909       6,794,895     14,393,344     23,552,181
FHLB advances ................................................      2,655,945       2,382,310      7,933,167      7,175,680
Other ........................................................         18,643          31,317         71,445         96,278
                                                                 ------------    ------------   ------------   ------------
Total interest expense .......................................      6,819,497       9,208,522     22,397,956     30,824,139
                                                                 ------------    ------------   ------------   ------------
Net interest income ..........................................     10,527,590      12,321,920     31,947,349     35,622,749

Provision for loan losses ....................................           --               --            --          156,000

                                                                 ------------    ------------   ------------   ------------
Net interest income after provision for
loan losses ..................................................     10,527,590      12,321,920     31,947,349     35,466,749
                                                                 ------------    ------------   ------------   ------------

NON-INTEREST INCOME
Fees and service charges on deposit accounts .................      1,622,549       1,261,713      4,724,932      3,589,813
Other fees and service charges ...............................      1,053,614         679,244      2,692,305      2,140,676
Gain on sale of investments ..................................        572,621         435,315      1,457,140        554,416
Gain on sale of real estate owned ............................         20,171          13,400         36,892         25,852
Brokerage and annuity commissions ............................        603,069         275,677      1,511,539        818,580
Gain on sale of mortgage loans ...............................        613,530         305,014      1,630,258        768,445
Income on bank-owned life insurance ..........................        206,208              --        343,680             --
Other income .................................................        160,887          84,097        573,361        359,590
                                                                 ------------    ------------   ------------   ------------
Total non-interest income ....................................      4,852,649       3,054,460     12,970,107      8,257,372
                                                                 ------------    ------------   ------------   ------------
NON-INTEREST EXPENSE
Compensation, employee benefits and related expense ..........      6,404,912       5,724,543     18,487,587     16,623,684
Occupancy expense ............................................      1,344,722       1,214,810      3,920,814      3,576,596
Data processing expense ......................................        397,229         382,571      1,090,336      1,162,289
Insurance premium expense ....................................         44,142          49,700        138,746        133,458
Loss on sale of investments ..................................        497,160           2,538        901,599          2,538
Impairment loss on investment securities .....................      3,530,005              --      3,530,005             --
Amortization of intangible assets ............................        912,094       1,382,205      2,736,281      4,138,475
Mandatorily redeemable preferred securities expense ..........        394,907         418,500      1,229,348        964,989
Other expense ................................................      3,884,016       3,228,903     10,791,188     10,327,467
                                                                 ------------    ------------   ------------   ------------
Total non-interest expense ...................................     17,409,187      12,403,770     42,825,904     36,929,496
                                                                 ------------    ------------   ------------   ------------

Earnings (loss) before income taxes ..........................     (2,028,948)      2,972,610      2,091,552      6,794,625

Provision (benefit) for income tax ...........................       (667,311)      1,044,375        605,868      2,374,176
                                                                 ------------    ------------   ------------   ------------

Net earnings (loss) ..........................................   ($ 1,361,637)   $  1,928,235   $  1,485,684   $  4,420,449
                                                                 ============    ============   ============   ============

Earnings (loss) per common share - basic .....................       ($  0.20)       $   0.30       $   0.23       $   0.69
Earnings (loss) per common share - fully diluted .............       ($  0.20)       $   0.30       $   0.22       $   0.68
Weighted average common shares outstanding - basic ...........      6,645,230       6,398,027      6,508,796      6,418,168
Weighted average common shares outstanding - with dilution ...      6,795,457       6,500,451      6,641,995      6,467,611
<FN>

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

                                        4
<PAGE>


                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
  FOR THE YEAR ENDED SEPTEMBER 30, 2002 AND THE NINE MONTHS ENDED JUNE 30, 2003
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                  Unearned     Unearned   Accumulated
                                    Common    Common   Additional                   shares       shares         other         Total
                                     stock     stock      paid-in    Retained       issued       issued comprehensive  shareholders'
                                    shares    amount      capital    earnings      to ESOP      to MRDP  income(loss)        equity
                                ----------  --------  ----------- -----------  -----------  -----------   -----------  ------------
<S>                              <C>        <C>       <C>         <C>          <C>          <C>           <C>          <C>
Balance at October 1, 2001..     6,561,461  $ 70,607  $33,926,796 $83,816,307  ($3,913,510) ($1,298,859)  $ 1,539,564  $114,140,905

Cash dividends ..............         --          --          --   (3,339,749)          --          --            --     (3,339,749)

Stock repurchased and
   retired ..................     (345,986)   (3,460)  (4,747,387)        --            --          --            --     (4,750,847)

ESOP contribution ...........       97,865        --      410,593         --       978,380          --            --      1,388,973

MRDP contribution ...........       23,847        --       11,511         --            --      299,748           --        311,259

Exercise of stock options ...       29,359       293      369,295         --            --           --           --        369,588

Tax benefit of stock options            --        --      311,251         --            --           --           --        311,251
                                ----------  --------   ----------  ----------  ------------  -----------   ----------   -----------
                                 6,366,546    67,440   30,282,059  80,476,558   (2,935,130)     (999,111)   1,539,564   108,431,380

Comprehensive income
  Net earnings ..............                                       6,788,776                                             6,788,776
  Other comprehensive income:
    Unrealized gain on
    securities, net of tax
    and reclassification
    adjustment ...... (1)                                                                                   4,717,880     4,717,880
                                                                                                                         ----------
    Total comprehensive
    income ..................                                                                                            11,506,656
                                ----------  --------   ----------  ----------  ------------  -----------   ----------   -----------
Balance at
  September 30, 2002 ........    6,366,546    67,440   30,282,059  87,265,334   (2,935,130)     (999,111)   6,257,444   119,938,036

Cash dividends ..............         --         --           --   (2,567,895)          --            --           --    (2,567,895)

Stock repurchased and retired      (11,659)     (117)    (189,022)         --           --            --           --      (189,139)

ESOP contribution ...........         --          --      475,445          --      733,988            --           --     1,209,433

MRDP contribution ...........       30,514        --        4,541          --           --       169,759           --       174,300

Exercise of stock options ...      248,254     2,483    3,258,665          --           --            --           --     3,261,148
                                ----------  --------   ----------  ----------  ------------  -----------   ----------   -----------
                                 6,633,655    69,806   33,831,688  84,697,439   (2,201,142)     (829,352)   6,257,444   121,825,883

Comprehensive loss
  Net earnings ..............                                       1,485,684                                             1,485,684
  Other comprehensive loss:
    Unrealized loss on
    securities, net of tax
    and reclassification
    adjustment ........(2)                                                                                 (1,834,695)   (1,834,695)
                                                                                                                         -----------
    Total comprehensive loss                                                                                               (349,011)
                                ----------  --------   ----------  ----------  ------------  -----------   ----------- -------------
Balance at June 30, 2003 ....    6,633,655  $ 69,806  $33,831,688 $86,183,123  ($ 2,201,142) ($  829,352)  $ 4,422,749 $121,476,872
                                ==========  ========  =========== ===========  ============  ===========   =========== =============
<FN>

(1)  Net unrealized  holding gain on securities of $5,095,497 (net of $3,123,389
     tax expense) less reclassification adjustment for net gains included in net
     earnings of $377,617 (net of $231,443 tax expense).

(2)  Net unrealized  holding gain on securities of $588,784 (net of $360,876 tax
     expense) less  reclassification  adjustment  for net gains  included in net
     earnings of $2,423,479 (net of $1,485,358 tax expense).


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


                                        5
<PAGE>
<TABLE>
<CAPTION>


                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE NINE MONTHS ENDED JUNE 30, 2003 AND 2002
                                   (Unaudited)


                                                                Nine Months Ended          Nine Months Ended
                                                                         June 30,                   June 30,
                                                                             2003                       2002
                                                                   --------------             --------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                 <C>                        <C>
    Net earnings ................................................   $   1,485,684              $   4,420,449

ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
    Depreciation and amortization ...............................       4,387,813                  5,758,925
    Deferred income taxes .......................................      (1,174,382)                        --
    Provision for loan losses ...................................              --                    156,000
    Compensation expense related to ESOP benefit ................       1,209,433                  1,017,319
    Compensation expense related to MRDP Trust ..................         174,300                    236,166
    Net amortization of premiums paid on
      investment and mortgage backed and related securities .....       6,642,463                  2,569,112
    Decrease in deferred loan fees, net of amortization .........        (722,608)                  (424,509)
    Net gain on sale of real estate owned and
      premises and equipment ....................................         (38,341)                   (25,081)
    Net gain on sale of investment and mortgage
      backed and related securities .............................        (555,542)                  (551,879)
     Impairment loss on investment securities ...................       3,530,005                         --
    FHLB stock dividend .........................................        (641,200)                  (611,200)
CHANGES IN ASSETS AND LIABILITIES
    Accrued interest receivable .................................       1,355,800                    513,033
    Other assets ................................................      (1,065,943)                 3,055,005
    Accrued interest on deposit liabilities .....................         (54,126)                  (799,885)
    Accrued interest on borrowings ..............................          53,920                    (27,267)
    Pension liabilities .........................................         (41,071)                    97,947
    Other liabilities ...........................................        (901,791)                    36,600
                                                                    -------------              -------------
Net cash provided by operating activities .......................      13,644,414                 15,420,735
                                                                    -------------              -------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from maturity of investment securities
      available for sale ........................................      17,597,000                    135,000
    Principal repayments received on mortgage
       backed and related securities held to maturity ...........             --                  1,236,726
    Principal repayments received on mortgage
       backed and related securities available for sale .........     246,526,265                 75,803,542
    Principal repayments received on loans ......................     283,578,625                209,974,397
    Loan originations ...........................................    (305,666,953)              (202,059,567)
    Loans purchased .............................................      (3,875,225)                (1,683,363)
    Loans sold ..................................................      78,677,341                 47,345,825
    Purchase of investment securities available
      for sale ..................................................     (50,284,450)               (19,389,464)
    Purchase of mortgage backed and related
      securities available for sale .............................    (413,414,054)              (207,107,177)
    Proceeds from sale of investment securities
      available for sale ........................................      10,228,950                 31,437,125
    Proceeds from sale of mortgage backed and related
      securities available for sale .............................     214,703,334                 16,507,507
    Proceeds from sale of real estate owned and
      premises and equipment ....................................         445,180                    653,574
    Purchases of premises and equipment .........................      (1,729,580)                (8,247,398)
    Purchase of bank-owned life insurance .......................     (15,000,000)                        --
                                                                    -------------              -------------
Net cash provided by (used in) investing activities .............      61,786,433                (55,393,273)
                                                                    -------------              -------------
                                                                       Continued
</TABLE>






                                        6
<PAGE>
<TABLE>
<CAPTION>


                                                                        KLAMATH FIRST BANCORP, INC. AND SUBSIDIARIES
                                                                      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                     FOR THE NINE MONTHS ENDED JUNE 30, 2003 AND 2002
                                                                                        (Unaudited)
                                                                                        (Continued)

                                                                Nine Months Ended          Nine Months Ended
                                                                         June 30,                   June 30,
                                                                             2003                       2002
                                                                   --------------             --------------

CASH FLOWS FROM FINANCING ACTIVITIES
<S>                                                                 <C>                        <C>
    Decrease in deposit liabilities,
      net of withdrawals ........................................   ($ 60,995,898)             ($  4,235,368)
    Proceeds from FHLB advances .................................      69,800,000                 52,700,000
    Repayments of FHLB advances .................................     (67,050,000)               (62,700,000)
    Proceeds from short term borrowings .........................       3,300,000                    200,000
    Repayments of short term borrowings .........................      (5,000,000)                  (200,000)
    Issuance of mandatorily redeemable preferred securities, net               --                 12,618,674
    Stock repurchase and retirement .............................        (189,139)                (4,009,757)
    Stock options exercised .....................................       3,261,148                    369,588
    Advances from borrowers for taxes and insurance .............      (2,701,423)                (2,615,141)
    Dividends paid ..............................................      (2,658,007)                (2,730,317)
                                                                    -------------              -------------
Net cash used in financing activities ...........................     (62,233,319)               (10,602,321)
                                                                    -------------              -------------
Net increase (decrease) in cash and cash
  equivalents ...................................................      13,197,528                (50,574,859)

Cash and cash equivalents at beginning
  of period .....................................................      45,791,413                118,388,566

                                                                    -------------              -------------
Cash and cash equivalents at end of period ......................   $  58,988,941              $  67,813,707
                                                                    =============              =============
SUPPLEMENTAL SCHEDULE OF INTEREST AND
INCOME
  TAXES PAID
    Interest paid ...............................................   $  22,398,162              $  31,651,291
    Income taxes paid ...........................................       1,775,000                  1,455,000

SUPPLEMENTAL SCHEDULE OF NONCASH
  INVESTING AND FINANCING ACTIVITIES
    Net unrealized gain (loss) on securities
      available for sale, net of tax ............................   ($  1,834,695)             $   1,818,143
    Dividends declared and accrued in other
      liabilities ...............................................         907,483                    891,430

<FN>

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


                                        7
<PAGE>


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

1. BASIS OF PRESENTATION

In the opinion of Management,  the accompanying unaudited condensed consolidated
financial  statements contain all adjustments  necessary for a fair presentation
of Klamath First Bancorp,  Inc.'s (the "Company") financial condition as of June
30, 2003 and  September 30, 2002,  the results of  operations  for the three and
nine  months  ended June 30,  2003 and 2002 and cash  flows for the nine  months
ended June 30, 2003 and 2002. Certain information and note disclosures  normally
included  in  financial   statements  prepared  in  accordance  with  accounting
principles  generally accepted in the United States of America have been omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
These condensed  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,  2003 are not  necessarily  indicative  of the
results which may be expected for the entire fiscal year.

2. COMPREHENSIVE INCOME (LOSS)

For the three months  ended June 30, 2003,  the  Company's  total  comprehensive
income was $1.3 million compared to $7.5 million for the three months ended June
30, 2002.  Total  comprehensive  income for the three months ended June 30, 2003
was comprised of net loss of $1.4 million and other comprehensive income of $2.7
million,  net of tax. Total comprehensive income for the three months ended June
30, 2002 was  comprised of net earnings of $1.9 million and other  comprehensive
income of $5.6 million, net of tax.

For the nine months ended June 30, 2003, the Company's total  comprehensive loss
was $349,011 compared to total comprehensive income of $6.2 million for the nine
months ended June 30, 2002. Total  comprehensive  loss for the nine months ended
June  30,  2003  was  comprised  of net  earnings  of  $1.5  million  and  other
comprehensive loss of $1.8 million,  net of tax. Total comprehensive  income for
the nine  months  ended June 30,  2002 was  comprised  of net  earnings  of $4.4
million and other comprehensive income of $1.8 million, net of tax.

The  significant   fluctuations  noted  in  total  comprehensive  income  (loss)
comparing  the periods ended June 30, 2003 and 2002 resulted from changes in the
market value of investment and mortgage-backed securities available for sale and
the recognition of impairment losses on investment securities in June 2003 which
reduced net earnings.

3. INVESTMENTS - OTHER THAN TEMPORARY IMPAIRMENT

As part of the strategy to manage  interest rate risk, the Company had purchased
floating  rate  preferred  stock  issued  by  the  Federal   National   Mortgage
Association (FNMA) and the Federal Home Loan Mortgage  Corporation  (FHLMC).  As
prevailing  interest rates have declined,  the market value of these  securities
has also decreased. In the quarter ended June 30, 2003, the Company recognized a
$3.5 million  non-cash pre-tax charge to operations for these  investments.  The
Company  accounts for these securities in accordance with Statement of Financial
Accounting  Standards  ("SFAS")  No. 115.  Under SFAS No. 115, if the decline in
fair market  value below cost is  determined  to  be  other-than-temporary,  the
unrealized loss must be realized as expense on the statement of earnings.  Based
on a number of factors,  including  the magnitude of the decline in market value
and length of time the market  value had been below cost,  management  concluded
that  the   decline  in  value  was   other-than-temporary.   Accordingly,   the
other-than-temporary  impairment was recognized in the statement of earnings, in
the amount of  $916,484  for FNMA  preferred  stock and $2.6  million  for FHLMC
preferred stock. A corresponding  reduction in unrealized losses, net of tax, in
shareholders' equity was recorded totaling $2.2 million.


                                        8
<PAGE>


4. ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses is summarized as follows:


<TABLE>
<CAPTION>

                                      Nine Months Ended            Year Ended
                                               June 30,         September 30,
                                                   2003                  2002
                                          --------------        --------------
<S>                                          <C>                    <C>
Balance, beginning of period                 $7,375,812             $7,950,680
Charge-offs                                    (366,765)              (747,092)
Recoveries                                       49,859                 16,224
Additions                                          --                  156,000
                                          --------------         -------------
Balance, end of period                        $7,058,906            $7,375,812
                                          ==============         =============
</TABLE>

At June 30,  2003  and  2002,  impaired  loans  totaled  $506,844  and  $59,000,
respectively.  Specifically  allocated loan loss reserves related to these loans
totaled zero for both periods.  The average investment in impaired loans for the
three  months and nine months  ended June 30, 2003 was  $506,844  and  $520,941,
respectively.  The average investment in impaired loans for the three months and
nine months ended June 30, 2002 was $59,000 and $19,667, respectively.

5. GOODWILL AND INTANGIBLE ASSETS

On October 1, 2002, the Company  adopted SFAS No. 147,  Acquisitions  of Certain
Financial Institutions, which requires certain intangible assets to be accounted
for under the provisions of SFAS No. 141,  Business  Combinations,  and SFAS No.
142, Goodwill and Other Intangible Assets, which statements were also adopted on
October  1,  2002.  In  accordance  with  these  standards,  goodwill  and other
intangible  assets with  indefinite  lives are no  longer  being  amortized  but
instead will be tested for impairment at least  annually.  Upon adoption of SFAS
No. 147, $22.9 million of intangible assets related to prior branch acquisitions
were  reclassified to goodwill and amortization of these assets ceased.  Expense
related to  amortization  of goodwill  totaled  $1.2 million for the nine months
ended June 30,  2002.  A similar  expense is not being  recorded  in fiscal year
2003.  Core  deposit  intangibles  will  continue to be  amortized  based on the
estimated  lives of the  underlying  deposits.  The following  table  summarizes
selected information about intangible assets:

<TABLE>
<CAPTION>

                                            Gross Carrying Amount                         Accumulated Amortization
-----------------------------------   -----------------------------------             -----------------------------------
Intangible assets                     June 30, 2003    September 30, 2002             June 30, 2003    September 30, 2002
carrying value
                                      -----------------------------------             -----------------------------------
<S>                                   <C>                   <C>                       <C>                   <C>
Core deposit intangible ...........   $  28,376,467         $  28,376,467             $  13,686,673         $  10,950,393
Mortgage servicing rights (included       1,820,823             1,820,823                 1,081,056               604,424
in Other Assets)
                                      -------------   -------------------             -------------   -------------------
Total .............................   $  30,197,290         $  30,197,290             $  14,767,729         $  11,554,817
                                      =============   ===================             =============   ===================
</TABLE>

<TABLE>
<CAPTION>

                                               Amortization expense                  Amortization expense
                                        Three months ended June 30,            Nine months ended June 30,
                                      -----------------------------         -----------------------------
Intangible assets amortization                 2003            2002                  2003            2002
-----------------------------------   -------------   -------------         -------------   -------------
<S>                                   <C>             <C>                   <C>             <C>
Core deposit intangible ...........   $     912,094   $     973,761         $   2,736,281   $   2,921,282
Mortgage servicing rights .........         159,323          80,463               476,632         277,111
                                      -------------   -------------         -------------   -------------
Total .............................   $   1,071,417   $   1,054,224         $   3,212,913   $   3,198,393
                                      =============   =============         =============   =============
</TABLE>






                                                                             9

<PAGE>




Estimated amortization expense for core deposit intangible and MSR:

For year ended 9/30/2004                                          $3,611,358
For year ended 9/30/2005                                          $3,306,403
For year ended 9/30/2006                                          $1,648,489
For year ended 9/30/2007                                          $1,527,914
For year ended 9/30/2008                                          $1,258,079



                                                                             10

<PAGE>



6. ADVANCES FROM FEDERAL HOME LOAN BANK

Borrowings at June 30, 2003  consisted of four short term advances  totaling $26
million and 14 long term  advances  totaling  $182 million from the Federal Home
Loan  Bank  of  Seattle  ("FHLB").  The  Company  has  pledged   mortgage-backed
securities and collateralized mortgage obligations issued by the U.S. Government
and agencies thereof as collateral for the borrowings.

Scheduled maturities of advances from the FHLB were as follows:

<TABLE>
<CAPTION>

                                                 June 30, 2003                                     September 30, 2002
                              ------------  ------------------  -----------------    --------------  --------------  ---------------
                                                      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           $ 26,000,000       1.61% - 2.14%              2.02%       $31,250,000   1.91% - 2.20%            2.09%
After one but within
five years                      24,000,000       2.22% - 3.58%              3.02%        16,000,000   2.48% - 3.58%            3.06%
After five but within
ten years                      158,000,000       4.77% - 7.05%              5.86%       158,000,000   4.77% - 7.05%            5.86%
                            --------------                                           --------------
                              $208,000,000                                             $205,250,000
                            ==============                                           ==============
</TABLE>

7. SHORT TERM BORROWINGS

During the quarter  ended June 30,  2003,  the Company paid off the $1.7 million
balance of short term borrowings  which were  outstanding at September 30, 2002.
The  borrowings  consisted  of one line of  credit  at Key Bank  that was  fully
disbursed.  This line carried interest based on one-month LIBOR plus 1.95% which
was 5.58% at September 30, 2002.

8. COMMITMENTS AND CONTINGENCIES

In the  ordinary  course  of  business,  the  Company  has  various  outstanding
commitments  and  contingencies  that  are  not  reflected  in the  accompanying
consolidated  financial statements.  In addition,  the Company is a defendant in
certain claims and legal actions arising in the ordinary course of business.  In
the opinion of management,  after consultation with legal counsel,  the ultimate
disposition  of these matters is not expected to have a material  adverse effect
on the consolidated financial condition of the Company.

9. EARNINGS (LOSS) PER SHARE

Earnings  (loss) per share ("EPS") is computed in accordance  with SFAS No. 128,
"Earnings per Share." Shares held by the Company's Employee Stock Ownership Plan
("ESOP")  that are committed for release are  considered  contingently  issuable
shares and are included in the computation of basic 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 or loss.




                                       11

<PAGE>

<TABLE>
<CAPTION>


                                                                            For the Three Months Ended
                                                                         June 30,                   June 30,
                                                                             2003                       2002
                                                                    -------------              -------------
<S>                                                                     <C>                        <C>
Weighted average common shares outstanding - basic ..............       6,645,230                  6,398,027
                                                                    -------------              -------------
Effect of Dilutive Securities on Number of Shares:
Stock options ...................................................         149,059                     94,584
MRDP shares .....................................................           1,168                      7,840
                                                                    -------------              -------------
Total Dilutive Securities .......................................         150,227                    102,424
                                                                    -------------              -------------
Weighted average common shares outstanding - with dilution ......       6,795,457                  6,500,451
                                                                    =============              =============
</TABLE>
<TABLE>
<CAPTION>

                                                                             For the Nine Months Ended
                                                                         June 30,                   June 30,
                                                                             2003                       2002
                                                                    -------------              -------------
<S>                                                                     <C>                        <C>
Weighted average common shares outstanding - basic ..............       6,508,796                  6,418,168
                                                                    -------------              -------------
Effect of Dilutive Securities on Number of Shares:
Stock options ...................................................         131,365                     41,496
MRDP shares .....................................................           1,834                      7,947
                                                                    -------------              -------------
Total Dilutive Securities .......................................         133,199                     49,443
                                                                    -------------              -------------
Weighted average common shares outstanding-with dilution ........       6,641,995                  6,467,611
                                                                    =============              =============

</TABLE>


                                                                             12
<PAGE>


10. 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, 2003:

<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, 2003                ------------     -----           ------------     -----          ------------     -----
<S>                                <C>              <C>              <C>              <C>            <C>             <C>
 Total Capital:                    $103,287,781     13.0%            $63,787,456      8.0%           $79,734,320     10.0%
  (To Risk Weighted Assets)
 Tier I Capital:                     96,328,367     12.3%                    N/A       N/A            47,840,592      6.0%
  (To Risk Weighted Assets)
 Tier I Capital:                     96,328,367      6.9%             55,895,617      4.0%            69,869,522      5.0%
  (To Total Assets)
 Tangible Capital:                   96,328,367      6.9%             20,960,856      1.5%                   N/A       N/A
  (To Tangible Assets)
</TABLE>


11.         RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December  2002,  the FASB issued SFAS No.  148,  Accounting  for  Stock-Based
Compensation  -  Transition  and  Disclosure.  SFAS No. 148 amends SFAS No. 123,
Accounting  for  Stock-Based  Compensation  to  provide  alternative  methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation. This statement is effective
for fiscal years ending after December 15, 2002. Management does not expect that
the  provisions of SFAS No. 148 will impact the Company's  results of operations
or financial condition.

In April  2003,  the FASB issued SFAS No. 149,  Amendment  of  Statement  133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends SFAS No. 133,
Accounting  for  Derivative  Instruments  and  Hedging  Activities,  for certain
decisions made by the FASB and to incorporate  clarifications  of the definition
of a  derivative.  This  statement is effective  for  contracts  entered into or
modified after June 30, 2003.  Management does not expect that the provisions of
SFAS No.  149 will  impact the  Company's  results of  operations  or  financial
condition.

In May 2003,  the FASB  issued SFAS No. 150,  Accounting  for Certain  Financial
Instruments with  Characteristics of both Liabilities and Equity. This statement
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with  characteristics  of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability or an asset in some  circumstances.  This  statement is effective
for the  Company  for the  quarter  ended  September  30,  2003.  The Company is
currently  evaluating  the impact that  adoption of SFAS No. 150 may have on the
results of operations or financial condition.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest  Entities." This  interpretation  requires a variable interest
entity  to be  consolidated  by the  primary  beneficiary  of that  entity.  The
consolidation  requirements of this interpretation apply immediately to variable
interest entities created after January 31, 2003, and apply to existing entities
for the first  fiscal  year or interim  period  beginning  after June 15,  2003.
Certain disclosure  requirements apply in all financial  statements issued after
January  31,  2003,   regardless  of  when  the  variable  interest  entity  was
established.   The   Company  is   currently   evaluating   the  impact  of  the
interpretation on its financial  statements and, except for the possible effects
related to the  issuance  of its trust  preferred  securities,  and any  related
regulatory  effects,  does not currently believe the interpretation  will have a
material  impact on the results of  operations  or  financial  condition  of the
Company.





                                       13
<PAGE>


12.         SUBSEQUENT EVENT

On July 15, 2003,  the Company  announced  that it had entered into an Agreement
and Plan of Merger ("the Sterling Merger") with Sterling Financial  Corporation,
Inc., a Washington corporation ("Sterling"). The Company will be merged with and
into Sterling,  with Sterling being the surviving corporation in the merger. The
Company's  wholly-owned  subsidiary,  Klamath  First  Federal  Savings  and Loan
Association,  will be merged with and into Sterling's  wholly-owned  subsidiary,
Sterling   Savings  Bank,  with  Sterling   Savings  Bank  being  the  surviving
institution.

Under the terms of the Sterling  Merger,  each share of Klamath  First  Bancorp,
Inc.  common stock will be converted  into 0.77 shares of Sterling  common stock
subject to certain conditions. Based upon the closing price for Sterling on July
14, 2003 of $26.55 per share,  the  consideration  is  equivalent  to $20.44 per
share of Klamath First Bancorp, Inc. common stock. The merger will be structured
as a  tax-free  reorganization  and is  expected  to be  completed  in the first
calendar quarter of 2004.

                                       14
<PAGE>


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

Special Note Regarding Forward-Looking Statements

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations and other portions of this report  contain  certain  "forward-looking
statements"  concerning  the future  operations of Klamath First  Bancorp,  Inc.
Management  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 the Company of the protections of such safe
harbor  with  respect  to all  "forward-looking  statements"  contained  in this
quarterly report. We have used  "forward-looking  statements" to describe future
plans  and  strategies,  including  our  expectations  of the  Company's  future
financial  results.  Management'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  which  could  affect  the
collectibility  of loan balances,  the ability to increase  non-interest  income
through  expansion  of new lines of  business,  the  ability  of the  Company to
control costs and expenses,  competitive products and pricing,  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.

Critical Accounting Policies and Estimates

The "Management's  Discussion and Analysis of Financial Condition and Results of
Operations,"  as well as disclosures  included  elsewhere in this Form 10-Q, are
based upon our consolidated  financial  statements,  which have been prepared in
accordance with accounting principles generally accepted in the United States of
America.  The preparation of these financial  statements  requires management to
make  estimates  and  judgments  that  affect  the  reported  amounts of assets,
liabilities,  revenues and expenses.  On an ongoing basis,  management evaluates
the  estimates  used,  including  the adequacy of the allowance for loan losses,
impairment of intangible assets, and contingencies and litigation. Estimates are
based upon historical experience,  current economic conditions and other factors
that management  considers  reasonable under the circumstances.  These estimates
result in judgments regarding the carrying values of assets and liabilities when
these values are not readily  available  from other sources as well as assessing
and  identifying  the accounting  treatments of commitments  and  contingencies.
Actual results may differ from these estimates  under  different  assumptions or
conditions.   The  following  critical  accounting  policies  involve  the  more
significant   judgments  and   assumptions   used  in  the  preparation  of  the
consolidated financial statements.

The allowance for loan losses is established to absorb known and inherent losses
attributable to loans outstanding and related off-balance sheet commitments. The
adequacy  of the  allowance  is  monitored  on an ongoing  basis and is based on
management's  evaluation of numerous factors.  These factors include the quality
of the current loan portfolio,  the trend in the loan  portfolio's risk ratings,
current economic conditions,  loan concentrations,  loan growth rates,  past-due
and  non-performing  trends,  evaluation  of  specific  loss  estimates  for all
significant  problem loans,  historical  charge-off and recovery  experience and
other  pertinent  information.  Approximately  70 percent of the Company's  loan
portfolio is secured by real estate, both residential and commercial properties,
and a  significant  depreciation  in real  estate  values in Oregon  would cause
management to increase the allowance for loan and lease losses.

Retained mortgage servicing rights are measured by allocating the carrying value
of the loans  between the assets sold and the  interest  retained,  based on the
relative  fair  value  at the  date of the  sale.  The fair  market  values  are
determined  using a discounted cash flow model.  Mortgage  servicing  assets are
amortized over the expected life of the loan and are evaluated  periodically for
impairment.  The expected life of the loan can vary from management's  estimates
due to prepayments by borrowers. Prepayments in excess of management's estimates
would negatively impact the recorded value of the mortgage servicing rights. The
value of the mortgage  servicing rights is also dependent upon the discount rate
used in the model. Management reviews

                                       15
<PAGE>


this rate on an ongoing  basis  based on current  market  rates.  A  significant
increase  in the  discount  rate would  negatively  impact the value of mortgage
servicing rights.

The extended period of low interest rates has resulted in prepayment of mortgage
loans,  including those related to the mortgage  servicing  rights.  The Company
monitors the value of the mortgage  servicing rights and recognizes  impairment,
when necessary, on a quarterly basis. While management expects that there may be
additional impairment of the value of mortgage servicing rights in the continued
low interest rate environment,  the net balance of mortgage  servicing rights at
June 30, 2003 was less than $1 million,  limiting the amount of impairment which
can be  experienced.  As of June 30, 2003, the Company had recorded  $332,306 of
impairment related to mortgage servicing rights.

At June 30, 2003 the Company had  approximately  $37.6  million in core  deposit
intangibles and goodwill as a result of business combinations. Periodic analysis
of the fair  value  of  recorded  core  deposit  intangibles  and  goodwill  for
impairment will involve a substantial  amount of judgment,  as will establishing
and monitoring  estimated  lives of other  amortizable  intangible  assets.  The
Company is party to various legal proceedings.  These matters have a high degree
of uncertainty associated with them. There can be no assurance that the ultimate
outcome will not differ  materially from our assessment of them.  There can also
be no assurance that all matters that may be brought  against us are known to us
at any point in time.

General

The  Company,  an Oregon  corporation,  is the unitary  savings and loan holding
company  for  the  Association.   At  June  30,  2003,  the  Company  had  total
consolidated  assets of $1.45 billion and consolidated  shareholders'  equity of
$121.5  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.

The   Association  is  a  progressive,   community-oriented   savings  and  loan
association  that focuses on customer  service  within its primary  market area.
Accordingly,  the Association is primarily  engaged in attracting  deposits from
the general  public  through  its  offices  and using those and other  available
sources of funds to originate  permanent  residential  one- to four-family  real
estate  loans and loans on  commercial  real  estate,  multi-family  residential
properties,  and to consumers and small businesses within its market area. While
the Association has historically  emphasized fixed rate mortgage lending, it has
been  diversifying  its loan  portfolio by focusing on increasing  the number of
originations of commercial real estate loans,  multi-family  residential  loans,
residential  construction loans, commercial and industrial loans, business loans
and  non-mortgage  consumer  loans.  A  significant  portion of these newer loan
products  carry  adjustable  rates,  higher  yields,  or shorter  terms than the
traditional  fixed rate mortgages.  This lending strategy is designed to enhance
earnings,  reduce  interest  rate risk,  and  provide a more  complete  range of
financial  services  to  customers  and  the  local  communities  served  by the
Association.  The  acquisition  of  13  branches  from  Washington  Mutual  Bank
("WAMU"),  which was completed in September 2002,  moved the Company strongly in
this direction.

On July 15, 2003,  the Company  announced  that it had entered into an Agreement
and Plan of Merger ("the Sterling Merger") with Sterling Financial  Corporation,
Inc., a Washington corporation ("Sterling"). The Company will be merged with and
into Sterling,  with Sterling being the surviving corporation in the merger. The
Company's  wholly-owned  subsidiary,  Klamath  First  Federal  Savings  and Loan
Association,  will be merged with and into Sterling's  wholly-owned  subsidiary,
Sterling   Savings  Bank,  with  Sterling   Savings  Bank  being  the  surviving
institution.

Under the terms of the Sterling  Merger,  each share of Klamath  First  Bancorp,
Inc.  common stock will be converted  into 0.77 shares of Sterling  common stock
subject to certain conditions. Based upon the closing price for Sterling on July
14, 2003 of $26.55 per share,  the  consideration  is  equivalent  to $20.44 per
share of Klamath First

                                       16
<PAGE>


Bancorp,  Inc.  common  stock.  The  merger  will be  structured  as a  tax-free
reorganization  and is expected to be completed in the first calendar quarter of
2004.

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.  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 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 59 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.

Liquidity and Capital Resources

The Company generates cash through operating  activities,  primarily as a result
of net income.  The  adjustments to reconcile net income to net cash provided by
operations during the periods presented  consisted primarily of net amortization
of premiums paid on investment and mortgage-backed securities,  depreciation and
amortization,  stock-based  compensation expense,  amortization of deferred loan
origination  fees,  net  gain on the  sale  of  investment  and  mortgage-backed
securities,  increases or decreases in various escrow  accounts and increases or
decreases in other assets and liabilities. The primary investing activity of the
Association is lending,  which is funded with cash provided from  operations and
financing  activities,  as well as proceeds from amortization and prepayments on
existing  loans and  mortgage  backed and  related  securities.  For  additional
information   about  cash  flows  from  operating,   financing,   and  investing
activities, see the Condensed Consolidated Statements of Cash Flows.

OTS capital  regulations  require the Association to have: (i) tangible  capital
equal to 1.5% of  adjusted  total  assets,  (ii) core  capital  equal to 4.0% of
adjusted  total  assets,  and (iii) total  risk-based  capital  equal to 8.0% of
risk-weighted  assets.  At June 30, 2003, the Association was in compliance with
all regulatory  capital  requirements  effective as of such date, with tangible,
core and risk-based capital of 6.9%, 6.9% and 13.0%,  respectively.  See Note 10
of the Notes to Condensed Consolidated Financial Statements.

Changes in Financial Condition

At June 30, 2003, the consolidated  assets of the Company totaled $1.45 billion,
consistent with $1.51 billion at September 30, 2002.

Net loans  receivable  decreased by $52.2 million to $555.3  million at June 30,
2003,  from $607.5  million at September 30, 2002. The decrease is primarily the
result of prepayments of existing single family mortgage loans and sale of $78.7
million in single family mortgage loans originated  during the nine months ended
June 30, 2003.

Investment  securities  increased $21.8 million, or 18.2% from $119.5 million at
September  30, 2002 to $141.3  million at June 30, 2003.  This  increase was the
combined  result of  purchase  of $50.3  million  in  securities,  sale of $10.2
million  of  investment  securities  available  for sale and  $17.6  million  of
maturities. During the

                                       17
<PAGE>


current fiscal year, the Company has  restructured  the investment  portfolio by
selling  securities whose balances had paid down to the extent that they were no
longer highly liquid.

During the nine months ended June 30, 2003, the Company purchased $413.4 million
of mortgage-backed  securities ("MBS"),  primarily agency-backed  collateralized
mortgage obligations  ("CMO's") of short duration.  In addition,  $246.5 million
was received in principal repayments on MBS and $214.7 million of MBS were sold,
resulting  in a  decrease  of $59.7  million  for MBS  from  $650.8  million  at
September 30, 2002 to $591.1 million at June 30, 2003.

In December  2002,  the  Company  purchased  $15.0  million in  bank-owned  life
insurance.  This  insurance  is  used to fund  director  benefits,  supplemental
executive  retirement  benefits,  and provide life  insurance to key  employees.
Income on bank-owned life insurance  totaled  $343,680 for the nine months ended
June 30,  2003,  with a  corresponding  $303,625  of expense to fund the benefit
liability.  Certain  employment  contracts  were amended in connection  with the
establishment of the supplemental executive retirement benefits.  Structuring of
the  supplemental  benefits  began  in  December  2002 and the  agreements  were
finalized during the quarter ended June 30, 2003.

Other assets increased by $715,222,  or19.1%, from $3.7 million at September 30,
2002 to $4.5 million at June 30, 2003. The increase relates  primarily to a $1.2
million  receivable for investments sold in June and not settled until July 2003
and a $480,683  increase in investment in low income housing tax credits.  These
increases were  partially  offset by a $628,199  decrease in mortgage  servicing
rights, resulting from amortization and valuation adjustments.

Deposit  liabilities  decreased  $61.0  million,  or 5.3% from $1.14  billion at
September 30, 2002 to $1.08 billion at June 30, 2003. The decrease  reflects the
Company's  pricing  strategy  in  light of its  high  liquidity  and low loan to
deposit ratio.

Advances from borrowers for taxes and insurance decreased $2.7 million from $5.1
million at September 30, 2002 to $2.4 million at June 30, 2003.  The decrease is
the result of using the  reserves to pay the  required  real estate taxes due on
the  Association's  loans  receivable  portfolio in November.  In addition,  the
general  decrease in the balance of mortgage loans for which taxes and insurance
are  collected  has  resulted in a more modest  increase in the balance over the
period since November than was noted in previous years.

The Company's total borrowings decreased by $1.1 million from September 30, 2002
to June 30, 2003 due to pay off of short term  borrowings by the holding company
which  were  partially   offset  by  additional  long  term  borrowings  by  the
Association.

Total shareholders'  equity increased $1.5 million, or 1.3%, from $119.9 million
at September 30, 2002 to $121.5 million at June 30, 2003.  This increase was the
combined  result of earnings of $1.5 million and $3.3  million in proceeds  from
exercise  of stock  options,  partially  offset by a $1.8  million  decrease  in
unrealized gain on securities  available for sale and payment of $2.6 million in
common stock dividends for the nine month period.

Results of Operations

            Comparison of Nine Months Ended June 30, 2003 and 2002

General. Record low interest rates were evident in decreases in interest income,
interest  expense,  and net  interest  income for the nine months ended June 30,
2003  compared  to the same  period a year  ago.  Non-interest  income  improved
significantly  over the  prior  year.  Non-interest  expense  was  significantly
increased   due   to   the   recording   of   investment   losses   related   to
"other-than-temporary" impairment of preferred stock.

Interest  Income.  Interest  income  decreased  by $12.1  million,  showing  the
combined  effects of a $9.1 million  decrease in average interest earning assets
and a 121 basis point  decrease  in yield from June 30,  2002 to June 30,  2003.
Interest income on loans receivable decreased $6.7 million, or 16.9%, from $39.9
million  for the nine months  ended June 30, 2002 to $33.2  million for the same
period of 2003. This

                                       18
<PAGE>


decrease was a result of the $77.9 million  decrease in average loans receivable
due to prepayments  from  refinancing  activity and sales of new loan production
combined  with a 47 basis point  decrease in average yield on loans for the nine
months  ended June 30, 2003  compared to the same  period  ended June 30,  2002.
Interest  rate  spread  (the  difference  between  the rates  earned on interest
earning  assets and the rates paid on interest  bearing  liabilities)  decreased
from 3.03% to 2.72% and interest  rate margin (net  interest  income  divided by
average  interest  earning  assets)  decreased from 3.47% to 3.09% comparing the
nine month periods.

Interest Expense.  Total interest expense decreased $8.4 million,  or 27.3%, for
the nine months  ended June 30, 2003  compared to the same period in 2002.  That
decrease  was the  combined  result of a $9.2  million  decrease  in interest on
deposit  liabilities  and a  $757,487  increase  in  interest  expense  on  FHLB
advances. The average balance of deposit liabilities decreased $57.1 million and
the average  rate paid on deposits  decreased by 108 basis points from 3.07% for
the nine months  ended June 30, 2002 to 1.99% for the same period ended June 30,
2003.  The average  balance of  borrowings  increased  $39.3 million from $169.3
million for the nine months  ended June 30, 2002 to $208.6  million for the same
period ended June 30, 2003. In addition,  the rate paid on borrowings  decreased
by 59 basis  points from 5.69% for the nine months  ended June 30, 2002 to 5.10%
for the same period in 2003.

Provision for Loan Losses.  There was no provision for loan losses  recorded for
the nine months ended June 30, 2003.  During that period there were  $366,765 of
charge offs and $49,859 of  recoveries.  This  compares to a $156,000  provision
with  $249,417 of charge offs and $42,406 of  recoveries  during the nine months
ended June 30, 2002. Based on analysis of the loan portfolio,  it was determined
that the  allowance  for loan losses was adequate at June 30, 2003,  without the
need for additional reserves, thus no provision for loan losses was recorded. In
accordance  with  contemporary  regulatory  guidance on the  allowance  for loan
losses,  the  Company is  required  to  estimate  reserves  based on the current
inherent  risk in the  portfolio.  Because  payoffs  have reduced the 1-4 family
mortgage  portfolio  and  historical  loan losses have been low,  the  allowance
indicated has not required additional provision.

At June 30,  2003,  the  allowance  for loan  losses  was equal to 408% of total
non-performing  assets  compared to 718% at June 30,  2002.  The decrease in the
coverage ratio was the combined result of an increase in real estate owned (thus
an increase in non-performing assets) and a lower total allowance.  The ratio of
non-performing  assets to total assets  increased from 0.07% at June 30, 2002 to
0.12% at June 30, 2003.  The increase  primarily  relates to an increase in real
estate owned, which is included in non-performing assets.

Non-Interest Income.  Non-interest income continues to improve,  increasing $4.7
million, or 57.1%, to $13.0 million for the nine months ended June 30, 2003 from
$8.3  million  for the nine  months  ended June 30,  2002.  Income from fees and
service charges on deposit accounts  increased by $1.1 million,  or 31.6%,  from
$3.6  million  for the nine months  ended June 30, 2002 to $4.7  million for the
nine months ended June 30, 2003. While overall deposits have decreased, checking
accounts,  money market and savings  accounts,  which  generate fees and service
charges,  have increased during fiscal 2003. These increases in account balances
coupled with increases in some fees and service  charges have boosted income for
the year.  Brokerage and annuity  commissions  also showed  significant  growth,
increasing  by 84.7% from  $818,580  for the nine months  ended June 30, 2002 to
$1.5  million  for the same  period  this year.  This  growth is a result of the
expanded  presence of Klamath First  Financial  Services,  making  brokerage and
investment  services  available  to customers  in more of the  Company's  market
areas.  With the high loan volume and subsequent  sale of single family mortgage
loan  production,  gain on sale of  mortgage  loans has  increased  112.2%  from
$768,445 for the nine months ended June 30, 2002 to $1.6 million for the current
nine month period.  A $1.5 million gain on sale of investments  was recorded for
the nine months ended June 30, 2003  compared to $554,416  gain on sale recorded
in the prior year.  Both gain on sale of  securities  and loss on sale, as noted
below,  are part of the ongoing  management  of the Company's  large  investment
portfolio to reposition the portfolio for higher long term yields in the current
interest rate  environment.  We expect  similar sales  activity in the future as
part of the active management of investment assets.

                                       19
<PAGE>


Non-Interest Expense. The Company's continued efforts to control expenses can be
seen in the  comparison  of  non-interest  expense  items  year-to-date  for the
periods  ended  June  30,  2003 and  2002.  Most  categories  of  expenses  were
consistent  from  year to year and total  non-interest  expense,  excluding  the
impairment  loss  on  investment   securities,   increased  by  a  modest  6.4%.
Compensation, employee benefits and related expense showed an 11.2% increase due
to increases  in number of employees  and salary  increases.  Occupancy  expense
increased 9.6% due to the increase in number of branch  locations and additional
space leased for back office  operations.  The Company recorded $901,599 in loss
on sale of investments as part of the repositioning of the investment  portfolio
as noted above.  During June 2003,  the Company  also  recognized a $3.5 million
loss related to  reductions in market value on certain  floating rate  preferred
stocks that were considered to be "other-than-temporary". See further discussion
in  Note  3  of  the  Notes  to  Condensed  Consolidated  Financial  Statements.
Amortization of intangible assets decreased as adoption of SFAS No. 142 and SFAS
No. 147 required the Company to cease  amortization  of goodwill  related to the
WAMU branch acquisition beginning October 1, 2002.  Amortization of core deposit
intangibles  arising from the branch acquisitions from Wells Fargo and WAMU will
continue to be recorded.

Income Taxes. The provision for income taxes decreased $1.8 million for the nine
months ended June 30, 2003 compared with the prior year.  Income taxes decreased
due to the lower income level year-to-date. The effective tax rate was 29.0% for
the nine  months  ended June 30,  2003  compared to 34.9% for the same period of
2002.  As part of the overall plan to reduce the  effective tax rate and enhance
the level of investments  qualifying under the Community  Reinvestment  Act, the
Company  has  increased  investment  in  low  income  housing  tax  credits  and
tax-exempt municipal securities. The decrease in effective tax rate is primarily
due to these activities and the effect of tax benefits related to employee stock
plans.

            Comparison of Three Months Ended June 30, 2003 and 2002

General.  As noted for the nine months ended June 30, 2003,  declining  interest
rates resulted in decreasing net interest  income,  interest income and interest
expense for the quarter  ended June 30, 2003 compared to the same quarter a year
ago.

Interest Income.  The Company  recorded  interest income of $17.3 million in the
third  quarter  ended June 30, 2003, a decrease of 19.4% from $21.5  million for
the same period last year.  Average  interest  earning assets  remained  stable,
decreasing by $1.3 million,  less than 0.1%.  Yield decreased from 6.32% for the
quarter  ended  June 30,  2002 to 5.15% for the same  period of 2003.  Yields on
loans, MBS, investment securities, and cash balances decreased as rates declined
over the year.  Also,  funds  generated from loan and MBS  prepayments are being
reinvested at the lower prevailing rates, further reducing yields.

Interest Expense.  Total interest expense decreased 25.9%, from $9.2 million for
the quarter  ended June 30, 2002 to $6.8 million for the quarter  ended June 30,
2003.  Average  deposits  decreased by $69.9 million  comparing the three months
ended June 30, 2002 to 2003, while the average interest paid on interest-bearing
deposits  decreased  93 basis  points from 2.68% for the three months ended June
30, 2002 to 1.75% for the same period ended June 30, 2003.  The average  balance
of borrowings increased $42.0 million,  from $168.1 million for the three months
ended June 30, 2002 to $210.1  million for the same period  ended June 30, 2003,
while the rate paid on borrowings decreased by 62 basis points,  resulting in an
increase in interest on  borrowings  of $273,236 for the three months ended June
30, 2003 compared with the same period ended June 30, 2002.

Provision for Loan Losses. The provision for loan losses was zero and there were
$180,353 of charge offs, and $5,218 of recoveries  during the three months ended
June 30, 2003  compared  to a zero  provision  with  $176,433 of charge offs and
$3,759 of recoveries  during the three months ended June 30, 2002.  Based on the
Company's  analysis of the allowance for loan losses,  the allowance is adequate
to cover anticipated  losses in the loan portfolio and additional  provision for
losses was not considered necessary. .

Non-Interest Income.  Non-interest income continues to improve,  increasing $1.8
million, or 58.9%, to $4.9

                                                                              20
<PAGE>


million for the three months ended June 30, 2003 from $3.1 million for the three
months  ended June 30,  2002.  Income from fees and  service  charges on deposit
accounts showed growth of 28.6% from $1.3 million for the quarter ended June 30,
2002 to $1.6  million for the current  quarter.  Other fees and service  charges
increased  by 55.1% from  $679,244  for the quarter  ended June 30, 2002 to $1.1
million  for the same  quarter  this year.  Brokerage  and  annuity  commissions
increased by 118.8% to $603,069 and profit on sale of mortgage  loans  increased
101.2% to $613,530 comparing June 30, 2003 to the same period in 2002.

Non-Interest Expense.  Non-interest expense increased $5.0 million, or 40.4%, to
$17.4  million for the three months ended June 30, 2003,  from $12.4  million in
the  comparable  period in 2002.  Compensation,  employee  benefits  and related
expense  showed an increase of 11.9% which  reflects  the  addition of staff and
salary  increases.  New branch locations and additional back office space pushed
occupancy  expense  up by 10.7%  compared  to the same  quarter a year ago.  The
Company  recorded  $497,160  in  loss  on  sale  of  investments  as part of the
repositioning of the investment portfolio. As noted previously, the Company also
recognized a $3.5 million loss related to  reductions in market value on certain
floating    rate    preferred    stocks    that    were    considered    to   be
"other-than-temporary".  See  further  discussion  in  Note  3 of the  Notes  to
Condensed  Consolidated   Financial  Statements.   Amortization  of  intangibles
decreased  as the adoption of SFAS No. 142 and SFAS No. 147 required the Company
to  cease  amortization  of  goodwill  related  to the WAMU  branch  acquisition
beginning October 1, 2002. Amortization of core deposit intangibles arising from
the branch  acquisitions from Wells Fargo and WAMU will continue to be recorded.
Other  expense  increased by $655,113,  or 20.3%,  primarily due to increases in
telephone  expense,  license and maintenance  fees and expenses  related to sold
mortgage loans.

Income  Taxes.  The provision  for income taxes  decreased  $1.7 million for the
quarter ended June 30, 2003 as the Company recorded a tax benefit of $667,311 in
connection  with the loss for the quarter.  The effective tax rate was 32.9% for
the quarter  ended June 30, 2003  compared to 35.1% for the same period of 2002.
As part of the  overall  plan to reduce the  effective  tax rate and enhance the
level of  investments  qualifying  under the  Community  Reinvestment  Act,  the
Company  has  increased  investment  in  low  income  housing  tax  credits  and
tax-exempt municipal securities. The decrease in effective tax rate is primarily
due to these activities and the effect of tax benefits related to employee stock
plans.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The  Company's  financial  performance  is  affected  by the  success of the fee
generating products it offers to its customers,  the credit quality of its loans
and securities,  and the extent to which its earnings are affected by changes in
interest  rates.  Credit risk is the risk that  borrowers  will become unable to
repay their debts as they become due. The Company relies on strict  underwriting
standards,  loan review,  and an adequate  allowance for loan losses to mitigate
its credit risk.

Interest  rate risk is the risk of loss in  principal  value and risk of earning
less net interest income due to changes in interest rates.  Put simply,  savings
institutions solicit deposits and lend the funds they receive to borrowers.  The
difference  between the rate paid on deposits and the rate  received on loans is
the interest rate spread. If the rates paid on deposits change, or reprice, with
the same timing and magnitude as the rates change on the loans, there is perfect
matching of interest  rate changes and thus,  no change in interest  rate spread
and no interest rate risk. In  actuality,  interest  rates on deposits and other
liabilities  do not reprice at the same time and/or with the same  magnitude  as
those on loans,  investments  and other  interest-earning  assets.  For example,
historically the Company primarily originated  fixed-rate  residential loans for
its portfolio.  Because fixed-rate loans do not reprice until payoff and because
the  majority of  residential  loans have terms of 15 to 30 years  (with  actual
expected lives of six years or less), the interest rate  characteristics  of the
loan portfolio do not exactly match the Company's liabilities,  which consist of
deposits with maturities  ranging up to ten years and borrowings which mature or
reprice in ten  years or less. When interest rates change, this mismatch creates
changes in interest rate spread that influence net interest income and result in
interest rate risk.


                                       21
<PAGE>


Changes  in  interest  rates  also  impact  the  fair  value of the  assets  and
liabilities  on the  Company's  balance  sheet,  expressed as changes in the net
portfolio value ("NPV"). NPV represents the market value of portfolio equity and
is equal to the market  value of assets  minus the market  value of  liabilities
plus or minus the estimated market value of off-balance sheet  instruments.  For
example,  the market  value of  investment  securities  and loans is impacted by
changes  in  interest  rates.  Fixed-rate  loans  and  investments  held  in the
Company's  portfolio  increase  in  market  value  if  interest  rates  decline.
Conversely,  the market value of  fixed-rate  portfolio  assets  decreases in an
increasing  interest rate environment.  It is generally assumed that assets with
adjustable  rates are less subject to market value  changes due to interest rate
fluctuations based on the premise that their rates will adjust with the market.

There has not been any material change in the market risk disclosures  contained
in the Company's  Annual Report on Form 10-K for the fiscal year ended September
30, 2002.


Item 4. Controls and Procedures

(a)  Evaluation  of  Disclosure  Controls and  Procedures:  An evaluation of the
Company's  disclosure  controls and  procedures  (as defined in Section  13(a) -
15(e) and  15d-15(e)  of the  Securities  Exchange  Act of 1934 (the "Act")) was
carried out under the  supervision and with the  participation  of the Company's
Chief Executive  Officer,  Chief Financial  Officer and several other members of
the  Company's  senior  management  as of the end of the period  covered by this
quarterly  report.  Based on such  evaluation,  the  Company's  Chief  Executive
Officer  and  Chief  Financial  Officer  concluded  that,  as of the end of such
period,  the  Company's  disclosure  controls and  procedures  are  effective in
ensuring  that the  information  required to be  disclosed by the Company in the
reports it files or submits under the Act is (i) accumulated and communicated to
the  Company's  management  (including  the Chief  Executive  Officer  and Chief
Financial Officer) in a timely manner, and (ii) recorded, processed,  summarized
and reported within the time periods specified in the SEC's rules and forms.

(b) Changes in Internal  Control Over Financial  Reporting:  There have not been
any changes in the  Company's  internal  control over  financial  reporting  (as
defined in Section  13(a) - 15(f) and  15d-15(f)  of the Act) during the quarter
ended June 30, 2003 that have materially  affected,  or are reasonably likely to
materially affect, the Company's internal control over financial reporting.



                                       22
<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) Exhibits
               Exhibit 10(a) Employment agreement for Kermit Houser
               Exhibit 10(b) First amendment to employment agreement for
                                  Kermit Houser
               Exhibit 10(c) Salary continuation agreement for Kermit
                                  Houser
               Exhibit 10(d) Employment agreement for sample executive
                    Including  Marshall  J.  Alexander,  Ben A.  Gay,  Frank  X.
                    Hernandez,  Craig  M  Moore,  James  E.  Essany,  Walter  F.
                    Dodrill, Nina G. Drake, and Jeffrey D. Schlenker

               Exhibit 10(e) First amendment to employment agreement for
                                  sample executive
                    Including  Marshall  J.  Alexander,  Ben A.  Gay,  Frank  X.
                    Hernandez,  Craig  M  Moore,  James  E.  Essany,  Walter  F.
                    Dodrill, Nina G. Drake, and Jeffrey D. Schlenker

               Exhibit 10(f) Salary continuation agreement for sample
                                  executive
                    Including  Marshall  J.  Alexander,  Ben A.  Gay,  Frank  X.
                    Hernandez,  Craig  M  Moore,  James  E.  Essany,  Walter  F.
                    Dodrill, Nina G. Drake, and Jeffrey D. Schlenker

               Exhibit 10(g) First amendment to salary continuation agreement
                                  for sample executive
                    Including  Frank  X.  Hernandez,  Craig M  Moore,  James  E.
                    Essany,  Walter F.  Dodrill,  Nina G. Drake,  and Jeffrey D.
                    Schlenker

               Exhibit 10(h) Director fee continuation agreement for sample
                                director
                    Including  Rodney N. Murray,  Bernard Z. Agrons,  Timothy A.
                    Bailey,  James D.  Bocchi,  Donald N.  Bauhofer,  William C.
                    Dalton, Dianne E. Spires

               Exhibit 31  Section 302 Certification
               Exhibit 32  Section 906 Certification

            b) During the quarter ended June 30, 2003,  the Company filed the
               following Current Reports on Form 8-K:

                Form 8-K dated April 24, 2003 announcing the issuance of the
                    Company's  press release for the second  quarter ended March
                    31, 2003.

                    Form 8-K dated  April 25,  2003  correcting  an error in the
                    press release for the second quarter ended March 31, 2003.


                                       23
<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 14, 2003                         By:   /s/ Kermit K. Houser
                                              ----------------------------------
                                              Kermit K. Houser, President and
                                              Chief Executive Officer


Date:  August 14, 2003                         By:   /s/ Marshall Jay Alexander
                                                     ---------------------------
                                               Marshall Jay Alexander, Executive
                                               Vice President and
                                               Chief Financial Officer
























                                       24
<PAGE>
                                                                   Exhibit 10(a)
                              EMPLOYMENT AGREEMENT
                         Amended and Restated May 9, 2003

     THIS  AGREEMENT is made  effective  as of November  15, 2002,  by and among
KLAMATH  FIRST FEDERAL  SAVINGS AND LOAN  ASSOCIATION  ("Association"),  Klamath
Falls, Oregon;  KLAMATH FIRST BANCORP, INC. ("Company"),  an Oregon corporation;
and KERMIT HOUSER ("Executive").

     WHEREAS, Association and Company wish to assure for themselves the services
of Executive for the period provided in the Agreement; and

     WHEREAS, Executive is willing to serve in the employ of the Association and
Company on a full-time basis for said period.

     NOW, THEREFORE,  in consideration of the mutual covenants contained herein,
and upon the other terms and conditions  hereinafter provided, the parties agree
as follows:

1.   POSITION.

     During the term of Executive's employment under this Agreement, Association
agrees to employ  Executive and Executive agrees to serve as President and Chief
Executive Officer of Association and Company.  During said term,  Executive also
agrees to serve, if elected, without separate compensation, as an officer and/or
director of company and/or Association or any subsidiary or affiliate of Company
or Association.

2.   DUTIES.

     As  President  and Chief  Executive  Officer of  Association  and  Company,
Executive  shall have such powers and duties and  appropriate to that office (a)
as may be provided by the articles  and/or bylaws of Association and Company and
(b) as  determined  by the board of directors  of  Association  and Company,  or
either of them,  respectively,  from time to time.  Executive shall at all times
discharge  his  duties  in  consultation  with and  under  the  supervision  and
direction of the board of directors of Association  and Company.  Subject to the
provisions of the Agreement, Executive's duties may be changed from time to time
during the term of the Agreement, and Executive's place of work may be relocated
at the sole discretion of the board of directors of Association and Company,  or
either of them.

3.   TERM.

     The term of Executive's employment under the Agreement shall commence as of
the date first  written  above and shall  continue  for a period of two years at
which time it will end,  unless sooner  termination in accordance with the terms
of this  Agreement  or  extended  as  provided  below.  Beginning  on the  first
anniversary  date of the  Agreement,  and  continuing at each  anniversary  date
thereafter,  the board of directors  of  Association  and Company,  or either of
them, may in their sole  discretion  extend  Executive's  employment  under this
Agreement  for  an  additional  one-year  period.  Prior  to  the  extension  of
Executive's  employment  under this  Agreement as provided in this Section,  the
board of directors of Association  and Company,  or either of them, may in their
sole  discretion  conduct a performance  evaluation of Executive for purposes of
determining  whether to extend this  Agreement.  Executive  may  terminate  this
Agreement at any time,  after providing at least sixty (60) days' written notice
to the chair of the board of directors of Association and Company,  or either of
them.  In such  event,  Executive  will remain  subject to the post  termination
provisions set forth in this Agreement.

4.   OUTSIDE ACTIVITIES.

     During the term of his employment  under this  Agreement,  Executive  shall
devote all his  business  time,  attention,  skill,  and efforts to the faithful
performance  of his duties  under this  Agreement.  Executive  shall  obtain the
consent of the board of directors of  Association  and Company before he engages
in any other professional or business activities that may require an appreciable
portion of Executive's  time or effort to the detriment of the  Association's or
Company's business or that of their affiliates.

5.   COMPENSATION AND FRINGE BENEFITS.

     (a)  As  compensation  for services  under the Agreement,  Association  and
          Company  shall pay to  Executive an annual  salary of  $200,000,  less
          legally  required   deductions  and  withholdings   ("Basic  Salary").
          Executive's  Base Salary shall be payable in accordance with the usual
          payroll  practices  of  Association  and  Company.  During the term of
          Executive's  employment under this Agreement,  Executive's Base Salary
          shall be  reviewed  at least  annually  by the board of  directors  of
          Association  and Company and the board of directors of Association and
          Company,  or  either  of them,  may in their  sole  discretion  adjust
          Executive's Base Salary from time to time.

     (b)  In  addition to the Base Salary  provided in Section  5(a),  Executive
          shall be eligible to receive an annual bonus payable within 30 days of
          each  anniversary date of this Agreement.  Executive's  entitlement to
          and the  specific  amount  of any such  annual  bonus  shall be at the
          discretion  of the board of directors of  Association  and company (or
          their duly convened committee),  based upon and subject to Executive's
          satisfactorily   meeting   certain  goals  and   objectives   mutually
          established  and  agreed to in writing  by the board of  directors  of
          Association and Company and Executive.

     (c)  In  addition  to the  compensation  described  above,  to  the  extent
          otherwise  eligible,   Executive  shall  be  entitled  to  receive  or
          participate  in, at not cost to  Executive,  all such other  benefits,
          including  without  limitation  pension  plans,  employee stock option
          plans,  and health and welfare  plans as may from time to time be made
          available to other senior  management  employees  of  Association  and
          Company.

6.   EXPENSES.

          Association and Company shall  reimburse  Executive for all reasonable
     and  necessary  expenses  incurred by  Executive in carrying out his duties
     under this  Agreement.  Executive  shall present to Association and company
     from time to time an itemized  account of such expenses in such form as may
     be required by Association and Company, or either of them.

7.   PAYMENTS TO EXECUTIVE UPON EVENT OF TERMINATION.

     (a)  For purposes of the Agreement, "Event of Termination" means any one or
          more of the  following:  (i)  termination of Association or Company of
          Executive's  employment under this Agreement for any reason other than
          a Change in Control (as defined in Section 8), disability (as provided
          in  Section  9),  or  death  (as  provided  in  Section  10);  or (ii)
          termination  by  Executive  of  Executive's   employment   under  this
          Agreement in accordance  with the  provisions of this Section upon (A)
          unless  consented to the Executive,  a material  change in Executive's
          title or job duties,  which change would cause Executive's position to
          become one of materially lesser  responsibility  from the position and
          duties  described  in  Sections  1 and  2,  or the  assignment  to the
          Executive of any duties or responsibilities substantially inconsistent
          with the Executive's  title or duties,  or a relocation of Executive's
          principal place of work by more than 35 miles from its location at the
          effective date of the Agreement; (B) unless consented to by Executive,
          any reduction in Executive's  Base Salary;  (C) the liquidation of the
          dissolution of Association and Company;  or (D) any material breach of
          the Agreement by Association  and Company.  Upon the occurrence of any
          event described in clauses (A), (B), (C), or (D) of clause (ii) above,
          Executive  shall have the right to elect to terminate  his  employment
          under this  Agreement upon not less than 60 days' prior written notice
          to the board of directors  of  Association  and  Company,  and each of
          them,  given  within a  reasonable  period of time not to exceed  four
          calendar months after the event giving rise to said right to elect.

     (b)  Upon  termination  of employment  following  occurrence of an Event of
          Termination  other  than for Cause or for  Neglect  (as  described  in
          Sections  11 or 12  hereof),  or upon  failure  to extend  Executive's
          employment for additional  one-year  period,  Association  and Company
          shall pay to  Executive  a sum equal to (i) the amount of  Executive's
          Base Salary (at the then current  rate) for the  remainder of the term
          of this  Agreement  following  the Date of  Termination  (as described
          below),  and (ii) the value of any employer  contributions  that would
          have been made by Association  and Company on Executive's  behalf over
          the remaining term of Executive's  employment  under this Agreement to
          any retirement  plan  sponsored by  Association  and Company as of the
          Date of Termination (as defined  below);  provided,  however,  that if
          Association or Company is not in compliance  with its minimum  capital
          requirements of if such payment would cause Association's or Company's
          capital to be reduced  below its minimum  capital  requirements,  such
          payment shall not be made until such time as  Association  and Company
          are in capital compliance.  Additionally,  Executive shall be entitled
          to receive the stock option and grant described under Section 5(c) and
          5(d).  The payment  described  in this Section 7(b) shall be made in a
          single lump sum within 30 days of the Date of Termination.

8.   CHANGE OF CONTROL

     (a)  For  purposes  of the  Agreement,  a "Change in Control" of Company or
          Association  shall be deemed to occur if and when (a) an offeror other
          than  Company  purchases  shares of the  common  stock of  Company  or
          Association  pursuant to a tender or exchange  offer for such  shares,
          (b) any person (as such term is used in Sections 13(d) and 14(d)(2) of
          the  Securities  Exchange  Act of 1934) is or becomes  the  beneficial
          owner, directly or indirectly, of securities of Company or Association
          representing 25% or more of the combined voting power of the Company's
          then  outstanding  securities,  (c) the  membership  of the  board  of
          directors  of  Company  or  Association  changes  as the  result  of a
          contested  election,  such that  individuals who were directors at the
          beginning of any twenty-four month period do not constitute a majority
          of  the  board  of  directors  at  the  end  of  such  period,  or (d)
          shareholders   of   Company   or   Association   approve   a   merger,
          consolidation,  sale or  disposition  of all or  substantially  all of
          Company's or  Association's  assets,  or a plan of partial or complete
          liquidation.

     (b)  In the  event of a  Change  in  Control,  in lieu of  amounts  payable
          pursuant to Section 7(b),  Executive  shall be entitled to the payment
          provided in Section 8(c) upon his subsequent  involuntary  termination
          of employment at any time during the term of his employment under this
          Agreement,  unless such  termination is because of Executive's  death,
          disability  (as  provided  in Section  9), or for Cause (as defined in
          Section 11).

     (c)  Upon a Change in Control  followed by the  involuntary  termination of
          Executive's  employment as provided in Section 8(b),  Association  and
          Company  shall  pay  to  Executive  a sum  equal  to  (i)  2.00  times
          Executive's "base amount," within the meaning of Section 280G(b)(3) of
          the Internal Revenue Code of 1986, as amended ("Code"); (ii) his stock
          option and grant  described under Section 5(c) and 5(d); and (iii) the
          value of any  employer  contributions  that  would  have  been made by
          Association and Company on Executive's  behalf over the remaining term
          of Executive's  employment under this Agreement to any retirement plan
          sponsored by  Association  and Company as of the Date of  Termination.
          Such payment  shall be made in a single lump sum within 30 days of the
          Date of Termination.

     (d)  IRS Section 280G Issues.  If any portion of the amounts payable to the
          Executive  under this  Agreement,  either alone or together with other
          payments which the Executive has the right to receive from the Company
          or Association,  constitute  "excess  parachute  payments"  within the
          meaning of  Section  280G of the  Internal  Revenue  Code of 1986,  as
          amended  (the  "Code"),  that are subject to the excise tax imposed by
          Section 4999 of the Code (or similar tax and/or assessment), Executive
          shall be responsible for the payment of such excise tax and Company or
          Association (and their successor) shall be responsible for any loss of
          deductibility  related  thereto;  provided,  however,  that Company or
          Association  and Executive shall cooperate with each other and use all
          reasonable  efforts to  minimize to the fullest  extent  possible  the
          amount of excise tax  imposed by  Section  4999 of the Code.  If, at a
          later  date,  it is  determined  (pursuant  to  final  regulations  or
          published rulings of the Internal Revenue Service, final judgment of a
          court of  competent  jurisdiction,  or  otherwise)  that the amount of
          excise  taxes  payable by the  Executive  is  greater  than the amount
          initially so determined,  then the Executive shall pay an amount equal
          to the sum of such additional excise taxes and any interest, fines and
          penalties  resulting from such underpayment.  The determination of the
          amount  of any such  excise  taxes  shall  be made by the  independent
          accounting  firm  employed by the Company or  Association  immediately
          prior to the change in control  or such other  independent  accounting
          firm or advisor as may be mutually agreeable to Company or Association
          and Executive in the exercise of their reasonable good faith judgment.

9.   TERMINATION UPON DISABILITY OF EXECUTIVE.

     (a)  If Executive  shall become  disabled as defined in  Association's  and
          Company's then current disability plan (or, if no such plan is then in
          effect,  if Executive is  permanently  and totally  disabled  with the
          meaning of Code Section  22(e(3)) and unable to perform the  essential
          functions  of  his  position  even  with   reasonable   accommodation,
          Association and Company, or either of them, may terminate  Executive's
          employment  for  disability.   (b)  Upon  termination  of  Executive's
          employment  for  disability,  Association  and  Company  will  pay  to
          Executive,   as   disability   pay,  a  bi-weekly   payment  equal  to
          three-quarters  of  Executive's  bi-weekly  rate of base Salary on the
          Date of  Termination.  The  disability  payments shall commence on the
          Date of  Termination  and  will  end on the  earlier  of (i) the  date
          Executive  returns to employment with  Association  and Company;  (ii)
          Executive's employment by another employer;  (iii) Executive attaining
          age 65; (iv)  Executive's  death; or (v) the expiration of the term of
          Executive's  employment under this Agreement.  The disability payments
          shall also be reduced by the amount,  if any, paid to Executive  under
          any plan of Association and Company providing  disability  benefits to
          Executive.

10.  TERMINATION UPON DEATH OF EXECUTIVE.

          Upon the death of Executive  during the term of his  employment  under
     this Agreement,  this Agreement shall terminate immediately and Executive's
     Base Salary  pursuant to Section 5(a) shall be prorated  and payable  until
     the date of termination of this Agreement.

11.  TERMINATION FOR CAUSE.

          Association and Company, or either of them, may terminate  Executive's
     employment under this Agreement at any time for Cause. For purposes of this
     Agreement,  "Cause"  means  any  fraud  or  dishonesty  by  Executive;  the
     Executive's  willful  misconduct,  incompetence,  or intentional failure to
     perform  stated  duties;  any failure by or refusal of  Executive to comply
     with  any   instructions  or  directives  of  the  board  of  directors  of
     Association or Company,  or either of them, any breach of fiduciary duty by
     Executive;  willful  violation of any law or government  regulation  (other
     than misdemeanor  traffic  violations or similar  misdemeanor  offenses) by
     Executive;   any  other  willful  conduct  by  Executive  which  materially
     adversely  reflects or impacts on Association's or Company's  reputation or
     business;  or any  material  breach  of the  Agreement  by  Executive.  For
     purposes of this  Section,  no act,  or the failure to act, on  Executive's
     part shall be  "willful"  unless done,  or omitted to be done,  not in good
     faith and without  reasonable belief that the action or omission was in the
     best interest of the  Association or its  affiliates.  Notwithstanding  the
     foregoing,  Executive  shall not be deemed to have been terminated by Cause
     unless  and until  there  shall  have been  sent to  Executive  a copy of a
     resolution  duly  adopted  by  the  affirmative   vote  of  not  less  than
     three-fourths  of the board of directors  of  Association  and Company,  or
     either of them,  (after  reasonable  notice to Executive and an opportunity
     for  Executive,  together  with  counsel,  to be heard  before the board of
     directors  of  Association  and  Company),  finding  that in the good faith
     opinion of the board of directors  of  Association  and Company,  Executive
     engaged  in  conduct  justifying   termination  for  Cause  and  describing
     specifically the conduct. Executive shall not have the right to receive any
     compensation  or other  benefits  for any period after  termination  of his
     employment  for Cause.  Any stock  options  granted to Executive  under any
     stock option plan that have vested shall remain the property of  Executive,
     but any unvested  awards  granted  under any other  stocks  benefit plan of
     Association,  Company, or any subsidiary or affiliate thereof, shall become
     null and void effective upon  Executive's  receipt of Notice of Termination
     (as defined  below) for Cause and shall not be  exercisable by Executive at
     any time subsequent to such termination for Cause.

12.  TERMINATION FOR NEGLECT.

     The  Association and Company,  or either of them may terminate  Executive's
     employment  under this  Agreement at any time for Neglect.  For purposes of
     this  Agreement,  "Neglect" means the failure of Executive to give due care
     to stated duties or to comply with  instructions or directives of the Board
     of Directors  of the  Association  or Company or either of them,  but where
     such failure is not  determined to be willful or  intentional as defined in
     Section 11.  Termination for Neglect includes  termination as the result of
     any continuing or repeated  problems with  Executive's  job  performance or
     conduct after written notice  specifying  such problem with  performance or
     conduct,   and  where  such  continuing  and  repeated  problems  were  not
     determined  to be  willful or  intentional,  or where the  conduct  was not
     deemed to have a material  adverse  impact on the  Association  or Company.
     Notwithstanding  the foregoing,  Executive shall not be deemed to have been
     terminated  by  Neglect  unless  and until  there  shall  have been sent to
     Executive a copy of a resolution duly adopted by a majority of the Board of
     Directors of the Association and Company,  or either of them (excluding the
     Executive in counting the majority if the Executive is then on the board of
     directors,  and after reasonable notice to Executive and an opportunity for
     Executive to be heard before the board of  directors),  finding that in the
     good  faith  opinion  of the  board of  directors  of the  Association  and
     Company,  or  either  of them,  Executive  engaged  in  conduct  justifying
     termination for Neglect and describing specifically the conduct.  Executive
     shall  not have the right to  receive  any  salary or bonus for any  period
     after  termination  of employment for Neglect.  Executive  shall retain any
     vested  benefits in defined  benefit  plans,  defined  contribution  plans,
     supplemental  executive  retirement plans,  stock option plans,  restricted
     stock plans, or other such benefits, but shall forfeit any rights that have
     not vested.

13.  REQUIRED PROVISIONS.

     (a)  If  Executive  is  suspended   and/or   temporarily   prohibited  from
          participating in the conduct of Association's or Company's,  or either
          of their,  affairs by a notice served under Section  8(e)(3) or (g)(1)
          of the Federal  Deposit  Insurance  Act  ("FDIA"),  Association's  and
          Company's  obligations  under this Agreement  shall be suspended as of
          the date of service, unless stayed by appropriate proceedings.  If the
          charges in the notice  are  dismissed,  Association  and  Company,  or
          either of them,  may, in their  discretion,  (i) pay  Executive all or
          part of the compensation  withheld while its contract obligations were
          suspended  and  (ii)  reinstate  (in  whole  or in  part)  any  of its
          obligations that were suspended.

     (b)  If   Executive  is  removed   and/or   permanently   prohibited   from
          participating in the conduct of Association's or Company's,  or either
          of their,  affairs by an order issued under Section  8(e)(4) or (g)(1)
          of the FDIA, all  obligations  of  Association  and Company under this
          Agreement shall  terminate as of the effective date of the order,  but
          vested rights of the contracting parties shall not be affected.

     (c)  If  Association  or  Company is in  default  (as  defined in Section 3
          (x)(1) of the  FDIA),  all  obligations  under  this  Agreement  shall
          terminate  as of the date of  default,  but this  paragraph  shall not
          affect any vested rights of the parties.

     (d)  All obligations  under this Agreement  shall be terminated  (except to
          the extent  determined that continuation of the Agreement is necessary
          for the continued  operation of Association and Company,  or either of
          them):  (i) by the  Director  of the Office of the Thrift  Supervision
          (the  "Director")  or his or her  designee  at the  time  the  Federal
          Deposit  Insurance  Corporation  or the Resolution  Trust  Corporation
          enters into an agreement to provide  assistance to or on behalf of the
          Association or Company under the authority  contained in Section 13(c)
          of the FDIA;  or (ii) by the  Director,  or his or her designee at the
          time the Director or such designee  approves a  supervisory  merger to
          resolve  problems  related to operation of  Association  or Company or
          when Association and Company,  or either of them, is determined by the
          Director  to be in an unsafe or unsound  condition.  Any rights of the
          parties that have already  vested,  however,  shall not be affected by
          such action.

     (e)  Any  payments  made  to  Executive  pursuant  to  the  Agreement,   or
          otherwise, are subject to and conditioned upon compliance with Section
          18(k) of the FDIA and any regulations promulgated thereunder.

14.      NOTICE.

     (a)  Any  purported  termination  of  Executive's   employment  under  this
          Agreement  (except by reason of Executive's  death) by Association and
          Company,  or either of them, or by Executive  shall be communicated by
          Notice  of  Termination  to the  other  party.  For  purposes  of this
          Agreement,  "Notice of Termination" means a written notice which shall
          state the specific termination provision in this Agreement relied upon
          and the effective date of the termination of Executive's employment.

     (b)  For  purposes  of this  Agreement,  "Date of  Termination"  means  the
          effective date of the termination of Executive's  employment specified
          in the Notice of Termination.

15.      NONCOMPETITION AND CONFIDENTIALITY.

     (a)  During the term of Executive's employment under this Agreement and for
          a period of one year  following an Event of  Termination as defined in
          Section  7(a) of this  Agreement,  Executive  will  not  compete  with
          Association  and/or  Company  in any  city,  town or  county  in which
          Association  and/or  Company has an office or has filed an application
          for regulatory approval to establish an office.  Executive agrees that
          during  such  period  and  within  said  cities,  towns and  counties,
          Executive  shall not work for,  advise,  consult,  or otherwise  serve
          with,  directly or indirectly,  any entity whose  business  materially
          competes with the depository, lending, or other business activities of
          the  Association  and/or  Company.   The  parties,   recognizing  that
          irreparable  injury will result to  Association  and/or Company in the
          event of Executive's  breach of this Section 14(a),  agree that in the
          event  of  any  such  breach  or   threatened   breach  by  Executive,
          Association and/or Company will be entitled,  in addition to any other
          remedies and damages available, to a temporary restraining order and a
          preliminary  and  permanent  injunction  to restrain the  violation or
          threatened  violation  hereof by Executive and  Executive's  partners,
          agents,  employers,  employees,  and all  persons  acting  for or with
          Executive.  Executive  represents  and  admits  that in the event of a
          termination  of  his  employment  under  this  Agreement,  Executives'
          experience  and  capabilities  are  such  that  Executive  can  obtain
          employment in a business  engaged in other lines and/or of a different
          nature that Association's  and/or Company, and that the enforcement of
          a remedy by way of injunction will not prevent  Executive from earning
          a  livelihood.   Nothing   herein  may  be  construed  as  prohibiting
          Association  and/or Company from pursuing any other remedies available
          to  Association  and  Company for such  breach or  threatened  breach,
          including recovery of damages from Executive.

     (b)  Executive  recognizes  and  acknowledges  that  the  knowledge  of the
          business  activities and plans for business  activities of Association
          and Company,  or either of them, and  affiliates of either,  as it may
          exist from time to time,  is a valuable,  special and unique  asset of
          the business of  Association  and Company.  Executive will not, at any
          time during or after the term of his employment  under this Agreement,
          use or disclose to any person or entity for any reason  whatsoever any
          knowledge  of the  past,  present,  planned,  or  considered  business
          activities  of  Association  and  Company,   or  either  of  them,  or
          affiliates of either.  Notwithstanding  the  foregoing,  Executive may
          disclose  any  knowledge  of  banking,   financial   and/or   economic
          principles, concepts or ideas which were not derived from the business
          plans and activities of  Association or Company.  This provision is in
          addition to and not in lieu of any duties or  obligations of Executive
          under any  applicable  statute or common law. In the event of a breach
          or threatened  breach by Executive of the  provisions of this Section,
          Association  and  Company,  or either of them,  will be  entitled to a
          temporary restraining order and a preliminary and permanent injunction
          restraining  Executive  from  disclosing,  in whole  or in  part,  the
          knowledge  of  the  past,  present,  planned  or  considered  business
          activities of Association and Company, or either of them or affiliates
          of either. Nothing herein will be construed as prohibiting Association
          and  Company,  or either of them,  from  pursuing  any other  remedies
          available  to  Association  or Company for such  breach or  threatened
          breach, including the recovery of damages from Executive.

16.  EFFECT ON PRIOR AGREEMENTS.

          This agreement contains the entire  understanding  between the parties
          concerning   the  subject  matter  hereof  and  supersedes  any  prior
          agreements  (express or implied,  oral or written) among  Association,
          Company,   and  Executive   concerning  the  subject  matter  of  this
          Agreement.

17.  SUCCESSORS AND ASSIGNS.

          This Agreement  shall inure to the benefit of any successor or assigns
          of the  Association or Company.  In case of any termination in which a
          successor  would not by the foregoing  sentence or operation of law be
          bound by this  Agreement,  Company  shall  require  such  successor to
          expressly  and  unconditionally  assume  this  Agreement  and  perform
          Company's obligations under this Agreement.

18.  MODIFICATION AND WAIVER

     (a)  This Agreement may be modified or amended only by a written instrument
          signed by the parties.

     (b)  No term or  condition of this  Agreement  shall be deemed to have been
          waived, nor shall there be any estoppel against the enforcement of any
          provision of this Agreement,  except by a written instrument signed by
          the part charged with such waiver or estoppel.  No such written waiver
          shall  be  deemed  a  continuing  waiver  unless  specifically  stated
          therein,  and each such waiver  shall  operate only as to the specific
          term or  condition  waived and shall not  constitute  a waiver of such
          term  or  condition  for the  future  as to any act  other  than  that
          specifically waived.

19.  SEVERABILITY.

          If, for any reason,  any provision of this  Agreement,  or any part of
          any provision,  is held invalid,  such invalidity shall not affect any
          other  provision of this  Agreement or any part of such  provision not
          held so invalid,  and each such other provision and part thereof shall
          to the full  extent  consistent  with law  continue  in full force and
          effect.

20.  HEADINGS FOR REFERENCE ONLY.

          The heading of sections  herein are included solely for convenience of
          reference and shall not control the meaning or  interpretation  of any
          of the provisions of this Agreement.

21.      GOVERNING LAW.

         This Agreement shall be governed by the laws of the state of Oregon.

22.      ARBITRATION.

          Any  dispute or  controversy  arising  out of or in any way related to
          this Agreement or Executive's  employment  under this Agreement or the
          termination of that employment,  except a claim by Association  and/or
          Company of a breach or  threatened  breach by  Executive of any of the
          provisions  of Section 14, shall be submitted to binding  arbitration,
          conducted in Portland,  Oregon,  in  accordance  with the then current
          rules of the American Arbitration Association.  Such arbitration shall
          be the  exclusive  remedy  for any such  dispute or  controversy,  and
          judgment may be entered on the arbitrator's  award in any court having
          jurisdiction.

23.      ATTORNEY FEES.

          If any action  (including  any  arbitration)  is brought to enforce or
          interpret  the  terms  of  this  Agreement  or any  part  of  it,  the
          prevailing party shall be entitled to recover from the other party its
          reasonable  attorney fees and costs  incurred  therein,  including all
          attorney fees and costs on appeal.

24.      INDEMNIFICATION.

          Association and Company,  or either of them,  shall provide  Executive
          (including  his heirs,  executors  and  administrators)  with coverage
          under a standard  directors' and officers'  liability insurance policy
          at its expense, or in lieu thereof, shall indemnify Executive (and his
          heirs,  executors and  administrators) to the fullest extent permitted
          under law against all expenses and liabilities  reasonably incurred by
          him  in  connection  with  or  arising  out of any  action,  suit,  or
          proceedings in which he may be involved by reason of his having been a
          director  or  officer of  Association  or  Company,  or either of them
          (whether or not he  continues  to be a director or officer at the time
          of  incurring  such  expenses or  liabilities),  such as expenses  and
          liabilities to include without limitation  judgment,  court costs, and
          attorney fees and the cost of reasonable settlements.


          IN WITNESS  WHEREOF,  the parties hereto have caused this Agreement to
          be  executed  by  a  duly  authorized   officer  or  director  of  the
          Association and the Company,  and Executive has signed this Agreement,
          all on the 9th day of May, 2003.

KLAMATH FIRST BANCORP, INC.             KLAMATH FIRST FEDERAL SAVINGS
                                        AND LOAN ASSOCIATION


BY:  /s/ Rodney N. Murray                BY:  /s/ Rodney N. Murray
     Rodney N. Murray, Chairman          Rodney N. Murray, Chairman



     /s/ Nina G. Drake                   /s/ Kermit K. Houser
WITNESS:                                 Kermit K. Houser


<PAGE>
                                                                   Exhibit 10(b)
                     FIRST AMENDMENT TO AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     This FIRST  AMENDMENT TO AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal  Savings and Loan  Association  ("Association"),  Klamath First Bancorp,
Inc.,  ("Company")  and the  undersigned  executive  officer of Association  and
Company (the "Executive").

     WHEREAS,  Association,  Company and  Executive  entered into an Amended and
Restated Employment Agreement dated May 9, 2003, (the "Employment Agreement");

     WHEREAS,  Company has entered into an Agreement and Plan of Merger dated as
of July 14, 2003, (the "Merger  Agreement") with Sterling Financial  Corporation
("Sterling") with respect to a proposed transaction (the "Transaction")  whereby
Sterling will acquire all of the outstanding shares of Company common stock in a
stock merger;

     WHEREAS,  Association  and Company  desire to enter into this  Agreement to
facilitate the Transaction; and

     WHEREAS,  the Executive  desires to enter into this Agreement to facilitate
the  Transaction  so as to  enable  his  change in  control  of  benefits  to be
triggered under the Employment  Agreement and his Executive Salary  Continuation
Agreement,  and to enhance the value of shares of common stock of Company  owned
by the Executive  and the value of his stock options to acquire  common stock of
Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Capitalized terms used herein, to the extent not defined  otherwise,  shall
     have the meaning ascribed to them in the Employment Agreement.

2.   Section 8(c) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association shall pay the Executive as severance pay or
     liquidated damages, or both (the "Base Severance Amount"),  an amount equal
     to $400,000.  In the event that all  conditions to closing under the Merger
     Agreement have been satisfied  during calendar year 2003, then  Association
     shall  make  payment  of the Base  Severance  Amount  plus  the  Additional
     Severance  Amount (as defined below) to the Executive on December 31, 2003.
     In the event such closing conditions are not satisfied during calendar year
     2003,  then the payments  contemplated  herein shall be made within 10 days
     after  consummation  of the merger  contemplated  by the Merger  Agreement.
     Notwithstanding  the foregoing,  if the Executive enters into a new written
     employment  agreement  with  Sterling  or  Sterling  Savings  Bank prior to
     December 31, 2003 (but effective upon completion of the merger contemplated
     by  the  Merger  Agreement),  then  the  Severance  Amount  and  Additional
     Severance  Amount  shall not be paid  pursuant to the terms  hereof and any
     severance to be provided to the  Executive,  if any,  shall be set forth in
     such new written employment agreement.  In addition, upon the occurrence of
     a Change in  Control  arising  from or  related  to the  Merger  Agreement,
     Association  shall pay the Executive as additional  severance the amount of
     $5,750 (the "Additional Severance Amount") in lieu of any obligation to pay
     the Executive the value of employer contributions that would have been made
     on the  Executive's  behalf over the remaining term of the agreement to any
     tax-qualified  retirement  plan. The Additional  Severance  Amount shall be
     paid at the time the Base Severance  Amount is paid.  Upon the  Executive's
     termination of service in connection  with or following a Change in Control
     arising from or relating to the Merger Agreement, Sterling Savings Bank, as
     successor-in-interest to the Association,  shall provide the Executive with
     continued life, medical, dental and disability coverage as is then provided
     by Sterling  Savings Bank to its  full-time  employees,  as the same may be
     changed from time to time,  during the 36 month period next  following  the
     Executive's  Date  of  Termination  with  the  cost to be  absorbed  by the
     Executive  being equal to the lesser of (i) the  employee  cost of coverage
     currently  being  borne  by the  Executive  or (ii)  the  employee  cost of
     coverage  borne by full-time  employees of Sterling  Savings Bank receiving
     the same  coverage;  provided  if the cost of  coverage  to be borne by the
     Executive is determined  under subpart (i), then such cost shall be subject
     to pro  rata  adjustment  based  upon the pro  rata  adjustment  in cost of
     coverage  that is borne by  full-time  employees  of Sterling  Savings Bank
     receiving the same coverage after completion of the merger  contemplated by
     the Merger Agreement."

3.   New Section 24 is added to the Employment Agreement as follows:

     "24.  Long  Term  Medical  Care.  The  Executive  shall not have a right to
     participate  in the long term  medical care  program to be  implemented  by
     Association."

4.   The  Employment  Agreement  shall be further  amended by adding  thereto an
     "Exhibit A to the  Employment  Agreement"  in the form  attached  hereto as
     Appendix I.

5.   Except as  specifically  set forth herein,  the Employment  Agreement shall
     continue  in full  force  and  effect.  To the  extent  that any  provision
     contained in this Agreement is  inconsistent  with any of the provisions of
     the  Employment  Agreement,  including  but not  limited to,  Section  8(b)
     thereof, the provisions contained in this Agreement shall be controlling.

6.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

7.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so  executed  shall be deemed an  original  and all of which,
     taken together, shall constitute one and the same agreement.

     The parties have entered this Agreement on July 14, 2003.

                               KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


                               By:   /s/ Craig M Moore
                               Craig M Moore SVP/Chief Auditor


                               By:   /s/ Marshall J. Alexander
                               Marshall J. Alexander EVP/CFO
                               KLAMATH FIRST BANCORP, INC.


                               By:   /s/ Craig M Moore
                               Craig M Moore SVP/Chief Auditor

                               EXECUTIVE:

                               By:   /s/ Kermit K. Houser
                               Kermit K. Houser President/CEO

<PAGE>
                                                                   Exhibit 10(c)
                     EXECUTIVE SALARY CONTINUATION AGREEMENT


     THIS AGREEMENT, entered into and effective this First day of January, 2003,
by and between  Klamath First Federal  Savings and Loan  Association,  a Federal
Savings and Loan Association  (hereinafter  referred to as the "Employer"),  and
Kermit K. Houser,  an Employee of the Employer  (hereinafter  referred to as the
"Employee"), who resides in the State of Oregon.

                              W I T N E S S E T H:

     WHEREAS,  the Employee is an employee of the Employer and, since January 1,
2003 has become  eligible to  participate in the Executive  Salary  Continuation
Plan represented by this Agreement (the "Plan");

     WHEREAS, the Employer desires to establish a compensation  benefits program
as a fringe benefit for certain officers of the Employer in order to attract and
retain  individuals  with  extensive  and  valuable  experience  in the  banking
industry;

     WHEREAS,  the  Employee's  experience  and  knowledge of the affairs of the
Employer and the banking industry are extensive and valuable;

     WHEREAS,  it is  deemed  to be in the best  interests  of the  Employer  to
provide the Employee  with certain  benefits,  on the terms and  conditions  set
forth  herein,  in order to  reasonably  induce  the  Employee  to remain in the
Employer's  employment  and to  compensate  the Employee  for valuable  services
heretofore rendered to the Employer; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and  conditions  upon  which  this  additional  compensatory  incentive  will be
provided  to  the  Employee,  or to the  Employee's  spouse  or  the  Employee's
designated beneficiaries, as the case may be;

     FURTHERMORE, it is the intent of the parties hereto that this Employee Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental   retirement  benefits  for  the  Employee,  and  be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Employee is fully advised of the
Employer's  financial  status and the design and operation of this benefit plan;
and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:
<PAGE>


I.   EMPLOYMENT

     Although  this  Agreement  is  intended  to provide  the  Employee  with an
     additional  incentive  to  remain  in  the  employ  of the  Employer,  this
     Agreement  shall not be deemed  to  constitute  a  contract  of  employment
     between the  Employee  and the  Employer  nor shall any  provision  of this
     Agreement  restrict or expand the right of the  Employer to  terminate  the
     Employee's  employment.  This Agreement shall have no impact or effect upon
     any separate written Employment  Agreement which the Employee may have with
     the Employer,  it being the parties'  intention  and agreement  that unless
     this Agreement is specifically  referenced in said Employment Agreement (or
     any modification  thereto),  this Agreement (and the Employer's obligations
     hereunder)  shall stand  separate and apart from,  and shall have no effect
     upon,  or be  affected  by,  the terms and  provisions  of said  Employment
     Agreement.

     Except as otherwise set forth in this Agreement,  the term "Employer" shall
     mean Klamath First Federal Savings and Loan Association; provided, further,
     that for purposes of this Agreement, the term "Employer" shall mean Klamath
     First Bancorp, Inc. and its subsidiaries and affiliated entities, including
     any parent holding company and its subsidiaries.


II.  FRINGE BENEFITS

     The salary continuation  benefits provided by this Agreement are granted by
     the  Employer as a fringe  benefit to the  Employee and are not part of any
     salary  reduction  plan or an  arrangement  deferring  a bonus  or a salary
     increase.  The Employee has no option to take any current  payment or bonus
     in  lieu  of  these  salary  continuation  benefits  except  as  set  forth
     hereinafter.


III. retirement date and early retirement date

     A.   Retirement Date:

          The term  "Retirement"  or "Retires" shall refer to the date which the
          Employee  attains  sixty-five  ("65") years of age and acknowledges in
          writing to the Employer to be the last day the  Employee  will provide
          any  significant   personal  services,   whether  as  an  employee  or
          independent consultant or contractor, to the Employer.
<PAGE>

     B.   Early Retirement Date:

          The term "Early Retirement Date" shall mean the Retirement, as defined
          above, of the Employee on, or after the Employee  achieves  fifty-five
          (55) years of age,  but has not yet reached  sixty-five  (65) years of
          age.


IV.  retirement benefit and early retirement benefit

     A.   Retirement Benefit:

          If the  Employee  shall  remain in the  continuous  employment  of the
          Employer until  attaining age  sixty-five  (65), the Employee shall be
          entitled  to be paid the  "Normal  Retirement  Benefit"  specified  in
          Schedule A, payable in substantially equal monthly installments on the
          first day of each month,  beginning with the month following the month
          in  which  the  Employee  Retires  (or on  such  later  date as may be
          mutually  agreed upon by the  Employee  and the Employer in advance of
          said  Retirement  date)  payable  until the  Employee's  death.  After
          commencement of payments,  the Normal Retirement Benefit will increase
          by two percent (2%) per year.

     B.   Early Retirement Benefit:

          The  Employee  shall  have  the  right  to  retire  on  a  date  which
          constitutes an Early  Retirement Date as defined in  Subparagraph  III
          (B) above.  In the event the Employee elects to Retire on a date which
          constitutes an Early Retirement Date, and said early retirement is not
          pursuant to a Change in Control as defined in paragraph VI below,  the
          Employee shall be entitled to be paid the "Normal Retirement  Benefit"
          specified  in  Schedule  A for the date  the  Retirement  occurs,  but
          reduced by a factor of  one-half  of one  percent  (.5%) per month for
          each month or portion thereof that the Early  Retirement  occurs prior
          to the Retirement  Date. The benefit shall be payable in substantially
          equal monthly  installments on the first day of each month,  beginning
          with the month following the month in which the Early  Retirement Date
          occurs (or on such later date as may be  mutually  agreed  upon by the
          Employee and the Employer in advance of such Early  Retirement  Date).
          After  commencement  of payments,  the Early  Retirement  benefit will
          increase by two percent (2%) per year.

          Example:  If the Early  Retirement  Date occurs on the Employee's 63rd
          birthday and if the Retirement Date in Section III.A.  above is at age
          65, the Normal Retirement  Benefit specified in Schedule "A" as of the
          Employee's 63rd birthday would be reduced by 12% [.5% x 24 months].


V.   other termination of EMPLOYMENT and DISABILITY

     A.   Payments in the Event Employment Is Terminated Prior to Retirement:

          The  Employer   reserves  the  right  to  terminate   the   Employee's
          employment,   with  or  without  cause  but  subject  to  any  written
          employment  agreement  which may then exist,  at any time prior to the
          Employee's  Retirement.  In  the  event  that  the  employment  of the
          Employee  shall  be  terminated,   other  than  by  reason  of  death,
          Disability or Retirement, prior to the Employee's attaining sixty-five
          (65) years of age, then this Agreement  shall terminate on the date of
          such termination of employment;  provided,  however, that the Employee
          shall be  entitled  to the  following  benefits  as may be  applicable
          depending   upon  the   circumstances   surrounding   the   Employee's
          termination:

          (i)  Termination  for Other  Than  Disability,  Change in  Control  or
               Cause:

          If the  Employee's  employment is terminated by the Employee or by the
          Employer for any reason other than Disability,  "Change in Control" or
          "Termination for Cause," the Employee shall be entitled to be paid the
          "Normal Retirement  Benefit" specified in Schedule A as of the date of
          termination,  payable in substantially  equal monthly  installments on
          the first day of each month,  beginning  with the month  following the
          month in which the Employee  attains  sixty-five (65) years of age (or
          on such later date as may be mutually  agreed upon by the Employee and
          the   Employer   not  less  than  fifteen  (15)  days  prior  to  such
          commencement  date)  payable  until the  Employee's  death,  and shall
          increase by two percent (2%) per year.  Alternatively,  upon achieving
          age  fifty-five  (55) but before  achieving age  sixty-five  (65), the
          Employee may choose to receive the Early  Retirement  Benefit with the
          reductions  from the  "Normal  Retirement  Benefit"  as of the date of
          termination,  and as described in Section IV.B. of this Agreement. The
          benefit shall be payable in substantially  equal monthly  installments
          on the first day of each month, beginning with the month following the
          month in which the Early Retirement Date occurs (or on such later date
          as may be mutually  agreed upon by the  Employee  and the Employer not
          less than fifteen (15) days prior to such  commencement  date) payable
          to the  Employee's  death,  and shall increase by two percent (2%) per
          year.
<PAGE>

          (ii) Termination for Cause:

               If the Employee  suffers a  "Termination  for Cause",  as defined
               herein below,  the Employee  shall forfeit any and all rights and
               benefits the Employee may have under the terms of this  Agreement
               and shall have no right to be paid any of the amounts which would
               otherwise be due or paid to the Employee by the Employer pursuant
               to the terms of this Agreement.  The term "Termination for Cause"
               shall have the definition  provided in the Employee's  Employment
               Agreement, as amended from time to time with the Employer. If the
               Employee  has  no   Employment   Agreement   with  the  Employer,
               "Termination for Cause" shall include  termination because of the
               Employee's personal dishonesty, incompetence, willful misconduct,
               breach of fiduciary duty involving  personal profit,  intentional
               failure to perform  stated  duties,  or willful  violation of any
               law,  rule,  or  regulation  (other than  traffic  violations  or
               similar offenses) or final  cease-and-desist  order. For purposes
               of this  Section,  no act, or the  failure to act, on  Employee's
               part shall be "willful"  unless done, or omitted to be done,  not
               in good faith and  without  reasonable  belief that the action or
               omission  was in the  best  interest  of the  Association  or its
               affiliates. Notwithstanding the foregoing, the Employee shall not
               be deemed  to have been  terminated  for Cause  unless  and until
               there  shall  have been  delivered  to the  Employee  a copy of a
               resolution duly adopted by the affirmative  vote of not less than
               three-fourths  of the  members  of the Board at a meeting  of the
               Board called and held for that purpose (after  reasonable  notice
               to the Employee and an opportunity,  together with counsel, to be
               heard before the Board),  finding that in the good faith  opinion
               of the Board,  the  Employee  was  guilty of  conduct  justifying
               termination for Cause and specifying the reasons thereof.

     B.   Payment in the Event of Disability Prior to Retirement:

          The Employee  shall,  in connection with acceptance of this Agreement,
          elect below  either the "Lump Sum  Payment" or the  "Annuity for Life"
          option in the event the  Employee  becomes  disabled at any time after
          the Effective Date of this Agreement but prior to Retirement. The term
          "Disability"  or  "Disabled"  shall have the same  meaning  given such
          terms in any policy of disability insurance maintained by the Employer
          for the benefit of employees including the Employee. In the absence of
          such a policy,  which extends coverage to the Employee in the event of
          disability,  the terms shall mean bodily injury or disease  (mental or
          physical)  which wholly and  continuously  prevents the performance of
          the Employee's  duties to the Employer for at least one hundred twenty
          (120) days.

          (i)  Lump Sum Payment.

               The  Employee   shall  be  entitled  to  be  paid  the  lump  sum
               "Disability  Benefit"  specified in Schedule A,  determined as of
               the  earlier  of the  date of  disability  or date  the  Employee
               otherwise  terminated  service with the  Employer  other than for
               Cause.  The lump sum shall be  payable  60 days from the date the
               Employer  has  received a written  request to commence  benefits,
               along with  documentation  showing  that the  Employee has become
               disabled.

          (ii) Annuity for Life.

               The  Employee  shall be  entitled  to be paid an annuity  for the
               Employee's life. The Employer shall purchase such an annuity from
               an insurance  company with an A. M. Best or Moody's  rating of no
               less  than  AA and  using  the  amount  of  "Disability  Benefit"
               specified in Schedule A, determined as of the earlier of the date
               of  disability  or the date  the  Employee  otherwise  terminated
               service  with the  Employer  other than for Cause.  The  Employer
               shall  purchase  the  annuity  within  60 days  from the date the
               Employer  has  received a written  request to commence  benefits,
               along with  documentation  showing  that the  Employee has become
               Disabled.   Nevertheless,   if  the  amount  of  the   applicable
               "Disability  Benefit"  specified in Schedule A is  $50,000.00  or
               less,  the payment shall be as a lump sum to the Employee and not
               the purchase of an annuity for life.

          (iii)Employee Election of Disability  Benefit.

               I elect to receive the following  Disability Benefit (Please sign
               on applicable line):

                           ______________________    Lump Sum Benefit.


                           __________X____________   Annuity for Life.


VI.  CHANGE OF CONTROL

     A.   Definition of Change In Control:

          A "Change in Control" of Klamath First Bancorp,  Inc. (the  "Company")
          or  Klamath  First   Federal   Savings  and  Loan   Association   (the
          "Association")  shall be  deemed  to occur if and when (a) an  offeror
          other than the  Company  purchases  shares of the common  stock of the
          Company or the Association  pursuant to a tender or exchange offer for
          such  shares,  (b) any person (as such term is used in Sections  13(d)
          and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes the
          beneficial owner, directly or indirectly, of securities of the Company
          or the  Association  representing  25% or more of the combined  voting
          power  of  the  Company's  or  the   Association's   then  outstanding
          securities,  (c) the  membership  of the  board  of  directors  of the
          Company  or the  Association  changes  as the  result  of a  contested
          election, such that individuals who were directors at the beginning of
          any twenty-four  month period (whether  commencing before or after the
          effective date of this  Agreement) do not constitute a majority of the
          Board at the end of such period, or (d) shareholders of the Company or
          the Association approve a merger,  consolidation,  sale or disposition
          of all or  substantially  all of the  Company's  or the  Association's
          assets, or a plan of partial or complete liquidation.

     B.   Termination  by the  Employer  on  Account  of or  After a  Change  in
          Control:

          In the event the Employee's employment with the Employer is terminated
          by the Employer in connection  with a Change in Control,  the Employee
          shall  be  immediately  vested  in  the  "Normal  Retirement  Benefit"
          specified  in  Schedule  A for the  date  the  Employee  achieves  age
          sixty-five (65). The Employee shall be entitled to be paid the "Change
          in Control Benefit"  specified in Schedule A, in  substantially  equal
          monthly  installments  on the first day of each  month,  beginning  no
          sooner  than the  month  following  the  month in which  the  Employee
          attains age  fifty-five  (55), as requested in writing by the Employee
          and delivered to the Employer or its successor  thirty (30) days prior
          to the commencement of installment payments;  provided,  however, that
          in the event the  Employee  does not  request a  commencement  date as
          specified,  such  installments  shall be paid on the first day of each
          month,  beginning  with the  month  following  the  month in which the
          Employee  attains  sixty-five (65) years of age. Upon the commencement
          of payments,  the  installments  shall be payable until the Employee's
          death, and shall increase by two percent (2%) per year.

          A  termination  shall be deemed to be in  connection  with a Change in
          Control if, within two (2) years  following the occurrence of a Change
          in  Control:  (a) the  Employee's  employment  with  the  Employer  is
          terminated by the Employer other than a Termination  for Cause; or (b)
          by reason of the  Employer's  actions any adverse change occurs in the
          scope  of  the  Employee's  position,  material  responsibilities  and
          duties,  salary,  benefits  or  location  of  employment;  or (c)  the
          Employer  causes an event to occur  which  reasonably  constitutes  or
          results in a demotion,  loss of title,  a  significant  diminution  of
          responsibilities  or  authority,  or a  constructive  termination  (by
          forcing a resignation or otherwise) of the Employee's employment.


VII. benefit accounting

     The Employer shall account for this benefit using the regulatory accounting
     principles of the Employer's primary federal regulator.  The Employer shall
     establish an accrued  liability  retirement  account for the Employee  into
     which appropriate reserves shall be accrued.


VIII. restrictions on funding

     The Employer shall have no obligation to set aside,  earmark or entrust any
     fund or money with which to pay its  obligations  under this Employee Plan.
     The Employee,  her or his  beneficiary  (ies), or any successor in interest
     shall be and remain  simply a general  creditor of the Employer in the same
     manner as any other creditor  having a general claim for matured and unpaid
     compensation.  The  Employer  reserves  the  absolute  right,  at its  sole
     discretion, to either fund the obligations undertaken by this Employee Plan
     or to refrain from funding the same and to determine the extent, nature and
     method of such  funding.  Should the Employer  elect to fund this  Employee
     Plan, in whole or in part,  through the purchase of life insurance,  mutual
     funds, disability policies or annuities, the Employer reserves the absolute
     right,  in its sole  discretion,  to terminate such funding at any time, in
     whole or in part. At no time shall any Employee be deemed to have any lien,
     right,  title or interest in any specific  funding  investment or assets of
     the Employer.

     If the Employer elects to invest in a life insurance, disability or annuity
     policy on the life of the  Employee,  then the  Employee  shall  assist the
     Employer  by  freely  submitting  to a  physical  exam and  supplying  such
     additional information necessary to obtain such insurance or annuities.

     Notwithstanding  anything hereinabove to the contrary, the Employer and the
     Employee  acknowledge  and agree that,  in the event of a Change in Control
     and at the written request of the Employee,  the Employer shall  establish,
     not later than the effective  date of the Change in Control,  a Rabbi Trust
     or multiple  Rabbi  Trusts (the  "Trust" or  "Trusts")  upon such terms and
     conditions as the Employer in its sole discretion deems  appropriate and in
     compliance with applicable provisions of the Internal Revenue Code of 1986,
     as  amended   (the  "Code")  in  order  to  permit  the  Employer  to  make
     contributions  and/or  transfer  assets to the Trust or Trusts to discharge
     its obligations  pursuant to this Agreement.  The principal of the Trust or
     Trusts and any earnings thereon shall be held separate and apart from other
     funds  of  the  Employer  to be  used  exclusively  for  discharge  of  the
     Employer's  obligations pursuant to this Agreement and shall continue to be
     subject to the claims of the Employer's general creditors until paid to the
     Employee or its beneficiaries in such manner and at such times as specified
     in this Agreement


IX.  MISCELLANEOUS

     A.   Alienability and Assignment Prohibition:

          The  Employee  shall  have no  power or  right  to  transfer,  assign,
          anticipate,   hypothecate,  mortgage,  commute,  modify  or  otherwise
          encumber in advance any of the benefits  payable  hereunder  nor shall
          any of said  benefits  be subject to  seizure  for the  payment of any
          debts, judgments, alimony or separate maintenance owed by the Employee
          nor be  transferable  by operation of law in the event of  bankruptcy,
          insolvency   or  otherwise.   In  the  event  the  Employee   attempts
          assignment,  commutation,  hypothecation,  transfer or disposal of the
          benefits hereunder,  the Employer's  liabilities shall forthwith cease
          and terminate.

     B.   Binding Obligation of the Employer and any Successor in Interest:

          The  Employer  shall not  merge or  consolidate  into or with  another
          Employer or sell  substantially all of its assets to another Employer,
          firm or person until such Employer, firm or person expressly agree, in
          writing,  to assume and  discharge the duties and  obligations  of the
          Employer under this Employee Plan. This Employee Plan shall be binding
          upon the parties hereto,  their successors,  beneficiaries,  heirs and
          personal representatives.

     C.   Amendment or Revocation:

          It is agreed by and  between  the  parties  hereto  that,  during  the
          lifetime of the Employee, this Employee Plan may be amended or revoked
          at any time or  times,  in whole or in  part,  by the  mutual  written
          consent of the Employee and the Employer.

     D.   Gender:

          Whenever  in this  Employee  Plan words are used in the  masculine  or
          neuter  gender,  they shall be read and construed as in the masculine,
          feminine or neuter gender, whenever they should so apply.

     E.   Effect on Other Employer Benefit Plans:

          Nothing  contained in this Employee Plan shall affect the right of the
          Employee  to  participate  in  or  be  covered  by  any  qualified  or
          non-qualified   pension,   profit-sharing,   group,   bonus  or  other
          supplemental  compensation or fringe benefit plan  constituting a part
          of the Employer's existing or future compensation structure.

     F.   Headings:

          Headings  and  subheadings  in this  Employee  Plan are  inserted  for
          reference and convenience  only and shall not be deemed a part of this
          Employee Plan.

     G.   Applicable Law:

          The  laws of the  State  of  Oregon  shall  govern  the  validity  and
          interpretation of this Agreement.

     H.   Partial Invalidity:

          If any term,  provision,  covenant, or condition of this Employee Plan
          is determined  by an arbitrator or a court,  as the case may be, to be
          invalid,  void, or unenforceable,  such determination shall not render
          any other term, provision,  covenant,  or condition invalid,  void, or
          unenforceable,  and the  Employee  Plan shall remain in full force and
          effect notwithstanding such partial invalidity.

     I.   Not a Contract of Employment:

          This  Agreement  shall not be  deemed  to  constitute  a  contract  of
          employment  between the parties hereto, nor shall any provision hereof
          restrict  the right of the  Employer to  discharge  the  Employee,  or
          restrict the right of the Employee to terminate employment.

     J.   Notices:

          Any  notice  required  or  permitted  of either  the  Employee  or the
          Employer under this Agreement shall be deemed to have been duly given,
          if by personal  delivery,  upon the date  received by the party or its
          authorized  representative;  if by facsimile,  upon  transmission to a
          telephone  number  previously  provided  by  the  party  to  whom  the
          facsimile  is  transmitted  as  reflected  in the records of the party
          transmitting  the facsimile and upon  reasonable  confirmation of such
          transmission;  and if by mail, on the third day after mailing via U.S.
          first class mail, registered or certified,  postage prepaid and return
          receipt  requested,  and  addressed to the party at the address  given
          below for the receipt of notices,  or such  changed  address as may be
          requested in writing by a party.
<PAGE>


                  If to the Employer:       Klamath First Bancorp, Inc.
                                            540 Main Street
                                            Klamath Falls, Oregon 97601-6047
                                            Attention: Human Resources

                  If to the Employee:       Kermit K. Houser
                                            10131 Mourning Dove
                                            Klamath Falls, OR 97601

     K.   Opportunity To Consult With Independent Advisors:

          The Employee  acknowledges  that the  Employee  has been  afforded the
          opportunity  to  consult  with  independent  advisors  of  his  or her
          choosing including,  without  limitation,  accountants or tax advisors
          and counsel  regarding both the benefits granted to the Employee under
          the terms of this Agreement and the (i) terms and conditions which may
          affect the  Employee's  right to these  benefits and (ii) personal tax
          effects of such benefits including, without limitation, the effects of
          any federal or state taxes,  Section  280G of the Code,  and any other
          taxes,  costs,  expenses  or  liabilities  whatsoever  related to such
          benefits,  which  in any  of  the  foregoing  instances  the  Employee
          acknowledges  and  agrees  shall  be the  sole  responsibility  of the
          Employee   notwithstanding   any  other  term  or  provision  of  this
          Agreement.  The  Employee  further  acknowledges  and agrees  that the
          Employer  shall  have no  liability  whatsoever  related  to any  such
          personal tax effects or other personal costs, expenses, or liabilities
          applicable to the Employee and further  specifically  waives any right
          for  the  Employee  and  his  or  her  heirs,   beneficiaries,   legal
          representatives,  agents,  successors,  and assigns to claim or assert
          liability on the part of the Employer related to the matters described
          above in this  subparagraph.  The Employee  further  acknowledges  and
          agrees that the Employee has read,  understands and consents to all of
          the terms and  conditions  of this  Agreement,  and that the  Employee
          enters into this Agreement with a full  understanding of its terms and
          conditions.


X.   ADMINISTRATIVE AND CLAIMS PROVISION

     A.   Named Fiduciary and Plan Administrator:

          The "Named  Fiduciary  and Plan  Administrator"  of this Employee Plan
          shall be Klamath First Bancorp, Inc., until its resignation or removal
          by the Board. As Named Fiduciary and Plan Administrator,  the Employer
          shall be responsible for the management, control and administration of
          the Employee Plan. The Named  Fiduciary may delegate to others certain
          aspects  of  the  management  and  operation  responsibilities  of the
          Employee Plan  including the employment of advisors and the delegation
          of ministerial duties to qualified individuals.

     B.   Claims Procedure:

          In the event a dispute  arises over benefits  under this Employee Plan
          and benefits are not paid to the Employee and the claimant feels he is
          entitled to receive such  benefits,  then a written claim must be made
          to the Named  Fiduciary  and Plan  Administrator  named  above  within
          forty-five  (45) days from the date  payments are  refused.  The Named
          Fiduciary and Plan Administrator shall review the written claim and if
          the  claim is  denied,  in whole or in part,  they  shall  provide  in
          writing  within  forty-five  (45) days of  receipt  of such  claim the
          specific reasons for such denial,  reference to the provisions of this
          Employee  Plan  upon  which the  denial  is based  and any  additional
          material or information  necessary to perfect the claim.  Such written
          notice  shall  further  indicate the  additional  steps to be taken by
          claimants if a further review of the claim denial is desired.  A claim
          shall be deemed denied if the Named  Fiduciary and Plan  Administrator
          fail to take any action within the aforesaid forty-five-day period.

          If  claimants  desire a second  review  they  shall  notify  the Named
          Fiduciary and Plan  Administrator  in writing within  forty-five  (45)
          days of the first claim  denial.  Claimants  may review this  Employee
          Plan or any documents  relating  thereto and submit any written issues
          and comments it may feel  appropriate.  In their sole discretion,  the
          Named  Fiduciary and Plan  Administrator  shall then review the second
          claim and provide a written  decision  within  forty-five (45) days of
          receipt of such claim. This decision shall likewise state the specific
          reasons  for the  decision  and shall  include  reference  to specific
          provisions of the Plan Agreement upon which the decision is based.

     C.   Arbitration:

          All claims,  disputes and other matters in question  arising out of or
          relating to this  Agreement or the breach or  interpretation  thereof,
          other than those matters which are to be determined by the Employer in
          its  sole  and  absolute  discretion,  shall be  resolved  by  binding
          arbitration  before a  representative  member,  selected by the mutual
          agreement of the parties,  of the Judicial  Arbitration  and Mediation
          Services,  Inc. ("JAMS").  In the event JAMS is unable or unwilling to
          conduct  the  arbitration   provided  for  under  the  terms  of  this
          Paragraph,  or has discontinued its business, the parties agree that a
          representative  member,  selected  by  the  mutual  agreement  of  the
          parties,  of  the  American  Arbitration  Association  ("AAA"),  shall
          conduct the binding arbitration referred to in this Paragraph.  Notice
          of the demand for arbitration shall be filed in writing with the other
          party to this  Agreement and with JAMS (or AAA, if  necessary).  In no
          event  shall the  demand for  arbitration  be made after the date when
          institution  of legal or  equitable  proceedings  based on such claim,
          dispute or other matter in question  would be barred by the applicable
          statute of limitations. The arbitration shall be subject to such rules
          of procedure  used or  established  by JAMS, or if there are none, the
          rules of procedure  used or  established by AAA. Any award rendered by
          JAMS or AAA  shall be final  and  binding  upon  the  parties,  and as
          applicable,    their   respective    heirs,    beneficiaries,    legal
          representatives, agents, successors and assigns, and may be entered in
          any court having jurisdiction thereof. Any arbitration hereunder shall
          be conducted in Klamath Falls,  Oregon,  unless otherwise agreed to by
          the parties.

     D.   Attorneys Fees:

          In  the  event  of  any  arbitration  or  litigation   concerning  any
          controversy,  claim or dispute between the parties hereto, arising out
          of or  relating  to  this  Agreement  or  the  breach  hereof,  or the
          interpretation  hereof,  the  prevailing  party  shall be  entitled to
          recover from the non-prevailing party reasonable expenses,  attorneys'
          fees and costs incurred in connection  therewith or in the enforcement
          or  collection  of  any  judgment  or  award  rendered  therein.   The
          "prevailing  party" means the party determined by the arbitrator(s) or
          court, as the case may be, to have most nearly prevailed, even if such
          party did not prevail in all matters, not necessarily the one in whose
          favor a judgment is rendered.


XI.  SECTION 280G BENEFITS ADJUSTMENT

     If all or any portion of the  amounts  payable to the  Employee  under this
     Agreement,  either alone or together with other payments which the Employee
     has the right to receive from the Employer,  constitute  "excess  parachute
     payments"  within the meaning of Section 280G of the Code, that are subject
     to the excise  tax  imposed by  Section  4999 of the Code (or  similar  tax
     and/or assessment),  the Employer (and its successor) and the Employee each
     agree to pay their  share of any taxes  that may be  imposed as a result of
     payments made pursuant to this Agreement;  provided, however, that Employer
     and Employee shall cooperate with each other and use all reasonable efforts
     to minimize to the fullest extent possible the amount of excise tax imposed
     by Section 4999 of the Code. If at a later date it is determined  (pursuant
     to final  regulations or published rulings of the Internal Revenue Service,
     final judgment of a court of competent jurisdiction, or otherwise) that the
     amount of excise  taxes  payable by the Employee is greater than the amount
     initially so determined, then the Employee shall pay an amount equal to the
     sum of such additional  excise taxes and any interest,  fines and penalties
     resulting from such  underpayment.  The  determination of the amount of any
     such excise taxes shall be made by the independent accounting firm employed
     by the  Employer  immediately  prior to the change in control or such other
     independent  accounting  firm or advisor as may be  mutually  agreeable  to
     Employer  and  Executive  in the  exercise of their  reasonable  good faith
     judgment.


     In witness whereof,  the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

     Klamath First Federal Savings and Loan Association



/s/ Rodney N. Murray                                          /s/ Nina G. Drake
Rodney Murray                                                 Witness
Chairman of the Board




/s/ Kermit K. Houser                                          /s/ Nina G. Drake
Kermit K. Houser                                              Witness
<PAGE>

                                                                   Exhibit 10(d)
                              EMPLOYMENT AGREEMENT
                        Amended and Restated May 19, 2003
                              FOR SAMPLE EXECUTIVE

The Employment  Agreements are  substantially the same for all Executives except
for the following:
                                Salary                  Severence
                            -----------------         --------------
Marshall J. Alexander           $138,000                2.00 times
Ben A.Gay                       $138,000                2.00 times
Frank X. Hernandez              $108,000                1.50 times
Craig M Moore                   $117,000                1.50 times
James E. Essany                 $ 95,000                1.50 times
Walter F. Dodrill               $119,000                1.50 times
Nina G. Drake                   $ 99,000                1.50 times
Jeffrey D. Schlenker            $ 45,000                1.50 times

<PAGE>

                                                                   Exhibit 10(d)
                              EMPLOYMENT AGREEMENT
                        Amended and Restated May 19, 2003

     THIS  AGREEMENT  is made  effective  as of October 1, 2002,  by and between
KLAMATH FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Association"),  Klamath
Falls,  Oregon;   KLAMATH  FIRST  BANCORP,  INC.  (the  "Company"),   an  Oregon
corporation; and (the "Executive").

     WHEREAS,  the  Association  wishes to  assure  itself  of the  services  of
Executive for the period provided in this Agreement; and

     WHEREAS, the Executive is willing to serve in the employ of the Association
on a full-time basis for said period.

     NOW, THEREFORE,  in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1.       POSITION AND RESPONSIBILITIES.

     During the period of his employment hereunder, Executive agrees to serve as
Senior Vice  President of the  Association.  During said period,  Executive also
agrees to serve,  if elected,  as an officer of the Company or any subsidiary or
affiliate of the Company or the Association.

2.       TERMS AND DUTIES.

     (a) The term of this Agreement  shall be deemed to have commenced as of the
date first above  written and shall  continue for a period of  twenty-four  (24)
full calendar months  thereafter.  Commencing on the first anniversary date, and
continuing at each anniversary  date  thereafter,  the Board of Directors of the
Association (the "Board") or its Compensation Committee may extend the Agreement
for an  additional  year.  Prior to the  extension of the  Agreement as provided
herein,  the Board of Directors of the  Association  will review the Executive's
performance  evaluation  for  purposes  of  determining  whether  to extend  the
Agreement,  and the  results  thereof  shall be  included  in the minutes of the
Board's meeting.

     (b) During the period of his  employment  hereunder,  except for periods of
absence  occasioned by illness,  reasonable  vacation  periods,  and  reasonable
leaves of absence,  Executive shall devote  substantially all his business time,
attention,  skill,  and  efforts  to the  faithful  performance  of  his  duties
hereunder  including  activities  and  services  related  to  the  organization,
operation and management of the Association;  provided,  however, that, with the
approval of the Board, as evidenced by a resolution of such Board,  from time to
time,  Executive may serve, or continue to serve, on the boards of directors of,
and hold any other offices or positions in, companies or  organizations,  which,
in such Board's  judgment,  will not present any  conflict of interest  with the
Association, or materially affect the performance of Executive's duties pursuant
to this Agreement.



<PAGE>

3.       COMPENSATION AND REIMBURSEMENT.

     (a) The  compensation  specified under this Agreement shall  constitute the
salary and  benefits  paid for the  duties  described  in  Sections 1 and 2. The
Association  shall pay  Executive  as  compensation  a salary  of  {"Executive's
Salary} per year ("Base Salary") effective 11/1/2002.  Such Base Salary shall be
payable in accordance with the customary  payroll  practices of the Association.
During the period of this Agreement,  Executive's  Base Salary shall be reviewed
at least  annually;  the first such  review  will be made no later than one year
from the date of this Agreement.  Such review shall be conducted by the Board or
its Compensation Committee,  and the Board may increase Executive's Base Salary.
In addition to the Base Salary  provided in this Section 3(a),  the  Association
shall provide  Executive at no cost to Executive with all such other benefits as
are provided uniformly to regular salaried employees of the Association.

     (b) The  Association  will provide  Executive with employee  benefit plans,
arrangements  and  perquisites   substantially  equivalent  to  those  in  which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement,  and the  Association  will not,
without  Executive's  prior  written  consent,  make any  changes in such plans,
arrangements or perquisites which would adversely affect  Executive's  rights or
benefits thereunder.  However, changes in Association-sponsored  group insurance
plan  premiums,   deductibles,   co-payments  and  related  coverage  limits  or
conditions  are  excluded  from the prior  sentence for any such change which is
consistently applied to or available to regular salaried Association  employees.
Without  limiting the generality of the foregoing  provisions of this Subsection
(b),  Executive will be entitled to participate in or receive benefits under any
employee  benefit  plans  including,  but  not  limited  to,  retirement  plans,
supplemental   retirement   plans,   pension   plans,    profit-sharing   plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement  made  available  by the  Association  in the  future to its  senior
executives and key management  employees,  subject to, and on a basis consistent
with,  the  terms,  conditions  and  overall  administration  of such  plans and
arrangements.  Executive will be entitled to incentive  compensation and bonuses
as provided in any plan, or pursuant to any arrangement of the  Association,  in
which Executive is eligible to participate.  Nothing paid to the Executive under
any such plan or arrangement will be deemed to be in lieu of other  compensation
to which the  Executive  is entitled  under this  Agreement,  except as provided
under Section 5(e).

     (c) In addition to the Base Salary  provided for by  paragraph  (a) of this
Section 3, the Association  shall pay or reimburse  Executive for all reasonable
travel  and  other  obligations  under  this  Agreement  and  may  provide  such
additional compensation in such form and such amounts as the Board may from time
to time determine.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

     (a) Upon the  occurrence  of an Event of  Termination  (as herein  defined)
during the Executive's term of employment  under this Agreement,  the provisions
of  this  Section  shall  apply.  As  used  in  this  Agreement,  an  "Event  of
Termination"  shall mean and include any one or more of the  following:  (i) the
termination by the Association of Executive's full-time employment hereunder for
any reason  other than a Change in Control,  as defined in Section  5(a) hereof;
disability,  as defined in Section 6(a) hereof; death; or retirement, as defined
in Section 7 hereof; (ii) Executive's resignation from the Association's employ,
upon (A) unless consented to by the Executive,  a material change in Executive's
function,  duties,  or  responsibilities,  which change would cause  Executive's
position to become one of lesser responsibility,  importance,  or scope from the
position and attributes  thereof described in Sections 1 and 2, above, (any such
material change shall be deemed a continuing  breach of this  Agreement),  (B) a
relocation of  Executive's  principal  place of employment by more than 35 miles
from  its  location  at the  effective  date of this  Agreement,  or a  material
reduction in the benefits and perquisites to Executive from those being provided
as of the effective date of this  Agreement,  (C) the liquidation or dissolution
of the Association, or (D) any breach of this Agreement by the Association. Upon
the occurrence of any event  described in clauses (A), (B), (C), or (D),  above,
Executive  shall have the right to elect to terminate his employment  under this
Agreement by resignation upon not less than sixty (60) days prior written notice
given  within a  reasonable  period of time not to  exceed,  except in case of a
continuing  breach,  four  calendar  months  after the event giving rise to said
right to elect.

     (b) Upon the occurrence of an Event of Termination  other than for Cause of
for Neglect (as described in Sections 8 and 9 hereof), the Association shall pay
Executive,  or,  in the  event  of his  subsequent  death,  his  beneficiary  or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages,  or both,  a sum equal to the  payments  due to the  Executive  for the
remaining term of the Agreement,  including Base Salary,  bonuses, and any other
cash or  deferred  compensation  paid  or to be paid  (including  the  value  of
employer  contributions that would have been made on the Executive's behalf over
the  remaining  term  of the  agreement  to any  tax-qualified  retirement  plan
sponsored by the  Association as of the Date of  Termination),  to the Executive
for the term of the Agreement provided,  however, that if the Association is not
in compliance  with its minimum  capital  requirements or if such payments would
cause  the  Association's  capital  to be  reduced  below  its  minimum  capital
requirements, such payments shall be deferred until such time as the Association
is in capital compliance.  All payments made pursuant to this Section 4(b) shall
be paid in substantially  equal monthly  installments over the remaining term of
this Agreement following the Executive's termination; provided, however, that if
the remaining term of the Agreement is less than one (1) year  (determined as of
the Executive's Date of  Termination),  such payments and benefits shall be paid
to the Executive in a lump sum within 30 days of the Date of Termination.

     (c) Upon the occurrence of an Event of Termination  other than for Cause or
for Neglect (as  described  in Sections 8 and 9 hereof),  the  Association  will
cause  to  be  continued   life,   medical,   dental  and  disability   coverage
substantially  identical  to the  coverage  maintained  by the  Association  for
Executive  prior  to  his  termination.  Such  coverage  shall  cease  upon  the
expiration of the remaining term of this Agreement.

5.       CHANGE IN CONTROL.

     (a) No benefit  shall be paid under this  Section 5 unless there shall have
occurred a Change in Control of the Company or the Association.  For purposes of
this Agreement, a "Change in Control" of the Company or the Association shall be
deemed to occur if and when (a) an  offeror  other  than the  Company  purchases
shares of the common  stock of the  Company  or the  Association  pursuant  to a
tender or exchange  offer for such shares,  (b) any person (as such term is used
in Sections  13(d) and  14(d)(2) of the  Securities  Exchange Act of 1934) is or
becomes the  beneficial  owner,  directly or  indirectly,  of  securities of the
Company or the Association representing 25% or more of the combined voting power
of the Company's then outstanding securities, (c) the membership of the board of
directors of the Company or the Association changes as the result of a contested
election,  such that  individuals  who were  directors  at the  beginning of any
twenty-four month period (whether  commencing before or after the effective date
of this  Agreement) do not constitute a majority of the Board at the end of such
period, or (d) shareholders of the Company or the Association  approve a merger,
consolidation,  sale or disposition of all or substantially all of the Company's
or the Association's assets, or a plan of partial or complete liquidation.

     (b) If any of the events  described in Section 5(a) hereof  constituting  a
Change in Control have occurred or the Board of the  Association  or the Company
has  determined  that a Change  in  Control  has  occurred,  Executive  shall be
entitled to the benefits provided in paragraphs (c), (d) and (e) of this Section
5 upon his subsequent  involuntary  termination of employment at any time during
the term of this  Agreement  (or  voluntary  termination  following  a Change of
Control following any demotion,  loss of title, office or significant authority,
reduction in his annual compensation or benefits, or relocation of his principal
place of employment by more than 35 miles from its location immediately prior to
the  Change in  Control),  unless  such  termination  is  because  of his death,
retirement as provided in Section 7,  termination  for Cause, or termination for
Disability.

     (c) Upon the occurrence of a Change in Control  followed by the Executive's
termination of employment,  the Association shall pay Executive, or in the event
of his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be, as severance  pay or  liquidated  damages,  or both, a sum equal to
________  times the  Executive's  "base  amount,"  within the meaning of Section
280G(b)(3)  of the Internal  Revenue  Code of 1986  ("Code"),  as amended.  Such
payment shall be made in a lump sum paid within ten (10) days of the Executive's
Date of Termination.

     (d) Upon the occurrence of a Change in Control  followed by the Executive's
termination  of employment,  the  Association  will cause to be continued  life,
medical,  dental and disability coverage substantially identical to the coverage
maintained by the Association for Executive prior to his severance. In addition,
Executive shall be entitled to receive the value of employer  contributions that
would have been made on the  Executive's  behalf over the remaining  term of the
agreement to any  tax-qualified  retirement plan sponsored by the Association as
of the Date of  Termination.  Such  coverage and  payments  shall cease upon the
expiration of thirty-six (36) months.

     (e) Upon the  occurrence  of a Change in Control,  the  Executive  shall be
entitled to receive benefits due him under, or contributed by the Company or the
Association  on his  behalf,  pursuant  to  any  retirement,  incentive,  profit
sharing,  bonus,   performance,   disability  or  other  employee  benefit  plan
maintained by the  Association or the Company on the  Executive's  behalf to the
extent that such benefits are not otherwise  paid to the Executive upon a Change
in Control.

     (f) IRS Section 280G Issues.  If any portion of the amounts  payable to the
Executive  under this  Agreement,  either alone or together with other  payments
which the  Executive  has the right to receive from the Company or  Association,
constitute "excess parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"),  that are subject to the
excise  tax  imposed  by  Section  4999  of the  Code  (or  similar  tax  and/or
assessment),  Executive  shall be responsible for the payment of such excise tax
and Company or Association  (and their  successor)  shall be responsible for any
loss of  deductibility  related  thereto;  provided,  however,  that  Company or
Association and Executive shall cooperate with each other and use all reasonable
efforts to  minimize  to the fullest  extent  possible  the amount of excise tax
imposed by  Section  4999 of the Code.  If, at a later  date,  it is  determined
(pursuant  to final  regulations  or published  rulings of the Internal  Revenue
Service, final judgment of a court of competent jurisdiction, or otherwise) that
the amount of excise taxes  payable by the  Executive is greater than the amount
initially so determined, then the Executive shall pay an amount equal to the sum
of such additional excise taxes and any interest,  fines and penalties resulting
from such underpayment. The determination of the amount of any such excise taxes
shall be made by the  independent  accounting  firm  employed  by the Company or
Association immediately prior to the change in control or such other independent
accounting  firm  or  advisor  as  may  be  mutually  agreeable  to  Company  or
Association  and  Executive  in the  exercise  of their  reasonable  good  faith
judgment.


6.       TERMINATION FOR DISABILITY.

     (a) If the Executive shall become disabled as defined in the  Association's
then  current  disability  plan (or,  if no such plan is then in effect,  if the
Executive  is  permanently  and totally  disabled  within the meaning of Section
22(e)(3) of the Code as determined by a physician  designated by the Board), the
Association may terminate Executive's employment for "Disability."

     (b) Upon the  Executive's  termination  of employment for  Disability,  the
Association will pay Executive,  as disability pay, a semi-monthly payment equal
to three-quarters  (3/4) of Executive's  semi-monthly rate of Base Salary on the
effective date of such termination.  These disability payments shall commence on
the effective date of Executive's termination and will end on the earlier of (i)
the date Executive returns to the full-time employment of the Association in the
same capacity as he was employed  prior to his  termination  for  Disability and
pursuant to an employment agreement between Executive and the Association;  (ii)
Executive's full-time employment by another employer;  (iii) Executive attaining
the age of 65; or (iv)  Executive's  death; or (v) the expiration of the term of
this Agreement.  The disability pay shall be reduced by the amount, if any, paid
to the Executive under any plan of the Association providing disability benefits
to the Executive.

     (c) The Association  will cause to be continued life,  medical,  dental and
disability  coverage  substantially  identical to the coverage maintained by the
Association for Executive prior to his termination for Disability. This coverage
and payments shall cease upon the earlier of (i) the date  Executive  returns to
the  full-time  employment  of the  Association,  in the same capacity as he was
employed prior to his  termination  for Disability and pursuant to an employment
agreement  between  Executive and the Association;  (ii)  Executive's  full-time
employment by another employer;  (iii)  Executive's  attaining the age of 65; or
(iv) the Executive's death; or (v) the expiration of the term of this Agreement.

     (d)  Notwithstanding  the  foregoing,  there  will be no  reduction  in the
compensation  otherwise  payable to  Executive  during any period  during  which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.

7.       TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.

     Termination by the  Association of Executive  based on  "Retirement"  shall
mean  retirement  at age 65 or in  accordance  with any  retirement  arrangement
established  with  Executive's  consent with respect to him. Upon termination of
Executive upon Retirement, Executive shall be entitled to all benefits under any
retirement  plan of the  Association  or the  Company  and other  plans to which
Executive is a party.  Upon the death of the  Executive  during the term of this
Agreement,  the Association shall pay to Executive's estate the compensation due
to the Executive  through the last day of the calendar  month in which his death
occurred.


<PAGE>

8.       TERMINATION FOR CAUSE.

     For  purposes of this  Agreement,  "Termination  for Cause"  shall  include
termination  because  of  the  Executive's  personal  dishonesty,  incompetence,
willful misconduct,  breach of fiduciary duty involving personal profit, willful
violation of any law,  rule,  or  regulation  (other than traffic  violations or
similar  offenses) or final  cease-and-desist  order,  or material breach of any
provision of this Agreement. In addition,  "Termination for Cause" shall include
termination  because of the  Executive's  intentional  failure to perform stated
duties, such as the refusal of the Executive to comply with the Association's or
the Company's  instructions,  policies or rules or other willful  conduct of the
Executive  which  materially  adversely  reflects  on the  Association's  or the
Company 's reputation or operation. For purposes of this Section, no act, or the
failure to act, on Executive's  part shall be "willful"  unless done, or omitted
to be done, not in good faith and without  reasonable  belief that the action or
omission  was  in  the  best  interest  of the  Association  or its  affiliates.
Notwithstanding  the  foregoing,  Executive  shall  not be  deemed  to have been
terminated  for Cause unless and until there shall have been  delivered to him a
copy of a  resolution  duly  adopted  by the  affirmative  vote of not less than
three-fourths  of the members of the Board at a meeting of the Board  called and
held for that purpose (after  reasonable  notice to Executive and an opportunity
for him, together with counsel,  to be heard before the Board),  finding that in
the good faith opinion of the Board,  Executive was guilty of conduct justifying
termination  for Cause and specifying the reasons  thereof.  The Executive shall
not have the right to  receive  compensation  or other  benefits  for any period
after  termination  for Cause.  Any stock options granted to Executive under any
stock option plan or any unvested  awards  granted under any other stock benefit
plan of the Association,  the Company,  or any subsidiary or affiliate  thereof,
shall  become  null and void  effective  upon  Executive's  receipt of Notice of
Termination for Cause pursuant to Section 9 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.

9.       TERMINATION FOR NEGLECT.

     The  Association and Company,  or either of them may terminate  Executive's
employment  under this  Agreement at any time for Neglect.  For purposes of this
Agreement,  "Neglect"  means the failure of Executive to give due care to stated
duties or to comply with instructions or directives of the Board of Directors of
the  Association  or  Company or either of them,  but where such  failure is not
determined to be willful or intentional as defined in Section 8. Termination for
Neglect  includes  termination  as the  result  of any  continuing  or  repeated
problems with  Executive's  job  performance  or conduct  after  written  notice
specifying such problem with  performance or conduct,  and where such continuing
and repeated problems were not determined to be willful or intentional, or where
the conduct was not deemed to have a material  adverse impact on the Association
or Company. Notwithstanding the foregoing, Executive shall not be deemed to have
been  terminated  by  Neglect  unless  and until  there  shall have been sent to
Executive  a copy of a  resolution  duly  adopted by a majority  of the Board of
Directors of the  Association  and  Company,  or either of them  (excluding  the
Executive  in counting  the  majority if the  Executive  is then on the board of
directors,  and after  reasonable  notice to Executive  and an  opportunity  for
Executive to be heard before the board of  directors),  finding that in the good
faith  opinion of the board of directors  of the  Association  and  Company,  or
either of them, Executive engaged in conduct justifying  termination for Neglect
and describing  specifically the conduct.  Executive shall not have the right to
receive any salary or bonus for any period after  termination  of employment for
Neglect.  Executive  shall retain any vested  benefits in defined benefit plans,
defined  contribution  plans,  supplemental  executive  retirement plans,  stock
option plans,  restricted stock plans, or other such benefits, but shall forfeit
any rights that have not vested.


10.      REQUIRED PROVISIONS.

     (a) The Association may terminate  Executive's  employment at any time, but
any  termination  by the  Association,  other than as  described in Section 8 or
Section  9  of  this  Agreement,   shall  not  prejudice  Executive's  right  to
compensation  or other benefits under this  Agreement.  Executive shall not have
the  right to  receive  compensation  or other  benefits  for any  period  after
Termination for Cause as defined in Section 8 herein.

     (b)  If  Executive  is  suspended   and/or   temporarily   prohibited  from
participating  in the conduct of the  Association's  affairs by a notice  served
under Section  8(e)(3) or (g)(1) of the Federal  Deposit  Insurance Act ("FDIA")
(12 U.S.C.  1818(e)(3)  and (g)(1)),  the  Association's  obligations  under the
Agreement  shall  be  suspended  as of the date of  service,  unless  stayed  by
appropriate  proceedings.  If the  charges  in the  notice  are  dismissed,  the
Association  may,  in its  discretion,  (i)  pay  Executive  all or  part of the
compensation  withheld  while its contract  obligations  were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.

     (c)  If   Executive  is  removed   and/or   permanently   prohibited   from
participating  in the conduct of the  Association's  affairs by an order  issued
under  Section  8(e)(4) or (g)(1) of the FDIA (12 U.S.C.  1818(e)(4) or (g)(1)),
all obligations of the Association under the Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting  parties shall
not be affected.

     (d) If the  Association is in default (as defined in Section 3(x)(1) of the
FDIA),  all  obligations  under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the parties.

     (e) All obligations under this Agreement shall be terminated (except to the
extent  determined  that  continuation  of the  Agreement is  necessary  for the
continued  operation of the  Association):  (i) by the Director of the Office of
Thrift  Supervision  (the  "Director")  or his or her  designee  at the time the
Federal Deposit Insurance Corporation or the Resolution Trust Corporation enters
into an agreement to provide assistance to or on behalf of the Association under
the authority contained in Section 13(c) of the FDIA or (ii) by the Director, or
his or her  designee  at the time  the  Director  or such  designee  approves  a
supervisory  merger to resolve  problems related to operation of the Association
or when the  Association  is  determined  by the  Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested, however,
shall not be affected by such action.

     (f)  Any  payments  made  to  Executive  pursuant  to  this  Agreement,  or
otherwise,  are  subject  to and  conditioned  upon  compliance  with 12  U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

11.      NOTICE.

     (a) Any purported  termination by the  Association or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this  Agreement,  a "Notice of  Termination"  shall mean a written  notice which
shall indicate the specific termination  provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances  claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

     (b) "Date of  Termination"  shall  mean (A) if  Executive's  employment  is
terminated  for  Disability,  thirty (30) days after a Notice of  Termination is
given (provided that he shall not have returned to the performance of his duties
on a  full-time  basis  during  such  thirty  (30) day  period),  and (B) if his
employment is terminated for any other reason,  the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

     (c) If, within thirty (30) days after any Notice of  Termination  is given,
the party  receiving such Notice of Termination  notifies the other party that a
dispute  exists  concerning  the  termination,  except upon the  occurrence of a
Change in Control and voluntary  termination  by the Executive in which case the
Date of  Termination  shall be the date  specified  in the  Notice,  the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties,  by a binding  arbitration award, or
by a final judgment,  order or decree of a court of competent  jurisdiction (the
time for appeal there from having  expired and no appeal having been  perfected)
and provided further that the Date of Termination  shall be extended by a notice
of dispute  only if such notice is given in good faith and the party giving such
notice  pursues  the  resolution  of such  dispute  with  reasonable  diligence.
Notwithstanding the pendency of any such dispute,  the Association will continue
to pay Executive his full  compensation in effect when the notice giving rise to
the dispute was given (including,  but not limited to, Base Salary) and continue
him as a participant in all  compensation,  benefit and insurance plans in which
he was participating  when the notice of dispute was given, until the dispute is
finally  resolved in  accordance  with this  Agreement.  Amounts paid under this
Section are in addition to all other amounts due under this  Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.

12.      NON-COMPETITION.

     (a) Upon any termination of Executive's employment hereunder pursuant to an
Event of  Termination as provided in Section 4 hereof,  Executive  agrees not to
compete  with the  Association  and/or the  Company for a period of one (1) year
following such  termination in any city, town or county in which the Association
and/or the  Company  has an office or has filed an  application  for  regulatory
approval to establish an office,  determined  as of the  effective  date of such
termination.  Executive  agrees that during such period and within said  cities,
towns and counties, Executive shall not work for or advise, consult or otherwise
serve  with,  directly  or  indirectly,  any entity  whose  business  materially
competes  with the  depository,  lending  or other  business  activities  of the
Association and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the  Association  and/or the  Company,  its  business  and
property in the event of Executive's  breach of this Subsection 11(a) agree that
in the event of any such breach by Executive, the Association and/or the Company
will be entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by Executive,  Executive's partners,
agents,  servants,  employers,  employees  and all  persons  acting  for or with
Executive.  Executive represents and admits that in the event of the termination
of his  employment  pursuant  to Section 8 hereof,  Executive's  experience  and
capabilities are such that Executive can obtain employment in a business engaged
in other lines  and/or of a different  nature  than the  Association  and/or the
Company,  and that the  enforcement  of a remedy by way of  injunction  will not
prevent Executive from earning a livelihood. Nothing herein will be construed as
prohibiting the Association  and/or the Company from pursuing any other remedies
available to the  Association  and/or the Company for such breach or  threatened
breach, including the recovery of damages from Executive.

     (b)  Executive  recognizes  and  acknowledges  that  the  knowledge  of the
business  activities and plans for business  activities of the  Association  and
affiliates  thereof,  as it may exist from time to time, is a valuable,  special
and unique asset of the business of the Association.  Executive will not, during
or  after  the term of his  employment,  disclose  any  knowledge  of the  past,
present,  planned  or  considered  business  activities  of the  Association  or
affiliates  thereof to any person,  firm,  corporation,  or other entity for any
reason or purpose  whatsoever.  Notwithstanding  the  foregoing,  Executive  may
disclose  any  knowledge  of  banking,  financial  and/or  economic  principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Association.  In the event of a breach or threatened
breach by the Executive of the provisions of this Section,  the Association will
be entitled to an injunction restraining Executive from disclosing,  in whole or
in part,  the knowledge of the past,  present,  planned or  considered  business
activities of the  Association  or  affiliates  thereof,  or from  rendering any
services to any person, firm, corporation,  other entity to whom such knowledge,
in whole or in  part,  has been  disclosed  or is  threatened  to be  disclosed.
Nothing herein will be construed as prohibiting  the  Association  from pursuing
any other remedies  available to the  Association  for such breach or threatened
breach, including the recovery of damages from Executive.

13.      SOURCE OF PAYMENTS.

     All  payments  provided in this  Agreement  shall be timely paid in cash or
check  from  the  general  funds  of  the  Association.  The  Company,  however,
guarantees  all  payments  and the  provision  of all amounts and  benefits  due
hereunder to Executive  and, if such payments are not timely paid or provided by
the  Association,  such  amounts and  benefits  shall be paid or provided by the
Company.

14.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     This Agreement contains the entire understanding between the parties hereto
and supersedes any prior  employment  agreement  between the  Association or any
predecessor of the Association  and Executive,  except that this Agreement shall
not  affect or operate to reduce  any  benefit  or  compensation  inuring to the
Executive of a kind elsewhere provided.  No provision of this Agreement shall be
interpreted to mean that  Executive is subject to receiving  fewer benefits than
those available to him without reference to this Agreement.

15.      NO ATTACHMENT.

     (a) Except as  required  by law,  no right to receive  payments  under this
Agreement  shall be  subject to  anticipation,  commutation,  alienation,  sale,
assignment,  encumbrance,  charge,  pledge, or  hypothecation,  or to execution,
attachment,  levy, or similar process or assignment by operation of law, and any
attempt,  voluntary  or  involuntary,  to affect any such action  shall be null,
void, and of no effect.  (b) This Agreement  shall be binding upon, and inure to
the benefit of,  Executive,  the  Association,  the Company and their respective
successors and assigns.

16.      MODIFICATION AND WAIVER.

     (a) This  Agreement may not be modified or amended  except by an instrument
in writing signed by the parties hereto.

     (b) No term or  condition  of this  Agreement  shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement,  except by written  instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing  waiver
unless specifically  stated therein,  and each such waiver shall operate only as
to the specific  term or condition  waived and shall not  constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.


17.      SEVERABILITY.

     If, for any reason,  any  provision of this  Agreement,  or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this  Agreement or any part of such  provision not held so invalid,  and each
such other  provision and part thereof shall to the full extent  consistent with
law continue in full force and effect.

18.      HEADINGS FOR REFERENCE ONLY.

     The headings of sections  and  paragraphs  herein are  included  solely for
convenience of reference and shall not control the meaning or  interpretation of
any of the provisions of this Agreement.

19.      GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of Oregon, unless
otherwise specified herein;  provided,  however, that in the event of a conflict
between the terms of this Agreement and any  applicable  federal or state law or
regulation, the provisions of such law or regulation shall prevail.

20.      ARBITRATION.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three  arbitrators  sitting in a location selected by the employee within one
hundred (100) miles from the location of the Association, in accordance with the
rules of the American  Arbitration  Association then in effect.  Judgment may be
entered on the arbitrator's  award in any court having  jurisdiction;  provided,
however,  that Executive  shall be entitled to seek specific  performance of his
right to be paid  until  the Date of  Termination  during  the  pendency  of any
dispute or controversy arising under or in connection with this Agreement.

21.      PAYMENT OF LEGAL FEES.

     All  reasonable  legal fees paid or incurred by  Executive  pursuant to any
dispute or question of  interpretation  relating to this Agreement shall be paid
or reimbursed by the  Association,  if successful  pursuant to a legal judgment,
arbitration or settlement.

22.      INDEMNIFICATION.

     The Association shall provide Executive (including his heirs, executors and
administrators)   with  coverage  under  a  standard  directors'  and  officers'
liability insurance policy at its expense,  or in lieu thereof,  shall indemnify
Executive (and his heirs,  executors and  administrators)  to the fullest extent
permitted under law against all expenses and liabilities  reasonably incurred by
him in  connection  with or arising out of any action,  suite or  proceeding  in
which he may be  involved  by reason of his having been a director or officer of
the Association (whether or not he continues to be a directors or officer at the
time of incurring such expenses or  liabilities),  such expenses and liabilities
to include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.



23.      SUCCESSOR TO THE ASSOCIATION OR THE COMPANY.

     The  Association  and the Company  shall require any successor or assignee,
whether direct or indirect, by purchase, merger,  consolidation or otherwise, to
all or  substantially  all the  business  or  assets of the  Association  or the
Company,  expressly  and  unconditionally  to assume  and agree to  perform  the
Association's  or the Company's  obligations  under this Agreement,  in the same
manner and to the same  extent  that the  Association  or the  Company  would be
required to perform if no such succession or assignment had taken place.


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by a duly  authorized  officer or director of the  Association  and the
Company,  and Executive has signed this  Agreement,  all on the 19th day of May,
2003.

KLAMATH FIRST BANCORP, INC.                 KLAMATH FIRST FEDERAL SAVINGS
                                                      AND LOAN ASSOCIATION


BY:                                             BY:
    Kermit K. Houser, President & CEO           Kermit K. Houser President & CEO




WITNESS:                                        (the "Executive")

<PAGE>

                                                                   Exhibit 10(e)

          FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT

                              FOR SAMPLE EXECUTIVE
<TABLE>
<CAPTION>

The First  Amendments  to the Amended and  Restated  Employment  Agreements  are
substantially the same for all Executives except for the following:


                                                        Long
                        Severance       Additional      Term Care   Additional
                        Pay             Severance       Estimate    Compensation
                        -----------     ----------      ----------  ------------
<S>                     <C>             <C>             <C>         <C>
Marshall J. Alexander   $276,000        $5,750          $67,000         --
Ben A.Gay                276,000         5,750           54,500         --
Frank X. Hernandez       162,000         5,750           50,000         --
Craig M Moore            125,000         5,750           33,000     $8,333 per
                                                               month to Dec.2003
James E. Essany          142,500         5,750              --          --
Walter F. Dodrill        148,500         5,750           54,000         --
Nina G. Drake            148,500         5,750           54,000         --
Jeffrey D. Schlenker      67,500         5,750           34,000         --

</TABLE>




<PAGE>
                                                                   Exhibit 10(e)
                     FIRST AMENDMENT TO AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     This FIRST  AMENDMENT TO AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal  Savings and Loan  Association  ("Association"),  Klamath First Bancorp,
Inc.,  ("Company")  and the  undersigned  executive  officer of Association  and
Company (the "Executive").

     WHEREAS,  Association,  Company and  Executive  entered into an Amended and
Restated Employment Agreement dated May 19, 2003, (the "Employment Agreement");

     WHEREAS,  Company has entered into an Agreement and Plan of Merger dated as
of July 14, 2003, (the "Merger  Agreement") with Sterling Financial  Corporation
("Sterling") with respect to a proposed transaction (the "Transaction")  whereby
Sterling will acquire all of the outstanding shares of Company common stock in a
stock merger;

     WHEREAS,  Association  and Company  desire to enter into this  Agreement to
facilitate the Transaction; and

     WHEREAS,  the Executive  desires to enter into this Agreement to facilitate
the  Transaction  so as to  enable  his  change in  control  of  benefits  to be
triggered under the Employment  Agreement and his Executive Salary  Continuation
Agreement,  and to enhance the value of shares of common stock of Company  owned
by the Executive  and the value of his stock options to acquire  common stock of
Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Capitalized terms used herein, to the extent not defined  otherwise,  shall
     have the meaning ascribed to them in the Employment Agreement.

2.   Section 5(c) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association shall pay the Executive as severance pay or
     liquidated damages, or both (the "Base Severance Amount"),  an amount equal
     to $_______.  In the event that all  conditions to closing under the Merger
     Agreement have been satisfied  during calendar year 2003, then  Association
     shall  make  payment  of the Base  Severance  Amount  plus  the  Additional
     Severance  Amount (as defined in Section  5(d) below) to the  Executive  on
     December 31, 2003. In the event such closing  conditions  are not satisfied
     during calendar year 2003, then the payments  contemplated  herein shall be
     made within 10 days after  consummation  of the merger  contemplated by the
     Merger Agreement.  Notwithstanding  the foregoing,  if the Executive enters
     into a new written  employment  agreement with Sterling or Sterling Savings
     Bank prior to  December  31, 2003 (but  effective  upon  completion  of the
     merger contemplated by the Merger Agreement), then the Severance Amount and
     Additional  Severance Amount shall not be paid pursuant to the terms hereof
     and any  severance to be provided to the  Executive,  if any,  shall be set
     forth in such new written employment agreement."

     Section 5(d) of the Employment Agreement is amended in full as follows:

     "Upon the occurrence of a Change in Control  arising from or related to the
     Merger  Agreement,  Association  shall  pay  the  Executive  as  additional
     severance the amount of $5,750 (the "Additional  Severance Amount") in lieu
     of any obligation to pay the Executive the value of employer  contributions
     that would have been made on the Executive's behalf over the remaining term
     of the  agreement to any  tax-qualified  retirement  plan.  The  Additional
     Severance  Amount  shall be paid at the time the Base  Severance  Amount is
     paid pursuant to Section 5(c) above.  Upon the  Executive's  termination of
     service in connection with or following a Change in Control arising from or
     relating   to   the   Merger   Agreement,   Sterling   Savings   Bank,   as
     successor-in-interest to the Association,  shall provide the Executive with
     continued life, medical, dental and disability coverage as is then provided
     by Sterling  Savings Bank to its  full-time  employees,  as the same may be
     changed from time to time,  during the 36 month period next  following  the
     Executive's  Date  of  Termination  with  the  cost to be  absorbed  by the
     Executive  being equal to the lesser of (i) the  employee  cost of coverage
     currently  being  borne  by the  Executive  or (ii)  the  employee  cost of
     coverage  borne by full-time  employees of Sterling  Savings Bank receiving
     the same  coverage;  provided  if the cost of  coverage  to be borne by the
     Executive is determined  under subpart (i), then such cost shall be subject
     to pro  rata  adjustment  based  upon the pro  rata  adjustment  in cost of
     coverage  that is borne by  full-time  employees  of Sterling  Savings Bank
     receiving the same coverage after completion of the merger  contemplated by
     the Merger Agreement."

3.   New Section 24 is added to the Employment Agreement as follows:

     "24.  Long  Term  Medical  Care.  The  Executive  shall  have  a  right  to
     participate  in the long term  medical care  program to be  implemented  by
     Association  if the Executive  meets the  eligibility  requirements  of the
     insurer. If the Executive meets the eligibility requirements of the insurer
     and becomes a participant  in the long term medical care  program,  then in
     that  event,  his Base  Severance  Amount  shall be  reduced  by the single
     premium cost paid by Association  for such long term medical care on behalf
     of the  Executive  (which is estimated to be  $_______)  and the  Executive
     shall have no  obligation  to  reimburse  Association  for any premium cost
     relating to such program after the Executive's termination of employment."

4.   The  Employment  Agreement  shall be further  amended by adding  thereto an
     "Exhibit A to the  Employment  Agreement"  in the form  attached  hereto as
     Appendix I.

5.   Except as  specifically  set forth herein,  the Employment  Agreement shall
     continue  in full  force  and  effect.  To the  extent  that any  provision
     contained in this Agreement is  inconsistent  with any of the provisions of
     the  Employment  Agreement,  including  but not  limited to,  Section  5(b)
     thereof, the provisions contained in this Agreement shall be controlling.

6.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

7.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so  executed  shall be deemed an  original  and all of which,
     taken together, shall constitute one and the same agreement.

     The parties have entered this Agreement on July 14, 2003.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION


                                                By:
                                                Kermit K.  Houser
                                                President/CEO
                                                KLAMATH  FIRST BANCORP, INC.


                                                By:
                                                Craig M Moore
                                                SVP/Chief Auditor

                                                EXECUTIVE:


                                                By:
                                                (the "Executive")




<PAGE>
                                                                   Exhibit 10(f)

                     EXECUTIVE SALARY CONTINUATION AGREEMENT

                              FOR SAMPLE EXECUTIVE
<TABLE>
<CAPTION>

The Executive Salary Continuation  Agreements are substantially the same for all
Executives except for the following:

                        Annuity         Lump
                        For Life        Sum
                        -----------     ----------
<S>                        <C>             <C>
Marshall J. Alexander      YES              --
Ben A.Gay                   --             YES
Frank X. Hernandez         YES              --
Craig M Moore              YES              --
James E. Essany             --             YES
Walter F. Dodrill          YES              --
Nina G. Drake              YES              --
Jeffrey D. Schlenker        --             YES
</TABLE>



<PAGE>
                                                                   Exhibit 10(f)
                     EXECUTIVE SALARY CONTINUATION AGREEMENT


     THIS AGREEMENT, entered into and effective this First day of January, 2003,
by and between  Klamath First Federal  Savings and Loan  Association,  a Federal
Savings and Loan Association  (hereinafter  referred to as the "Employer"),  and
(the "Employee"),  an Employee of the Employer (hereinafter referred to as the
"Employee"), who resides in the State of Oregon.

                              W I T N E S S E T H:

     WHEREAS,  the Employee is an employee of the Employer and, since January 1,
2003 has become  eligible to  participate in the Executive  Salary  Continuation
Plan represented by this Agreement (the "Plan");

     WHEREAS, the Employer desires to establish a compensation  benefits program
as a fringe benefit for certain officers of the Employer in order to attract and
retain  individuals  with  extensive  and  valuable  experience  in the  banking
industry;

     WHEREAS,  the  Employee's  experience  and  knowledge of the affairs of the
Employer and the banking industry are extensive and valuable;

     WHEREAS,  it is  deemed  to be in the best  interests  of the  Employer  to
provide the Employee  with certain  benefits,  on the terms and  conditions  set
forth  herein,  in order to  reasonably  induce  the  Employee  to remain in the
Employer's  employment  and to  compensate  the Employee  for valuable  services
heretofore rendered to the Employer; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and  conditions  upon  which  this  additional  compensatory  incentive  will be
provided  to  the  Employee,  or to the  Employee's  spouse  or  the  Employee's
designated beneficiaries, as the case may be;

     FURTHERMORE, it is the intent of the parties hereto that this Employee Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental   retirement  benefits  for  the  Employee,  and  be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Employee is fully advised of the
Employer's  financial  status and the design and operation of this benefit plan;
and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.       EMPLOYMENT

          Although  this  Agreement is intended to provide the Employee  with an
          additional  incentive  to remain in the employ of the  Employer,  this
          Agreement  shall not be deemed to  constitute a contract of employment
          between the Employee and the Employer nor shall any  provision of this
          Agreement  restrict or expand the right of the  Employer to  terminate
          the  Employee's  employment.  This  Agreement  shall have no impact or
          effect  upon any  separate  written  Employment  Agreement  which  the
          Employee may have with the Employer,  it being the parties'  intention
          and agreement that unless this Agreement is specifically referenced in
          said  Employment  Agreement  (or  any  modification   thereto),   this
          Agreement  (and the  Employer's  obligations  hereunder)  shall  stand
          separate and apart from, and shall have no effect upon, or be affected
          by, the terms and provisions of said Employment Agreement.

          Except as otherwise set forth in this  Agreement,  the term "Employer"
          shall  mean  Klamath  First  Federal  Savings  and  Loan  Association;
          provided,  further,  that for  purposes  of this  Agreement,  the term
          "Employer" shall mean Klamath First Bancorp, Inc. and its subsidiaries
          and affiliated entities,  including any parent holding company and its
          subsidiaries.


II.      FRINGE BENEFITS

          The  salary  continuation  benefits  provided  by this  Agreement  are
          granted by the  Employer as a fringe  benefit to the  Employee and are
          not part of any salary  reduction plan or an  arrangement  deferring a
          bonus or a salary  increase.  The  Employee  has no option to take any
          current payment or bonus in lieu of these salary continuation benefits
          except as set forth hereinafter.


III.     retirement date and early retirement date

         A.       Retirement Date:

          The term  "Retirement"  or "Retires" shall refer to the date which the
          Employee  attains  sixty-two  ("62") years of age and  acknowledges in
          writing to the Employer to be the last day the  Employee  will provide
          any  significant   personal  services,   whether  as  an  employee  or
          independent consultant or contractor, to the Employer.

<PAGE>


         B.       Early Retirement Date:

               The term "Early  Retirement  Date" shall mean the Retirement,  as
               defined above, of the Employee on, or after the Employee achieves
               fifty-five  (55) years of age, but has not yet reached  sixty-two
               (62) years of age.


IV.      retirement benefit and early retirement benefit

         A.       Retirement Benefit:

               If the Employee shall remain in the continuous  employment of the
               Employer until  attaining age sixty-two  (62), the Employee shall
               be entitled to be paid the "Normal Retirement  Benefit" specified
               in   Schedule  A,   payable  in   substantially   equal   monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the Employee  Retires (or on
               such later date as may be mutually  agreed  upon by the  Employee
               and the  Employer  in advance of said  Retirement  date)  payable
               until the Employee's death. After  commencement of payments,  the
               Normal  Retirement  Benefit will increase by two percent (2%) per
               year.

         B.       Early Retirement Benefit:

               The  Employee  shall  have the right to  retire  on a date  which
               constitutes an Early  Retirement  Date as defined in Subparagraph
               III (B) above.  In the event the  Employee  elects to Retire on a
               date which  constitutes an Early  Retirement Date, and said early
               retirement  is not  pursuant to a Change in Control as defined in
               paragraph VI below, the Employee shall be entitled to be paid the
               "Normal Retirement  Benefit" specified in Schedule A for the date
               the Retirement occurs, but reduced by a factor of one-half of one
               percent  (.5%) per month for each month or portion  thereof  that
               the Early  Retirement  occurs prior to the  Retirement  Date. The
               benefit   shall  be  payable  in   substantially   equal  monthly
               installments  on the first day of each month,  beginning with the
               month  following  the month in which the  Early  Retirement  Date
               occurs (or on such later date as may be  mutually  agreed upon by
               the Employee and the Employer in advance of such Early Retirement
               Date).  After  commencement  of  payments,  the Early  Retirement
               benefit will increase by two percent (2%) per year.

               Example:  If the Early  Retirement  Date occurs on the Employee's
               60th birthday and if the Retirement Date in Section III.A.  above
               is at age 62, the Normal Retirement Benefit specified in Schedule
               "A" as of the  Employee's  60th birthday  would be reduced by 12%
               [.5% x 24 months].


V.       other termination of EMPLOYMENT and DISABILITY

         A.       Payments in the Event Employment Is Terminated Prior to
                  Retirement:

               The  Employer  reserves  the right to  terminate  the  Employee's
               employment,  with or without  cause but  subject  to any  written
               employment  agreement  which may then exist, at any time prior to
               the  Employee's  Retirement.  In the event that the employment of
               the Employee shall be terminated,  other than by reason of death,
               Disability  or  Retirement,  prior  to the  Employee's  attaining
               sixty-two (62) years of age, then this Agreement  shall terminate
               on the date of such termination of employment; provided, however,
               that the Employee shall be entitled to the following  benefits as
               may be applicable  depending upon the  circumstances  surrounding
               the Employee's termination:

              (i)      Termination for Other Than Disability, Change in Control
                       or Cause:

               If the Employee's  employment is terminated by the Employee or by
               the  Employer for any reason  other than  Disability,  "Change in
               Control"  or  "Termination  for  Cause,"  the  Employee  shall be
               entitled to be paid the "Normal Retirement  Benefit" specified in
               Schedule   A  as  of  the  date  of   termination,   payable   in
               substantially equal monthly installments on the first day of each
               month,  beginning with the month following the month in which the
               Employee  attains  sixty-two  (62) years of age (or on such later
               date  as may be  mutually  agreed  upon by the  Employee  and the
               Employer   not  less  than   fifteen  (15)  days  prior  to  such
               commencement  date) payable until the Employee's death, and shall
               increase  by two  percent  (2%)  per  year.  Alternatively,  upon
               achieving age fifty-five (55) but before  achieving age sixty-two
               (62),  the  Employee  may choose to receive the Early  Retirement
               Benefit with the reductions from the "Normal Retirement  Benefit"
               as of the date of termination,  and as described in Section IV.B.
               of this Agreement.  The benefit shall be payable in substantially
               equal  monthly  installments  on the  first  day of  each  month,
               beginning  with the month  following the month in which the Early
               Retirement  Date occurs (or on such later date as may be mutually
               agreed  upon by the  Employee  and the  Employer  not  less  than
               fifteen (15) days prior to such commencement date) payable to the
               Employee's  death,  and shall  increase by two  percent  (2%) per
               year.

<PAGE>


                   (ii)    Termination for Cause:

               If the Employee  suffers a  "Termination  for Cause",  as defined
               herein below,  the Employee  shall forfeit any and all rights and
               benefits the Employee may have under the terms of this  Agreement
               and shall have no right to be paid any of the amounts which would
               otherwise be due or paid to the Employee by the Employer pursuant
               to the terms of this Agreement.  The term "Termination for Cause"
               shall have the definition  provided in the Employee's  Employment
               Agreement, as amended from time to time with the Employer. If the
               Employee  has  no   Employment   Agreement   with  the  Employer,
               "Termination for Cause" shall include  termination because of the
               Employee's personal dishonesty, incompetence, willful misconduct,
               breach of fiduciary duty involving  personal profit,  intentional
               failure to perform  stated  duties,  or willful  violation of any
               law,  rule,  or  regulation  (other than  traffic  violations  or
               similar offenses) or final  cease-and-desist  order. For purposes
               of this  Section,  no act, or the  failure to act, on  Employee's
               part shall be "willful"  unless done, or omitted to be done,  not
               in good faith and  without  reasonable  belief that the action or
               omission  was in the  best  interest  of the  Association  or its
               affiliates. Notwithstanding the foregoing, the Employee shall not
               be deemed  to have been  terminated  for Cause  unless  and until
               there  shall  have been  delivered  to the  Employee  a copy of a
               resolution duly adopted by the affirmative  vote of not less than
               three-fourths  of the  members  of the Board at a meeting  of the
               Board called and held for that purpose (after  reasonable  notice
               to the Employee and an opportunity,  together with counsel, to be
               heard before the Board),  finding that in the good faith  opinion
               of the Board,  the  Employee  was  guilty of  conduct  justifying
               termination for Cause and specifying the reasons thereof.

         B.       Payment in the Event of Disability Prior to Retirement:

               The  Employee  shall,  in  connection  with  acceptance  of  this
               Agreement,  elect  below  either  the "Lump Sum  Payment"  or the
               "Annuity  for Life"  option in the  event  the  Employee  becomes
               disabled at any time after the Effective  Date of this  Agreement
               but prior to  Retirement.  The term  "Disability"  or  "Disabled"
               shall  have the same  meaning  given  such terms in any policy of
               disability  insurance  maintained by the Employer for the benefit
               of employees  including  the  Employee.  In the absence of such a
               policy,  which  extends  coverage to the Employee in the event of
               disability, the terms shall mean bodily injury or disease (mental
               or  physical)   which  wholly  and   continuously   prevents  the
               performance of the Employee's duties to the Employer for at least
               one hundred twenty (120) days.

(i)      Lump Sum Payment.

                    The  Employee  shall  be  entitled  to be paid  the lump sum
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the  date  of  disability  or  date  the
                    Employee  otherwise  terminated  service  with the  Employer
                    other than for Cause.  The lump sum shall be payable 60 days
                    from the date the Employer has received a written request to
                    commence benefits, along with documentation showing that the
                    Employee has become disabled.

(ii)     Annuity for Life.

                    The Employee shall be entitled to be paid an annuity for the
                    Employee's life. The Employer shall purchase such an annuity
                    from an  insurance  company  with an A. M.  Best or  Moody's
                    rating  of  no  less  than  AA  and  using  the   amount  of
                    "Disability  Benefit" specified in Schedule A, determined as
                    of the  earlier  of the date of  disability  or the date the
                    Employee  otherwise  terminated  service  with the  Employer
                    other  than for  Cause.  The  Employer  shall  purchase  the
                    annuity  within  60 days  from  the date  the  Employer  has
                    received a written request to commence benefits,  along with
                    documentation showing that the Employee has become Disabled.
                    Nevertheless,  if the amount of the  applicable  "Disability
                    Benefit"  specified in Schedule A is $50,000.00 or less, the
                    payment  shall be as a lump sum to the  Employee and not the
                    purchase of an annuity for life.

(iii)    Employee  Election of Disability  Benefit.

                    I elect to receive the following  Disability Benefit (Please
                    sign on applicable line):

                           ______________________    Lump Sum Benefit.


                           ______________________    Annuity for Life.



VI.               CHANGE OF CONTROL

         A.       Definition of Change In Control:

                    A "Change in Control" of Klamath  First  Bancorp,  Inc. (the
                    "Company")  or  Klamath  First  Federal   Savings  and  Loan
                    Association (the "Association")  shall be deemed to occur if
                    and when (a) an  offeror  other than the  Company  purchases
                    shares of the common stock of the Company or the Association
                    pursuant to a tender or exchange offer for such shares,  (b)
                    any  person  (as such  term is used in  Sections  13(d)  and
                    14(d)(2)  of the  Securities  Exchange  Act of  1934)  is or
                    becomes the beneficial  owner,  directly or  indirectly,  of
                    securities  of the Company or the  Association  representing
                    25% or more of the combined voting power of the Company's or
                    the  Association's  then  outstanding  securities,  (c)  the
                    membership  of the board of  directors of the Company or the
                    Association  changes as the result of a contested  election,
                    such that individuals who were directors at the beginning of
                    any twenty-four  month period (whether  commencing before or
                    after  the  effective   date  of  this   Agreement)  do  not
                    constitute  a  majority  of the  Board  at the  end of  such
                    period,   or  (d)   shareholders   of  the  Company  or  the
                    Association  approve  a  merger,   consolidation,   sale  or
                    disposition of all or substantially  all of the Company's or
                    the  Association's  assets, or a plan of partial or complete
                    liquidation.

         B.       Termination by the Employer on Account of or After a Change in
                  Control:

                    In the event the Employee's  employment with the Employer is
                    terminated  by the Employer in  connection  with a Change in
                    Control,  the Employee  shall be  immediately  vested in the
                    "Normal Retirement  Benefit" specified in Schedule A for the
                    date the Employee  achieves age sixty-two (62). The Employee
                    shall be entitled to be paid the "Change in Control Benefit"
                    specified  in Schedule  A, in  substantially  equal  monthly
                    installments  on the first day of each month,  beginning  no
                    sooner  than the  month  following  the  month in which  the
                    Employee  attains  age  fifty-five  (55),  as  requested  in
                    writing by the Employee and delivered to the Employer or its
                    successor  thirty  (30) days  prior to the  commencement  of
                    installment payments;  provided,  however, that in the event
                    the  Employee  does  not  request  a  commencement  date  as
                    specified,  such installments shall be paid on the first day
                    of each month,  beginning with the month following the month
                    in which the Employee  attains  sixty-two (62) years of age.
                    Upon the commencement of payments, the installments shall be
                    payable until the  Employee's  death,  and shall increase by
                    two percent (2%) per year.

                    A  termination  shall be deemed to be in  connection  with a
                    Change in Control  if,  within two (2) years  following  the
                    occurrence  of a  Change  in  Control:  (a)  the  Employee's
                    employment  with the Employer is  terminated by the Employer
                    other than a Termination  for Cause; or (b) by reason of the
                    Employer's actions any adverse change occurs in the scope of
                    the  Employee's  position,   material  responsibilities  and
                    duties, salary,  benefits or location of employment;  or (c)
                    the  Employer  causes  an event to  occur  which  reasonably
                    constitutes  or  results  in a  demotion,  loss of title,  a
                    significant diminution of responsibilities or authority,  or
                    a  constructive  termination  (by forcing a  resignation  or
                    otherwise) of the Employee's employment.


VII.     benefit accounting

                    The  Employer  shall  account  for this  benefit  using  the
                    regulatory  accounting  principles of the Employer's primary
                    federal  regulator.  The Employer shall establish an accrued
                    liability  retirement  account for the  Employee  into which
                    appropriate reserves shall be accrued.


VIII.    restrictions on funding

                    The Employer shall have no obligation to set aside,  earmark
                    or  entrust  any  fund  or  money  with  which  to  pay  its
                    obligations  under this Employee Plan. The Employee,  her or
                    his beneficiary (ies), or any successor in interest shall be
                    and remain simply a general  creditor of the Employer in the
                    same manner as any other creditor having a general claim for
                    matured and unpaid  compensation.  The Employer reserves the
                    absolute right, at its sole  discretion,  to either fund the
                    obligations  undertaken  by this Employee Plan or to refrain
                    from  funding the same and to determine  the extent,  nature
                    and method of such  funding.  Should the  Employer  elect to
                    fund this Employee  Plan,  in whole or in part,  through the
                    purchase  of  life  insurance,   mutual  funds,   disability
                    policies or  annuities,  the Employer  reserves the absolute
                    right, in its sole discretion,  to terminate such funding at
                    any time, in whole or in part. At no time shall any Employee
                    be deemed to have any lien, right,  title or interest in any
                    specific funding investment or assets of the Employer.

                    If the  Employer  elects  to  invest  in a  life  insurance,
                    disability  or annuity  policy on the life of the  Employee,
                    then the  Employee  shall  assist  the  Employer  by  freely
                    submitting to a physical exam and supplying such  additional
                    information necessary to obtain such insurance or annuities.

                    Notwithstanding  anything  hereinabove to the contrary,  the
                    Employer and the Employee acknowledge and agree that, in the
                    event of a Change in Control and at the  written  request of
                    the Employee,  the Employer shall establish,  not later than
                    the effective  date of the Change in Control,  a Rabbi Trust
                    or multiple Rabbi Trusts (the "Trust" or "Trusts") upon such
                    terms and conditions as the Employer in its sole  discretion
                    deems   appropriate   and  in  compliance   with  applicable
                    provisions of the Internal  Revenue Code of 1986, as amended
                    (the  "Code")  in  order  to  permit  the  Employer  to make
                    contributions  and/or transfer assets to the Trust or Trusts
                    to discharge its obligations pursuant to this Agreement. The
                    principal  of the Trust or Trusts and any  earnings  thereon
                    shall be held  separate  and apart from  other  funds of the
                    Employer  to  be  used  exclusively  for  discharge  of  the
                    Employer's  obligations pursuant to this Agreement and shall
                    continue  to be  subject  to the  claims  of the  Employer's
                    general   creditors  until  paid  to  the  Employee  or  its
                    beneficiaries  in such manner and at such times as specified
                    in this Agreement


IX.      MISCELLANEOUS

         A.       Alienability and Assignment Prohibition:

                    The  Employee  shall  have no power  or  right to  transfer,
                    assign, anticipate,  hypothecate,  mortgage, commute, modify
                    or otherwise encumber in advance any of the benefits payable
                    hereunder  nor  shall any of said  benefits  be  subject  to
                    seizure for the payment of any debts, judgments,  alimony or
                    separate   maintenance   owed   by  the   Employee   nor  be
                    transferable by operation of law in the event of bankruptcy,
                    insolvency or otherwise.  In the event the Employee attempts
                    assignment, commutation, hypothecation, transfer or disposal
                    of the benefits hereunder,  the Employer's liabilities shall
                    forthwith cease and terminate.

         B.       Binding Obligation of the Employer and any Successor in
                  Interest:

                    The  Employer  shall not merge or  consolidate  into or with
                    another Employer or sell  substantially all of its assets to
                    another Employer,  firm or person until such Employer,  firm
                    or  person  expressly  agree,  in  writing,  to  assume  and
                    discharge the duties and  obligations  of the Employer under
                    this Employee Plan. This Employee Plan shall be binding upon
                    the parties hereto, their successors,  beneficiaries,  heirs
                    and personal representatives.

         C.       Amendment or Revocation:

                    It is agreed by and between the parties hereto that,  during
                    the  lifetime of the  Employee,  this  Employee  Plan may be
                    amended  or  revoked  at any time or  times,  in whole or in
                    part, by the mutual written  consent of the Employee and the
                    Employer.

         D.       Gender:

                    Whenever  in  this  Employee  Plan  words  are  used  in the
                    masculine or neuter gender, they shall be read and construed
                    as in the  masculine,  feminine or neuter  gender,  whenever
                    they should so apply.

         E.       Effect on Other Employer Benefit Plans:

                    Nothing  contained  in this  Employee  Plan shall affect the
                    right of the Employee to participate in or be covered by any
                    qualified or non-qualified pension,  profit-sharing,  group,
                    bonus or other  supplemental  compensation or fringe benefit
                    plan  constituting  a part  of the  Employer's  existing  or
                    future compensation structure.

         F.       Headings:

                    Headings and  subheadings in this Employee Plan are inserted
                    for reference and convenience only and shall not be deemed a
                    part of this Employee Plan.

         G.       Applicable Law:

                    The laws of the State of Oregon  shall  govern the  validity
                    and interpretation of this Agreement.

         H.       Partial Invalidity:

                    If any  term,  provision,  covenant,  or  condition  of this
                    Employee Plan is determined by an arbitrator or a court,  as
                    the case may be, to be invalid, void, or unenforceable, such
                    determination  shall not render any other  term,  provision,
                    covenant, or condition invalid, void, or unenforceable,  and
                    the  Employee  Plan  shall  remain in full  force and effect
                    notwithstanding such partial invalidity.

         I.       Not a Contract of Employment:

                    This Agreement  shall not be deemed to constitute a contract
                    of  employment  between  the parties  hereto,  nor shall any
                    provision  hereof  restrict  the  right of the  Employer  to
                    discharge  the  Employee,  or  restrict  the  right  of  the
                    Employee to terminate employment.

         J.       Notices:

                    Any notice  required or  permitted of either the Employee or
                    the Employer  under this  Agreement  shall be deemed to have
                    been duly  given,  if by  personal  delivery,  upon the date
                    received by the party or its authorized  representative;  if
                    by  facsimile,  upon  transmission  to  a  telephone  number
                    previously  provided by the party to whom the  facsimile  is
                    transmitted  as  reflected  in  the  records  of  the  party
                    transmitting the facsimile and upon reasonable  confirmation
                    of such transmission; and if by mail, on the third day after
                    mailing via U.S. first class mail,  registered or certified,
                    postage prepaid and return receipt requested,  and addressed
                    to the party at the  address  given below for the receipt of
                    notices,  or such  changed  address as may be  requested  in
                    writing by a party.

<PAGE>


                  If to the Employer:       Klamath First Bancorp, Inc.
                                            540 Main Street
                                            Klamath Falls, Oregon 97601-6047
                                            Attention: Human Resources

                  If to the Employee:       (the "Employee")
                                            (the "Employee's" Address)

         K.       Opportunity To Consult With Independent Advisors:

                    The  Employee   acknowledges  that  the  Employee  has  been
                    afforded  the   opportunity  to  consult  with   independent
                    advisors  of  his  or  her   choosing   including,   without
                    limitation,   accountants   or  tax   advisors  and  counsel
                    regarding  both the benefits  granted to the Employee  under
                    the terms of this Agreement and the (i) terms and conditions
                    which may affect the Employee's  right to these benefits and
                    (ii)  personal  tax  effects  of  such  benefits  including,
                    without  limitation,  the  effects  of any  federal or state
                    taxes, Section 280G of the Code, and any other taxes, costs,
                    expenses or liabilities whatsoever related to such benefits,
                    which  in  any  of  the  foregoing  instances  the  Employee
                    acknowledges and agrees shall be the sole  responsibility of
                    the Employee  notwithstanding any other term or provision of
                    this Agreement. The Employee further acknowledges and agrees
                    that the Employer shall have no liability whatsoever related
                    to any such  personal tax effects or other  personal  costs,
                    expenses,  or  liabilities  applicable  to the  Employee and
                    further  specifically  waives any right for the Employee and
                    his  or her  heirs,  beneficiaries,  legal  representatives,
                    agents, successors, and assigns to claim or assert liability
                    on the part of the Employer related to the matters described
                    above   in   this   subparagraph.   The   Employee   further
                    acknowledges   and  agrees  that  the   Employee  has  read,
                    understands  and consents to all of the terms and conditions
                    of this  Agreement,  and that the Employee  enters into this
                    Agreement  with  a  full  understanding  of  its  terms  and
                    conditions.


X.       ADMINISTRATIVE AND CLAIMS PROVISION

         A.       Named Fiduciary and Plan Administrator:

                    The  "Named  Fiduciary  and  Plan   Administrator"  of  this
                    Employee Plan shall be Klamath First  Bancorp,  Inc.,  until
                    its  resignation or removal by the Board. As Named Fiduciary
                    and Plan  Administrator,  the Employer  shall be responsible
                    for  the  management,  control  and  administration  of  the
                    Employee  Plan.  The Named  Fiduciary may delegate to others
                    certain    aspects   of   the   management   and   operation
                    responsibilities   of  the  Employee   Plan   including  the
                    employment  of advisors and the  delegation  of  ministerial
                    duties to qualified individuals.

         B.       Claims Procedure:

                    In the event a  dispute  arises  over  benefits  under  this
                    Employee  Plan and benefits are not paid to the Employee and
                    the claimant  feels he is entitled to receive such benefits,
                    then a written claim must be made to the Named Fiduciary and
                    Plan  Administrator  named above within forty-five (45) days
                    from the date payments are refused.  The Named Fiduciary and
                    Plan Administrator shall review the written claim and if the
                    claim is denied,  in whole or in part, they shall provide in
                    writing within forty-five (45) days of receipt of such claim
                    the  specific  reasons  for such  denial,  reference  to the
                    provisions  of this  Employee  Plan upon which the denial is
                    based and any additional  material or information  necessary
                    to perfect the claim.  Such  written  notice  shall  further
                    indicate the additional  steps to be taken by claimants if a
                    further review of the claim denial is desired. A claim shall
                    be  deemed   denied  if  the   Named   Fiduciary   and  Plan
                    Administrator  fail to take any action  within the aforesaid
                    forty-five-day period.

                    If  claimants  desire a second  review they shall notify the
                    Named  Fiduciary and Plan  Administrator  in writing  within
                    forty-five  (45) days of the first claim  denial.  Claimants
                    may review  this  Employee  Plan or any  documents  relating
                    thereto  and submit any written  issues and  comments it may
                    feel  appropriate.  In  their  sole  discretion,  the  Named
                    Fiduciary  and Plan  Administrator  shall  then  review  the
                    second   claim  and  provide  a  written   decision   within
                    forty-five (45) days of receipt of such claim. This decision
                    shall likewise  state the specific  reasons for the decision
                    and shall  include  reference to specific  provisions of the
                    Plan Agreement upon which the decision is based.

C.       Arbitration:

                    All claims,  disputes and other matters in question  arising
                    out of or  relating  to  this  Agreement  or the  breach  or
                    interpretation  thereof,  other than those matters which are
                    to be  determined  by the  Employer in its sole and absolute
                    discretion,  shall be resolved by binding arbitration before
                    a representative member, selected by the mutual agreement of
                    the  parties,  of the  Judicial  Arbitration  and  Mediation
                    Services,  Inc.  ("JAMS").  In the  event  JAMS is unable or
                    unwilling to conduct the arbitration  provided for under the
                    terms of this Paragraph,  or has  discontinued its business,
                    the parties agree that a representative member,  selected by
                    the  mutual  agreement  of  the  parties,  of  the  American
                    Arbitration  Association ("AAA"),  shall conduct the binding
                    arbitration  referred  to in this  Paragraph.  Notice of the
                    demand for  arbitration  shall be filed in writing  with the
                    other  party to this  Agreement  and with  JAMS (or AAA,  if
                    necessary).  In no event shall the demand for arbitration be
                    made after the date when  institution  of legal or equitable
                    proceedings based on such claim,  dispute or other matter in
                    question  would  be  barred  by the  applicable  statute  of
                    limitations.  The arbitration shall be subject to such rules
                    of procedure  used or  established  by JAMS, or if there are
                    none, the rules of procedure used or established by AAA. Any
                    award  rendered  by JAMS or AAA shall be final  and  binding
                    upon the parties, and as applicable, their respective heirs,
                    beneficiaries, legal representatives, agents, successors and
                    assigns, and may be entered in any court having jurisdiction
                    thereof.  Any  arbitration  hereunder  shall be conducted in
                    Klamath Falls,  Oregon,  unless  otherwise  agreed to by the
                    parties.

         D.       Attorneys Fees:

                    In the event of any arbitration or litigation concerning any
                    controversy,  claim or dispute  between the parties  hereto,
                    arising out of or relating to this  Agreement  or the breach
                    hereof, or the  interpretation  hereof, the prevailing party
                    shall be entitled to recover from the  non-prevailing  party
                    reasonable  expenses,  attorneys' fees and costs incurred in
                    connection  therewith or in the enforcement or collection of
                    any  judgment or award  rendered  therein.  The  "prevailing
                    party" means the party  determined by the  arbitrator(s)  or
                    court,  as the case may be, to have most  nearly  prevailed,
                    even if such  party  did not  prevail  in all  matters,  not
                    necessarily the one in whose favor a judgment is rendered.


XI.      SECTION 280G BENEFITS ADJUSTMENT

                    If all or any portion of the amounts payable to the Employee
                    under this  Agreement,  either alone or together  with other
                    payments  which the  Employee  has the right to receive from
                    the Employer,  constitute "excess parachute payments" within
                    the meaning of Section 280G of the Code, that are subject to
                    the  excise  tax  imposed  by  Section  4999 of the Code (or
                    similar  tax  and/or  assessment),  the  Employer  (and  its
                    successor) and the Employee each agree to pay their share of
                    any taxes that may be imposed as a result of  payments  made
                    pursuant to this Agreement; provided, however, that Employer
                    and  Employee  shall  cooperate  with each other and use all
                    reasonable   efforts  to  minimize  to  the  fullest  extent
                    possible the amount of excise tax imposed by Section 4999 of
                    the Code. If at a later date it is  determined  (pursuant to
                    final  regulations  or  published  rulings  of the  Internal
                    Revenue  Service,  final  judgment  of a court of  competent
                    jurisdiction,  or otherwise) that the amount of excise taxes
                    payable by the Employee is greater than the amount initially
                    so  determined,  then the Employee shall pay an amount equal
                    to the sum of such additional excise taxes and any interest,
                    fines and penalties  resulting from such  underpayment.  The
                    determination  of the amount of any such excise  taxes shall
                    be made by the  independent  accounting firm employed by the
                    Employer  immediately prior to the change in control or such
                    other  independent  accounting  firm  or  advisor  as may be
                    mutually agreeable to Employer and Executive in the exercise
                    of their reasonable good faith judgment.


     In witness whereof,  the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.

  Klamath First Federal Savings and Loan Association



/s/                                                           /s/
Kermit K. Houser                                              Witness
President and CEO




/s/                                                           /s/
(the "Employee")                                              Witness

<PAGE>
                                                                  Exhibit 10(g)

                               FIRST AMENDMENT TO
                     EXECUTIVE SALARY CONTINUATION AGREEMENT

                              FOR SAMPLE EXECUTIVE
<TABLE>
<CAPTION>

The  First  Amendments to  the  Executive  Salary  Continuation  Agreements  are
substantially the same for all Executives except for the following:

                        December 31, 2003
                             Amount
                        -----------------
<S>                        <C>
Frank X. Hernandez         $548,847
Craig M Moore               606,309
James E. Essany             525,293
Walter F. Dodrill           582,214
Nina G. Drake               473,327
Jeffrey D. Schlenker        511,577
</TABLE>




<PAGE>

                                                                   Exhibit 10(g)
           FIRST AMENDMENT TO executive salary continuation AGREEMENT

     This FIRST  AMENDMENT  TO EXECUTIVE  SALARY  CONTINUATION  AGREEMENT  (this
"Agreement")  is made and entered into on July 14, 2003, by and between  Klamath
Federal Savings and Loan Association  ("Employer") and the undersigned executive
officer of Employer ("Employee").

     WHEREAS,   Employer   and  Employee   entered  into  an  Executive   Salary
Continuation Agreement (the "SCA") effective January 1, 2003;

     WHEREAS,  Klamath First Bancorp,  Inc.  ("Company"),  the parent company of
Employer,  has entered into an Agreement and Plan of Merger dated as of July 14,
2003, (the "Merger Agreement") with Sterling Financial Corporation  ("Sterling")
with respect to a proposed transaction (the "Transaction") whereby Sterling will
acquire all of the outstanding shares of Company common stock in a stock merger;

     WHEREAS,  Employer  desire to enter into this  Agreement to facilitate  the
Transaction; and

     WHEREAS,  Employee  desires to enter into this  Agreement to facilitate the
Transaction  so as to enable  Employee (a) to receive a cash-out of his benefits
under the SCA as  provided  herein,  (b) to receive  change in control  benefits
under his employment  agreement and (c) to enhance the value of shares of common
stock of Company owned by Employee and the value of his stock options to acquire
common stock of Company.

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged by the parties, it is agreed by the parties as follows:

1.   Notwithstanding  anything  contained in the SCA to the  contrary,  Employer
     shall  have the  right to pay  Employee  at any time  from the date  hereof
     through   December  31,  2003  the  amount  of  $__________  less  all  tax
     withholding  obligations  with respect  thereto (the "Cash-Out  Amount") in
     full and complete satisfaction of all obligations of Employer under the SCA
     and all rights of Employee  under the SCA. Upon Employer  making payment of
     the Cash-Out Amount to Employee as provided herein, the SCA shall terminate
     and shall have no further force or effect.

2.   Upon payment of the Cash-Out  Amount to Employee by Employer as provided in
     paragraph  1 above,  Employee  does hereby  release  and forever  discharge
     Employer,  its  affiliates,   and  their  respective  assigns,   directors,
     officers,  employees and agents from any and all claims, demands, causes of
     action and rights that Employee has or might have under the SCA of any kind
     or character whatsoever, whether known or unknown.

3.   In the event the Merger Agreement is terminated,  then this Agreement shall
     have no further force or effect.

4.   This Agreement may be executed in counterparts by the parties hereto,  each
     of which when so executed  shall be deemed an  original  and both of which,
     taken together, shall constitute one and the same agreement.

     The parties have  executed  this  Agreement on the day and year first above
     written.

                                    KLAMATH FEDERAL SAVINGS AND LOAN ASSOCIATION

                                        By:   /s/ Kermit K. Houser
                                               Kermit K. Houser
                                               President/CEO


                                     EMPLOYEE:


                                        By:
                                              ("Employee")




<PAGE>
                                                                   Exhibit 10(h)
                       DIRECTOR FEE CONTINUATION AGREEMENT

     THIS AGREEMENT,  made and entered into this First Day of January,  2003, by
and between Klamath First Bancorp,  Inc., a thrift holding company  (hereinafter
referred  to as the  "Bank"),  and  "Director",  a member  of the  Board of
Directors of the Bank (hereinafter referred to as the "Director").

                                   WITNESSETH:

     WHEREAS,  it is  the  consensus  of the  Board  of  Directors  (hereinafter
referred to as the "Board") that the Director's services to the Bank in the past
have been of exceptional  merit and have constituted an invaluable  contribution
to the general  welfare of the Bank and in bringing it to its present  status of
operating efficiency, and its present position in its field of activity;

     WHEREAS, the Director's  experience,  knowledge of the affairs of the Bank,
reputation,  and contacts in the industry are so valuable that  assurance of the
Director's  continued services is essential for the future growth and profits of
the  Bank  and it is in the  best  interests  of the  Bank to  arrange  terms of
continued  service for the Director so as to  reasonably  assure the  Director's
remaining in the Bank's service during the Director's  lifetime or until the age
of retirement;

     WHEREAS,  it is the  desire of the Bank  that the  Director's  services  be
retained as herein provided;

     WHEREAS, the Director is willing to continue to serve the Bank provided the
Bank agrees to pay the  Director or the  Director's  surviving  spouse,  certain
benefits in accordance with the terms and conditions hereinafter set forth;

     ACCORDINGLY,  it is the desire of the Bank and the  Director  to enter into
this Agreement  under which the Bank will agree to make certain  payments to the
Director at retirement or the  Director's  surviving  spouse in the event of the
Director's death pursuant to this Agreement;

     FURTHERMORE, it is the intent of the parties hereto that this Director Plan
be  considered  an  unfunded   arrangement   maintained   primarily  to  provide
supplemental  retirement  benefits  for the  Director,  and to be  considered  a
non-qualified  benefit  plan for  purposes  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"). The Director is fully advised of the
Bank's  financial  status  and has  had  substantial  input  in the  design  and
operation of this benefit plan; and

     NOW,  THEREFORE,  in consideration of services performed in the past and to
be  performed  in the future as well as of the  mutual  promises  and  covenants
herein contained it is agreed as follows:

<PAGE>


I.   SERVICE

     The Director will continue to serve the Bank in such capacity and with such
     duties and responsibilities as may be assigned,  and with such compensation
     as may be  determined  from time to time by the Board of  Directors  of the
     Bank.

II.  FRINGE BENEFITS

     The fee continuation benefits provided by this Agreement are granted by the
     Bank as a  fringe  benefit  to the  Director  and  are not  part of any fee
     reduction plan or an arrangement  deferring a bonus or a fee increase.  The
     Director  has no option  to take any  current  payment  or bonus in lieu of
     these fee continuation benefits except as set forth hereinafter.

III. retirement date AND NORMAL RETIREMENT AGE

     A.   Retirement  Date: If the Director  continuously  serves the Bank,  the
          Director shall be eligible to retire from active service with the Bank
          upon the  attainment of age  fifty-five  (55) and receive the benefits
          described  below,  unless by action  of the  Board of  Directors  this
          period of active service shall be shortened or extended.

     B.   Normal  Retirement Age:  Normal  Retirement Age shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-eight (68).

     C.   Normal Retirement Age Following a Change in Control:  The term "Normal
          Retirement  Age Following a Change in Control"  shall mean the date on
          which the  Director  Retires  from service as a member of the Board of
          Directors after attaining age sixty-five (65).

     D.   Early Retirement Date: The term "Early Retirement Date" shall mean the
          Retirement  of the Director  from active  service with the Bank at the
          beginning of any month after the Director  achieves age 55, but before
          attaining age sixty-eight (68), [sixty-five (65) following a Change in
          Control].

IV.  DIRECTOR BENEFITS - normal retirement age

     A.   Director  Emeritus  Benefits:  Upon the  attainment of age  sixty-five
          (65),  the Director  shall be entitled to serve the Bank as a Director
          Emeritus in accordance with the procedures and policies established by
          the Board of Directors of the Bank applicable to service as a Director
          Emeritus. If the Director elects to serve as a Director Emeritus,  the
          Director  shall be paid two thousand eight hundred thirty four dollars
          ($2,834) per month for a period of thirty-six (36) months,  commencing
          with the Retirement Date and continuing until the earlier of the third
          anniversary  thereof,  or the death of the Director.  Monthly payments
          will be increased by two percent at the end of each calendar  year. If
          the Director declines or is unable to serve as Director Emeritus,  the
          Director  shall  forfeit  any  entitlement  to the  Director  Emeritus
          Benefits.

     B.   Director Retirement  Benefits:  After the expiration of the thirty-six
          (36) month period  described  above in Paragraph IV A., the Bank shall
          pay to  the  Director  Retirement  Benefit  Payments  equal  to  three
          thousand  seven  dollars  per  month  ($3,007)  until the death of the
          Director. Monthly payments shall increase by two percent at the end of
          each calendar year.

V.   DIRECTOR BENEFITS - EARLY RETIREMENT AGE

     The Director shall have the right to retire on a date which  constitutes an
     Early Retirement Date as defined  previously in Subparagraph III. D. In the
     event the Director elects Early Retirement,  the Director shall be entitled
     to be paid  Director  Retirement  Benefits  equal to the "Early  Retirement
     Benefit"  applicable for the calendar year in which the Director retires as
     specified in Schedule  "A". The benefit  shall be payable in  substantially
     equal monthly  installments on the first day of each month,  beginning with
     the month  following the month the Director  Retires (or on such later date
     as may be mutually  agreed upon by the  Director and the Bank in advance of
     such Early Retirement), payable until the Director's death.

VI.  DIRECTOR DEATH BENEFITS - NORMAL RETIREMENT AGE

     In the event the Director Retires on or after the Normal Retirement Age and
     dies before receiving a total of thirty-six (36) monthly Director  Emeritus
     Benefits and twenty-four (24) monthly  Director  Retirement  Benefits,  the
     Bank shall  continue such monthly  payments  until the full number of sixty
     (60) monthly  payments have been made, or until the death of the Director's
     surviving  spouse,  whichever  occurs earlier.  Said payments due hereunder
     shall  begin  the  first  day of the month  following  the  decease  of the
     Director.

VII. DIRECTOR DEATH BENEFITS - EARLY RETIREMENT AGE

     In the  event  the  Director  Retires  on a  date  that  constitutes  Early
     Retirement and dies before receiving a total of sixty (60) monthly Director
     Retirement  Benefits,  the Bank shall continue such monthly  payments until
     the full number of sixty (60) monthly payments have been made, or until the
     death of the Director's  surviving spouse,  whichever occurs earlier.  Said
     payments due hereunder shall begin the first day of the month following the
     decease of the Director.
<PAGE>

VIII. benefit accounting

     The Bank shall  account for this benefit  using the  regulatory  accounting
     principles  of  the  Bank's  primary  federal  regulator.  The  Bank  shall
     establish an accrued  liability  retirement  account for the Director  into
     which appropriate reserves shall be accrued.

IX.  vesting

     Director's  interest in the benefits that are the subject of this Agreement
     shall be subject to a vesting schedule described in Schedule A.

X.   other termination of SERVICE

     A.   Voluntary  Resignation or failure to be re-elected:  In the event that
          the  service  of  the  Director  shall  terminate  by  the  Director's
          voluntary action, or by the Director's failure to be re-elected to the
          Board without cause, prior to the Retirement Date described in III. A.
          above,  then  this  Agreement  shall  terminate  upon the date of such
          termination  of  service  and the Bank  shall  pay to the  Director  a
          monthly  amount  equal  to  one-twelfth  (1/12)  times  the  "Director
          Retirement  Benefit" as  described  in Schedule A and earned as of the
          date of termination.  Such benefits shall be payable commencing on the
          first of the month  after the  Director  reaches  age 68 and  continue
          until the death of the Director.  Monthly  payments  shall increase by
          two percent at the end of each calendar year.

          In the event the  Director's  death should occur after such  severance
          but prior to the  completion of the monthly  payments  provided for in
          this Paragraph IX, the Bank shall continue such monthly payments until
          a total of sixty (60) monthly  payments  have been made,  or until the
          death of the Director's  surviving  spouse,  whichever occurs earlier.
          Said  payments  due  hereunder  shall begin the first day of the month
          following the decease of the Director.

     B.   Removal for Cause:  "Removal for Cause"  shall  include the removal of
          the  Director   because  of  the   Director's   personal   dishonesty,
          incompetence,  willful misconduct,  breach of fiduciary duty involving
          personal  profit,  willful  violation of any law,  rule, or regulation
          (other  than  traffic   violations  or  similar   offenses)  or  final
          cease-and-desist order. Notwithstanding the foregoing,  Director shall
          not be deemed to have been  removed  for Cause  unless and until there
          shall have been delivered to the Director a copy of a resolution  duly
          adopted by the affirmative vote of not less than  three-fourths of the
          remaining  members of the Board at a meeting  of the Board  called and
          held for that  purpose  (after  reasonable  notice to Director  and an
          opportunity,  together  with  counsel,  to be heard before the Board),
          finding that in the good faith opinion of the Board,  the Director was
          guilty of conduct  justifying  removal  for Cause and  specifying  the
          reasons  thereof.  The  Director  shall not have the right to  receive
          compensation  or other  benefits  for any period after the removal for
          Cause. All rights under this Agreement shall be forfeited,  whether or
          not vested.  Any stock options granted to the Director under any stock
          option  plan or any  unvested  awards  granted  under any other  stock
          benefit plan of the Bank,  or any  subsidiary  or  affiliate  thereof,
          shall become null and void effective upon Director's receipt of Notice
          of Removal for Cause pursuant to paragraph  IX(ii)  hereof,  and shall
          not be  exercisable  by the  Director at any time  subsequent  to such
          Removal for Cause.

     C.   Payments in the Event of Disability Prior to Retirement.  In the event
          the Director  becomes Disabled at any time after the Effective Date of
          this Agreement but prior to Retirement, the Director shall be entitled
          to be  paid  as a lump  sum  the  "Disability  Benefit"  specified  in
          Schedule "A" as of the date of the  disability.  The lump sum shall be
          payable  60 days from the date the  Employer  has  received  a written
          request to commence benefits,  along with  documentation  showing that
          the Employee has become  Disabled.  Once the lump sum payment has been
          made,  this  Agreement  is  terminated,  and the Bank  has no  further
          obligation to the Director or the  Director's  surviving  spouse under
          this plan.

          The term  "Disability" or "Disabled" shall have the same meaning given
          such terms in any policy of  disability  insurance  maintained  by the
          Employer for the benefit of its employees  including the Director.  In
          the absence of such a policy which extends coverage to the Director in
          the event of disability, the terms shall mean bodily injury or disease
          (mental or  physical)  which  wholly  and  continuously  prevents  the
          performance of the Employee's  duties to the Employer for at least one
          hundred twenty (120) days.

XI.  CHANGE OF CONTROL

          A "Change in Control" of the Bank or of Klamath First Federal  Savings
          and Loan Association (the  "Association")  shall be deemed to occur if
          and when (a) an offer or other than the Bank  purchases  shares of the
          common  stock of the Bank or the  Association  pursuant to a tender or
          exchange  offer for such shares,  (b) any person (as such term is used
          in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
          is or  becomes  the  beneficial  owner,  directly  or  indirectly,  of
          securities of the Bank or the Association  representing 25% or more of
          the combined voting power of the Bank's then  outstanding  securities,
          (c) the  membership  of the  board  of  directors  of the  Bank or the
          Association changes as the result of a contested  election,  such that
          individuals  who were  directors at the  beginning of any  twenty-four
          month period (whether commencing before or after the effective date of
          this  Agreement) do not  constitute a majority of the Board at the end
          of such period,  or (d)  shareholders  of the Bank or the  Association
          approve  a  merger,  consolidation,  sale  or  disposition  of  all or
          substantially all of the Bank's or the Association's assets, or a plan
          of  partial  or  complete  liquidation.   For  the  purposes  of  this
          Agreement,  transfers  made on account  of deaths or gifts,  transfers
          between  family  members or transfers to a qualified  retirement  plan
          maintained by the Bank or the Association,  shall not be considered in
          determining whether there has been a change in control.

          Upon a Change  of  Control,  if the  Director  subsequently  suffers a
          Termination of Service  (voluntary or involuntary),  except for cause,
          then the Director  shall be paid Director  Retirement  Benefits of two
          thousand eight hundred thirty four ($2,834) per month, commencing with
          the  Retirement   Date  specified  in  paragraph  III.  C.  above  and
          continuing  until  the  death  of  the  Director.  Alternatively,  the
          Director  may elect to receive the "Early  Retirement  Benefit:  After
          Change in  Control"  as  specified  in the  Schedule A, as of the date
          selected for early  retirement.  However,  if the Director dies before
          sixty monthly  payments have been made,  the Bank shall  continue such
          monthly  payments  until a total of sixty (60) monthly  payments  have
          been  made,  or until the death of the  Director's  surviving  spouse,
          whichever  occurs earlier.  Monthly  payments will be increased by two
          percent at the end of each calendar year.  Director  Emeritus Benefits
          provided  for in  paragraph VI above shall not be paid if the Director
          receives  benefits  pursuant  to  termination  following  a Change  in
          Control.

XII. restrictions on funding

          The Bank shall have no obligation to set aside, earmark or entrust any
          fund or money with which to pay its  obligations  under this  Director
          Plan.  The  Directors  or their  surviving  spouse shall be and remain
          simply a general  creditor of the Bank in the same manner as any other
          creditor having a general claim for matured and unpaid compensation.

          The Bank  reserves  the absolute  right,  at its sole  discretion,  to
          either fund the  obligations  undertaken  by this  Director Plan or to
          refrain from funding the same and to determine the extent,  nature and
          method of such  funding.  Should the Bank elect to fund this  Director
          Plan,  in whole or in part,  through the  purchase of life  insurance,
          mutual funds, disability policies or annuities,  the Bank reserves the
          absolute right, in its sole  discretion,  to terminate such funding at
          any time, in whole or in part. At no time shall any Director be deemed
          to have any lien or right,  title or  interest  in or to any  specific
          funding investment or assets of the Bank.

XIII. MISCELLANEOUS

          A.   Status as an Unsecured General Creditor: Notwithstanding anything
               contained herein to the contrary:  (i) neither the Director,  nor
               the Director's  spouse shall have any legal or equitable  rights,
               interests,  or claims in or to any specific property or assets of
               the Bank as a result of this  Agreement;  (ii) none of the Bank's
               assets shall be held in or under any trust for the benefit of the
               Director or the Director's  spouse or held in any way as security
               for the  fulfillment  of the  obligations  of the Bank under this
               Agreement; (iii) all of the Bank's assets shall be and remain the
               general  unpledged and unrestricted  assets of the Bank; (iv) the
               Bank's  obligation  under  this  Agreement  shall  be  that of an
               unfunded  and  unsecured  promise by the Bank to pay money in the
               future;  and (v) the Director and the Director's  spouse shall be
               unsecured  general  creditors  with respect to any benefits which
               may be payable under the terms of this Agreement.

               Notwithstanding  the above, the Director and the Bank acknowledge
               and agree  that,  in the event of a Change in Control  and at the
               written request of the Director,  the Bank shall  establish,  not
               later than the effective  date of the Change in Control,  a Rabbi
               Trust or multiple  Rabbi Trusts (the  "Trust" or  "Trusts")  upon
               such  terms  and  conditions  as the Bank in its sole  discretion
               deems appropriate and in compliance with applicable provisions of
               the Code in order to permit the Bank to make contributions and/or
               transfer   assets  to  the  Trust  or  Trusts  to  discharge  its
               obligations  pursuant to this  Agreement.  The  principal  of the
               Trust or Trusts and any earnings  thereon  shall be held separate
               and apart from other funds of the Bank to be used exclusively for
               discharge of the Bank's  obligations  pursuant to this  Agreement
               and shall  continue  to be  subject  to the  claims of the Bank's
               general creditors until paid to the Director or his beneficiaries
               in such manner and at such times as specified in this Agreement.

          B.   Binding Obligation of the Bank and any Successor in Interest: The
               Bank shall not merge or consolidate  into or with another bank or
               sell  substantially  all of its assets to another  bank,  firm or
               person  until  such  bank,  firm or person  expressly  agree,  in
               writing,  to assume and discharge the duties and  obligations  of
               the Bank under this  Director  Plan.  This Director Plan shall be
               binding upon the parties hereto, their successors, beneficiaries,
               heirs and personal representatives.

          C.   Amendment or Revocation:  It is agreed by and between the parties
               hereto that,  during the lifetime of the Director,  this Director
               Plan may be amended or revoked at any time or times,  in whole or
               in part,  by the mutual  written  consent of the Director and the
               Bank.

          D.   Gender:  Whenever  in this  Director  Plan  words are used in the
               masculine or neuter  gender,  they shall be read and construed as
               in the masculine, feminine or neuter gender, whenever they should
               so apply.

          E.   Effect on Other Bank  Benefit  Plans:  Nothing  contained in this
               Director   Plan  shall  affect  the  right  of  the  Director  to
               participate  in or be covered by any  qualified or  non-qualified
               pension,  profit-sharing,  group,  bonus  or  other  supplemental
               compensation  or fringe  benefit plan  constituting a part of the
               Bank's existing or future  compensation  structure.  However,  in
               connection  with the  establishment  of this Director  Plan,  the
               Director is waiving any rights  under the Klamath  First  Federal
               Savings and Loan Association  Director Emeritus Plan dated August
               20, 1996, which waiver is further documented in Schedule B.

          F.   Headings:  Headings and  subheadings  in this  Director  Plan are
               inserted  for  reference  and  convenience  only and shall not be
               deemed a part of this Director Plan.

          G.   Applicable Law: The validity and interpretation of this Agreement
               shall be governed by the laws of the State of Oregon.

          H.   12  U.S.C.  Sec.  1828(k):  Any  payments  made  to the  Director
               pursuant to this Director Plan, or otherwise,  are subject to and
               conditioned upon their compliance with 12 U.S.C.  Sec. 1828(k) or
               any regulations promulgated thereunder.

          I.   Partial  Invalidity:   If  any  term,  provision,   covenant,  or
               condition of this Director Plan is determined by an arbitrator or
               a  court,   as  the  case  may  be,  to  be  invalid,   void,  or
               unenforceable,  such  determination  shall not  render  any other
               term,  provision,   covenant,  or  condition  invalid,  void,  or
               unenforceable,  and the Director  Plan shall remain in full force
               and effect notwithstanding such partial invalidity.

          J.   Continuation as Director: Neither this Agreement nor the payments
               of any  benefits  hereunder  shall be  construed as giving to the
               Director  any  right to be  retained  as a member of the Board of
               Directors of the Bank.

XIV. ERISA PROVISION

          A.   Named Fiduciary and Plan Administrator:  The "Named Fiduciary and
               Plan  Administrator" of this Director Plan shall be Klamath First
               Bancorp,  Inc., until its resignation or removal by the Board. As
               Named  Fiduciary  and  Plan  Administrator,  the  Bank  shall  be
               responsible for the management, control and administration of the
               Director Plan. The Named Fiduciary may delegate to others certain
               aspects of the management and operation  responsibilities  of the
               Director  Plan  including  the  employment  of  advisors  and the
               delegation of ministerial duties to qualified individuals.

          B.   Claims Procedure and  Arbitration:  In the event a dispute arises
               over benefits  under this Director Plan and benefits are not paid
               to the Director  (or to the  Director's  surviving  spouse in the
               case of the  Director's  death) and such  claimants feel they are
               entitled to receive such  benefits,  then a written claim must be
               made to the Named  Fiduciary and Plan  Administrator  named above
               within sixty (60) days from the date  payments  are refused.  The
               Named Fiduciary and Plan  Administrator  shall review the written
               claim and if the claim is denied,  in whole or in part,  it shall
               provide  in  writing  within  sixty  (60) days of receipt of such
               claim its  specific  reasons for such  denial,  reference  to the
               provisions  of this  Director Plan upon which the denial is based
               and any additional  material or information  necessary to perfect
               the  claim.  Such  written  notice  shall  further  indicate  the
               additional  steps to be taken by claimants if a further review of
               the claim  denial is desired.  A claim shall be deemed  denied if
               the  Named  Fiduciary  and  Plan  Administrator  fail to take any
               action within the aforesaid sixty-day period. If claimants desire
               a second  review they shall notify the Named  Fiduciary  and Plan
               Administrator  in  writing  within  sixty  (60) days of the first
               claim  denial.  Claimants  may review this  Director  Plan or any
               documents  relating  thereto  and submit any  written  issues and
               comments it may feel appropriate.  In their sole discretion,  the
               Named  Fiduciary  and Plan  Administrator  shall then  review the
               second  claim and provide a written  decision  within  sixty (60)
               days of receipt of such claim. This decision shall likewise state
               the specific reasons for the decision and shall include reference
               to  specific  provisions  of the Plan  Agreement  upon  which the
               decision is based.

               If  claimants  continue to dispute the benefit  denial based upon
               completed  performance  of this  Director Plan or the meaning and
               effect of the terms and  conditions  thereof,  then claimants may
               submit the dispute to an arbitrator  for final  arbitration.  The
               arbitrator  shall be selected by mutual agreement of the Bank and
               the claimants.  The arbitrator  shall operate under any generally
               recognized  set of  arbitration  rules.  The parties hereto agree
               that they and their heirs, personal  representatives,  successors
               and assigns  shall be bound by the  decision  of such  arbitrator
               with  respect to any  controversy  properly  submitted  to it for
               determination.

               Where a dispute arises as to the Bank's discharge of the Director
               "for  cause,"  such  dispute  shall   likewise  be  submitted  to
               arbitration as above described and the parties hereto agree to be
               bound by the decision thereunder.

          In witness  whereof,  the  parties  hereto  acknowledge  that each has
     carefully  read this  Agreement  and executed  the original  thereof on the
     first  day set  forth  hereinabove,  and  that,  upon  execution,  each has
     received a conforming copy.

                                            KLAMATH FIRST BANCORP, INC.
                                                     Klamath Falls, Oregon


/s/                                 By: /s/
Witness                                 Rodney N. Murray, Chairman of Board

/s/                                     /s/
Witness                                 "Director"
<PAGE>

                                   SCHEDULE B

                          WAIVER OF PRIOR PLAN BENEFITS


          In  consideration  for the benefits made  available to the Director by
     this Agreement, the Director and agrees as follows:

               (a) The Director is party to that certain Agreement made with the
          Bank entitled the Klamath First Federal  Savings and Loan  Association
          Director  Emeritus  Plan  dated  August  20,  1996  (the  "Prior  Plan
          Agreement");

               (b) This  Agreement and the benefits  hereunder are provided as a
          substitute  for the Prior Plan  Agreement  and the  benefits  provided
          thereunder;

               (c) The Prior Plan  Agreement  and the  benefits  thereunder  are
          hereby terminated effective as of the date of this Agreement;

               (d) The Director  hereby waives and  relinquishes  for himself or
          herself, and his or her heirs,  beneficiaries,  legal representatives,
          agents,  successors and assigns,  any and all right,  entitlement  and
          interest  that the Director has or may have pursuant to the Prior Plan
          Agreement and the benefits thereunder;

               (e) The Director accepts the Director  Benefits  afforded by this
          Agreement in full and complete substitution for the benefits otherwise
          provided by the Prior Plan Agreement; and the Director acknowledges he
          (i) has had an  opportunity to consult with advisors of the Director's
          own  choice  in  determining  to enter  into this  Agreement  and this
          Waiver,  (ii)  understands  that  the  effect  of  this  Waiver  is to
          terminate,  waive and relinquish forever all rights,  entitlements and
          interests  that the  Director  has or may have  under the  Prior  Plan
          Agreement and the benefits  thereunder as a condition to receiving the
          benefits under this Agreement; and (iii) the Director is entering into
          this Agreement and this Waiver  voluntarily and with full appreciation
          of the effect of doing so.

          Dated:  5/21/03                     /s/
                                              "Director"

          I consent to and agree to be bound by the foregoing Waiver:


/s/                                                         /s/
Director's Spouse                                           Witness




<PAGE>

                                  Exhibit 31.1
                                  Certification

I, Kermit K. Houser, certify that:


     1.   I have  reviewed this  quarterly  report on Form 10-Q of Klamath First
          Bancorp, Inc.


     2.   Based on my  knowledge,  this  report  does  not  contain  any  untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this report;


     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this report,  fairly  present in all material
          respects the financial condition, results of operations and cash flows
          of the  registrant  as of,  and for,  the  periods  presented  in this
          report;


     4.   The registrant's other certifying officer(s) and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined  in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for the
          registrant and have:


          (a)  Designed such disclosure controls and procedures,  or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               registrant,  including  its  consolidated  subsidiaries,  is made
               known to us by others within those entities,  particularly during
               the period in which this report is being prepared;


          (b)  Evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls  and   procedures  and  presented  in  this  report  our
               conclusions  about the  effectiveness of the disclosure  controls
               and  procedures,  as of the  end of the  period  covered  by this
               report based on such evaluation; and


          (c)  Disclosed in this report any change in the registrant's  internal
               control  over  financial   reporting  that  occurred  during  the
               registrant's most recent fiscal quarter (the registrant's  fourth
               fiscal  quarter  in  the  case  of an  annual  report)  that  has
               materially  affected,  or  is  reasonably  likely  to  materially
               affect,   the   registrant's   internal  control  over  financial
               reporting; and


     5.   The  registrant's  other  certifying  officer(s) and I have disclosed,
          based on our most recent evaluation of internal control over financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's  board of directors (or persons performing the equivalent
          functions):


          (a)  All  significant  deficiencies  and  material  weaknesses  in the
               design or operation of internal control over financial  reporting
               which are reasonably  likely to adversely affect the registrant's
               ability  to  record,  process,  summarize  and  report  financial
               information; and


          (b)  Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal control over financial reporting.

Date: August 14, 2003
                                           /s/ Kermit K. Houser
                                           _________________________________
                                           President and Chief Executive Officer




<PAGE>

                                  Exhibit 31.2
                                  Certification

I, Marshall J. Alexander, certify that:


     1.   I have  reviewed this  quarterly  report on Form 10-Q of Klamath First
          Bancorp, Inc.


     2.   Based on my  knowledge,  this  report  does  not  contain  any  untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this report;


     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this report,  fairly  present in all material
          respects the financial condition, results of operations and cash flows
          of the  registrant  as of,  and for,  the  periods  presented  in this
          report;


     4.   The registrant's other certifying officer(s) and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined  in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for the
          registrant and have:


          (a)  Designed such disclosure controls and procedures,  or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               registrant,  including  its  consolidated  subsidiaries,  is made
               known to us by others within those entities,  particularly during
               the period in which this report is being prepared;


          (b)  Evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls  and   procedures  and  presented  in  this  report  our
               conclusions  about the  effectiveness of the disclosure  controls
               and  procedures,  as of the  end of the  period  covered  by this
               report based on such evaluation; and


          (c)  Disclosed in this report any change in the registrant's  internal
               control  over  financial   reporting  that  occurred  during  the
               registrant's most recent fiscal quarter (the registrant's  fourth
               fiscal  quarter  in  the  case  of an  annual  report)  that  has
               materially  affected,  or  is  reasonably  likely  to  materially
               affect,   the   registrant's   internal  control  over  financial
               reporting; and


     5.   The  registrant's  other  certifying  officer(s) and I have disclosed,
          based on our most recent evaluation of internal control over financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's  board of directors (or persons performing the equivalent
          functions):


          (a)  All  significant  deficiencies  and  material  weaknesses  in the
               design or operation of internal control over financial  reporting
               which are reasonably  likely to adversely affect the registrant's
               ability  to  record,  process,  summarize  and  report  financial
               information; and


          (b)  Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal control over financial reporting.

Date:  August 14, 2003
                                               /s/ Marshall J. Alexander
                                               _________________________________
                                               Executive Vice President and
                                               Chief Financial Officer



<PAGE>
                                   Exhibit 32
      CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
                         OF KLAMATH FIRST BANCORP, INC.
            PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection  with the Quarterly  Report of Klamath  First  Bancorp,  Inc. (the
"Company")  on Form 10-Q for the period  ended  June 30,  2003 as filed with the
Securities  and  Exchange  Commission  on the date  hereof (the  "Report"),  the
undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:

          1.   the report fully complies with the requirements of Sections 13(a)
               and 15(d) of the Securities Exchange Act of 1934, as amended, and

          2.   the information  contained in the report fairly presents,  in all
               material respects,  the company's financial condition and results
               of operations.



_/s/ Kermit K. Houser_________________         _/s/ Marshall J. Alexander_______
Kermit K. Houser                               Marshall J. Alexander
Chief Executive Officer                        Chief Financial Officer

Dated: August 14, 2003


A signed  original of this  written  statement  required by Section 906 has been
provided to Klamath  First  Bancorp,  Inc. and will be retained by Klamath First
Bancorp,  Inc. and furnished to the  Securities  and Exchange  Commission or its
staff upon request.