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 December 31, 1997

                                             OR

[  ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                              Commission File Number: 0-26556
 
                              KLAMATH FIRST BANCORP, INC.
                   (Exact name of registrant as specified in its charter)

         Oregon                                                     93-1180440 
State or other jurisdiction of incorporation                   (I.R.S. Employer
or organization)                                          Identification Number)

540 Main Street, Klamath Falls, Oregon                                    97601
Address of principal executive offices)                               (Zip Code)

Registrant's telephone number, including area code:              (541) 882-3444
 
Securities registered pursuant to Section 12(b) of the Act:                None
 
Securities registered pursuant to 
Section 12(g) of the Act:                Common Stock, par value $.01 per share
                                                                (Title of Class)



     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .

     As of  January  31,  1998,  there  were  issued  10,429,534  shares  of the
Registrant's  Common  Stock.  The  Registrant's  voting  common  stock is traded
over-the-counter  and is listed on the Nasdaq  National  Market under the symbol
"KFBI."
<PAGE>

                   KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS

Part I.  Financial Information
-------  ----------------------
Item 1.  Financial Statements                                          Page
                                                                       ----
         Consolidated Statements of Financial Condition
         (As of December 31, 1997 and September 30, 1997)               3

         Consolidated Statement of Earnings (For the three months
         ended December 31, 1997 and 1996)                              4

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

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

         Notes to Consolidated Financial Statements                    8 - 10

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                           11 - 14

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

Item 1.  Legal Proceedings                                              15

Item 2.  Changes in Securities                                          15

Item 3.  Defaults Upon Senior Securities                                15

Item 4.  Submission of Matters to a Vote of Security Holders            15

Item 5.  Other Information                                              15

Item 6.  Exhibits and Reports on Form 8-K                               15

Signatures                                                              16











                                        2

<PAGE>

<TABLE>
<CAPTION>

                                 KLAMATH FIRST BANCORP, INC. AND SUBSIDIARY
                               CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                               AS OF DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
                                                                                          (Unaudited)

                                                                             December 31, 1997     September 30, 1997
ASSETS                                                                       -----------------     ------------------
<S>                                                                              <C>                    <C>          
Cash and due from banks ......................................................   $  25,571,068          $  24,503,768
Interest earning deposits with banks .........................................       1,662,270              1,431,087
Federal funds sold and securities purchased under agreements to resell .......      12,979,830              6,108,341
                                                                                 -------------          -------------
   Total cash and cash equivalents ...........................................      40,213,168             32,043,196

Investment securities available for sale, at fair value ......................     244,965,652            261,846,320
  (amortized cost: $244,068,125 and $261,869,234)
Investment securities held to maturity, at amortized cost (fair ..............       3,041,547             22,937,314
  value: $3,074,844 and $22,968,997) 
Mortgage backed and related securities available for sale, at fair ...........      65,158,033             64,868,633
  value (amortized cost: $64,721,147 and $64,097,246) 
Mortgage backed and related securities held to maturity, at amortized ........       5,043,070              5,446,957
  cost (fair value: $5,089,073 and $5,518,648) 
Loans receivable, net ........................................................     573,334,473            551,463,590
Real estate owned ............................................................            --                     --
Premises and equipment, net ..................................................      11,624,443             11,671,124
Stock in Federal Home Loan Bank of Seattle, at cost ..........................       7,294,500              7,150,400
Accrued interest receivable ..................................................       9,071,099              7,626,164
Core deposit intangible ......................................................      12,670,526             13,083,695
Other assets .................................................................       2,790,471              1,940,655
                                                                                 -------------          -------------

   Total assets ..............................................................   $ 975,206,982          $ 980,078,048
                                                                                 =============          =============
</TABLE>
<TABLE>
<CAPTION>

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
<S>                                                                              <C>                    <C>          
  Deposit liabilities ........................................................   $ 678,794,058          $ 673,977,901
  Accrued interest on deposits ...............................................       1,162,830              1,215,745
  Advances from borrowers for taxes and insurance ............................         775,284              8,915,486
  Advances from Federal Home Loan Bank of Seattle ............................     125,000,000            129,000,000
  Short term borrowings ......................................................      16,045,000             17,077,500
  Accrued interest on borrowings .............................................         328,280                512,716
  Pension liabilities ........................................................         757,789                727,140
  Deferred federal and state income taxes ....................................       2,160,784              1,911,573
  Other liabilities ..........................................................       3,176,332              2,277,544
                                                                                 -------------          -------------
    Total liabilities ........................................................     828,200,357            835,615,605
                                                                                 -------------          -------------

SHAREHOLDERS' EQUITY
  Preferred stock, $.01 par value, 500,000 shares authorized; none issued ....            --                     --
  Common stock, $.01 par value, 35,000,000 shares authorized, ................         104,295                104,295
    December 31, 1997 -- 10,429,534 issued, 9,235,582 outstanding;
    September 30, 1997 -- 10,429,534 issued, 9,235,582 outstanding 
  Additional paid-in-capital .................................................      92,892,950             92,601,639
  Retained earnings-substantially restricted .................................      66,119,346             64,744,995
  Unearned shares issued to ESOP .............................................      (7,584,537)            (7,829,200)
  Unearned shares issued to MRDP .............................................      (5,352,769)            (5,623,340)
  Net unrealized gain on securities available for sale, net of tax ...........         827,340                464,054
                                                                                 -------------          -------------
    Total shareholders' equity ...............................................     147,006,625            144,462,443
                                                                                 -------------          -------------
    Total liabilities and shareholders' equity ...............................   $ 975,206,982          $ 980,078,048
                                                                                 =============          =============
<FN>

      See notes to consolidated financial statements

</FN>
</TABLE>
                                                                3
<PAGE>
<TABLE>
<CAPTION>

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

                                                                             Three Months Ended     Three Months Ended
                                                                             December 31, 1997      December 31, 1996
                                                                             -----------------      -----------------
INTEREST INCOME
<S>                                                                              <C>                    <C>          
  Loans receivable ...........................................................   $  11,416,429          $   9,606,330
  Mortgage backed and related securities .....................................       1,107,748              1,269,267
  Investment securities ......................................................       4,191,435              1,422,890
  Federal funds sold and securities purchased under agreements to resell .....         148,649                284,254
  Interest earning deposits ..................................................          81,027                 19,882
                                                                                 -------------          -------------
    Total interest income ....................................................      16,945,288             12,602,623
                                                                                 -------------          -------------

INTEREST EXPENSE
  Deposit liabilities ........................................................       7,207,485              5,145,930
  Advances from FHLB of Seattle ..............................................       1,689,424              1,541,397
  Other ......................................................................         289,429                228,742
                                                                                 -------------          -------------
    Total interest expense ...................................................       9,186,338              6,916,069
                                                                                 -------------          -------------
    Net interest income ......................................................       7,758,950              5,686,554

Provision for loan losses ....................................................          75,000                 30,000
                                                                                 -------------          -------------
    Net interest income after provision for ..................................       7,683,950              5,656,554
      loan losses                                                                -------------          -------------

NON-INTEREST INCOME
  Fees and service charges ...................................................         605,364                 71,658
  Gain on sale of investments ................................................            --                    2,143
  Gain on sale of real estate owned ..........................................            --                   26,297
  Other income ...............................................................          91,303                 12,412
                                                                                 -------------          -------------
    Total non-interest income ................................................         696,667                112,510
                                                                                 -------------          -------------
NON-INTEREST EXPENSE
  Compensation, employee benefits and related expense ........................       2,479,533              1,578,967
  Occupancy expense ..........................................................         520,511                168,771
  Data processing expense ....................................................         232,512                121,079
  Insurance premium expense ..................................................          67,340                229,429
  Loss on sale of investments ................................................            --                   14,530
  Amortization of core deposit intangible ....................................         413,169                   --
  Other expense ..............................................................       1,115,411                491,159
                                                                                 -------------          -------------
    Total non-interest expense ...............................................       4,828,476              2,603,935
                                                                                 -------------          -------------

Earnings before income taxes .................................................       3,552,141              3,165,129

Provision for income tax .....................................................       1,406,067              1,252,042
                                                                                 -------------          -------------

Net earnings .................................................................   $   2,146,074          $   1,913,087
                                                                                 =============          =============

Basic earnings per share .....................................................   $        0.23          $        0.19
Earnings per share - assuming full dilution ..................................   $        0.22          $        0.18
Weighted average number of shares outstanding ................................       9,235,582             10,239,751
Weighted average number of shares - assuming full dilution ...................       9,716,094             10,380,580

<FN>

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

                                                               4

<PAGE>
<TABLE>
<CAPTION>

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

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

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

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

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

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

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

Net earnings .......        --           --             --       6,109,797         --             --            --        6,109,797
                     -----------  -----------  -------------  ------------  -----------  -------------  ------------  -------------
Balance at .........  10,242,360      116,124    110,762,678    59,082,479   (8,807,850)    (6,694,470)   (1,047,987)   153,410,974
  September 30, 1996

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

Unrealized gain ....        --           --             --            --           --             --       1,512,041      1,512,041
  on securities
  available for sale

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

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

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

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

Cash dividends .....        --           --             --        (771,723)        --             --            --         (771,723)

Unrealized gain ....        --           --             --            --           --             --         363,286        363,286
  on securities
  available for sale

ESOP contribution ..        --           --          291,311          --        244,663           --            --          535,974

MRDP contribution ..        --           --             --            --           --          270,571          --          270,571

Net earnings .......        --           --             --       2,146,074         --             --            --        2,146,074
                     -----------  -----------  -------------  ------------  -----------  -------------  ------------  -------------
Balance at .........   9,235,582  $   104,295  $  92,892,950  $ 66,119,346  $(7,584,537) $  (5,352,769) $    827,340  $ 147,006,625
  December 31, 1997
                     ===========  ===========  =============  ============  ===========  =============  ============  =============


<FN>

      See notes to consolidated financial statements.

</FN>
</TABLE>









                                                                5
<PAGE>
<TABLE>
<CAPTION>

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

                                                                                                   Three Months Ended
                                                                                                      December 31,
                                                                                             -------------    -------------
                                                                                                      1997             1996
                                                                                             -------------    -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                            <C>              <C>      
            Net earnings .................................................................     $ 2,146,074      $ 1,913,087
                                                                                             -------------    -------------
ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
            Depreciation and amortization ................................................         697,640           89,796
            Provision for loan losses ....................................................          75,000           30,000
            Compensation expense related to ESOP benefit .................................         535,974          359,897
            Compensation expense related to MRDP Trust ...................................         270,571          334,725
            Net amortization of premiums (discounts) paid on .............................        (178,961)         118,893
              investment and mortgage backed and related securities 
            Increase in deferred loan fees, net of amortization ..........................         283,958          155,724
            Amortization of premiums (accretion of discounts) on purchased loans .........          14,907              (81)
            Net (gain) loss on sale of real estate owned and .............................            --             (3,234)
              premises and equipment 
            FHLB stock dividend ..........................................................        (144,100)        (124,300)
CHANGES IN ASSETS AND LIABILITIES
            Accrued interest receivable ..................................................      (1,444,935)        (364,002)
            Other assets .................................................................        (889,816)           8,185
            Accrued interest on savings deposits .........................................         (52,915)          43,416
            Accrued interest on borrowings ...............................................        (184,436)         167,002
            Pension liabilities ..........................................................          30,649           33,837
            Deferred federal and state income taxes ......................................          26,551        1,109,631
            Other liabilities ............................................................         961,422        1,825,964
                                                                                             -------------    -------------
Net cash provided by operating activities ................................................       2,147,583        5,698,540
                                                                                             -------------    -------------
CASH FLOWS FROM INVESTING ACTIVITIES
            Proceeds from maturity of investment securities ..............................      20,000,000       28,949,466
              held to maturity 
            Proceeds from maturity of investment securities ..............................      21,680,000        2,000,000
              available for sale 
            Principal repayments received on mortgage ....................................         397,097          243,197
               backed and related securities held to maturity
            Principal repayments received on mortgage ....................................       4,367,763        4,397,787
               backed and related securities available for sale 
            Principal repayments received on loans .......................................      20,595,908       11,925,352
            Loan originations ............................................................     (40,940,648)     (27,146,345)
            Loans purchased ..............................................................      (1,900,000)            --
            Purchase of investment securities held .......................................            --        (28,930,495)
              to maturity 
            Purchase of investment securities available ..................................      (3,753,870)      (3,413,607)
              for sale 
            Purchase of mortgage backed and related ......................................      (5,035,162)      (5,151,261)
              securities available for sale 
            Purchase of FHLB stock .......................................................            --         (2,776,200)
            Proceeds from sale of investment securities ..................................            --         16,080,419
              available for sale 
            Proceeds from sale of mortgage backed and related ............................            --          4,710,359
              securities available for sale 
            Proceeds from sale of real estate owned and ..................................            --             72,717
              premises and equipment 
            Purchases of premises and equipment ..........................................        (197,791)         (10,094)
                                                                                             -------------    -------------
Net cash used in investing activities ....................................................      15,213,297          951,295
                                                                                             -------------    -------------
</TABLE>

                                                                 6
<PAGE>
<TABLE>
<CAPTION>

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


CASH FLOWS FROM FINANCING ACTIVITIES
<S>                                                                                            <C>              <C>      
            Increase/(decrease) in deposit liabilities, net of withdrawals ...............     $ 4,816,157      $ 2,140,205
            Proceeds from FHLB advances ..................................................      45,000,000       89,000,000
            Repayments of FHLB advances ..................................................     (49,000,000)     (78,000,000)
            Proceeds from short term borrowings ..........................................      25,485,000        8,059,000
            Repayments of short term borrowings ..........................................     (26,517,500)     (14,965,900)
            Stock retirement .............................................................            --         (3,735,000)
            Advances from borrowers for tax and insurance ................................      (8,140,202)      (7,439,181)
            Dividends paid ...............................................................        (834,363)        (812,873)
                                                                                             -------------    -------------
Net cash provided by financing activities ................................................      (9,190,908)      (5,753,749)
                                                                                             -------------    -------------
Net (decrease) increase in cash and cash equivalents .....................................       8,169,972          896,086

Cash and cash equivalents at beginning of year ...........................................      32,043,196       16,179,633
                                                                                             -------------    -------------
Cash and cash equivalents at end of quarter ..............................................     $40,213,168      $17,075,719
                                                                                             =============    =============
SUPPLEMENTAL SCHEDULE OF INTEREST AND INCOME
  TAXES PAID
            Interest paid ................................................................     $ 9,377,162      $ 6,705,650
            Income taxes paid ............................................................         415,000            5,000

SUPPLEMENTAL SCHEDULE OF NONCASH
  INVESTING ACTIVITIES

            Net change in unrealized gain on securities available for sale ...............         363,286          965,230

<FN>



      See notes to consolidated financial statements.
</FN>

</TABLE>



                                                                7
<PAGE>

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

1. BASIS OF PRESENTATION

In the opinion of Management, the accompanying unaudited consolidated statements
contain all  adjustments  necessary  for a fair  presentation  of Klamath  First
Bancorp, Inc.'s (the "Company") financial condition as of December 31, 1997, and
September  30,  1997,  the  results of  operations  for the three  months  ended
December  31,  1997 and  1996 and the cash  flows  for the  three  months  ended
December 31, 1997 and 1996.  Certain  information and note disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and regulations of
the Securities and Exchange Commission.  It is suggested that these consolidated
financial  statements be read in  conjunction  with the  consolidated  financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K. The results of operations for the three months ended December 31, 1997 are
not  necessarily  indicative of the results which may be expected for the entire
fiscal year.

2. ALLOWANCE FOR LOAN LOSSES


Activity in allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
 
                                  December 31,   September 30,
                                          1997            1997
                                 -------------   -------------
<S>                              <C>             <C>          
Balance, beginning of year ...   $   1,296,451   $     927,820
Charge-offs ..................            --            (1,369)
Additions ....................          75,000         370,000
                                 -------------   -------------

Balance, end of period .......   $   1,371,451   $   1,296,451
                                 =============   =============
</TABLE>

 
3. ADVANCES FROM FEDERAL HOME LOAN BANK

Borrowings at December 31, 1997 consisted of seven short term advances  totaling
$55.0 million and six long term advances totaling $70.0 million from the Federal
Home Loan Bank of Seattle ("FHLB"). The advances are collateralized in aggregate
by certain  mortgages or deeds of trust,  securities of the U.S.  Government and
agencies thereof and cash on deposit with the FHLB.

Scheduled maturities of advances from the FHLB  were as follows:
<TABLE>
<CAPTION>
 
 
                                                 December 31, 1997                               September 30, 1997
                                    ------------------------------------------        -----------------------------------------
                                                       Range of       Weighted                          Range of       Weighted
                                                       interest        average                          interest        average
                                         Amount           rates  interest rate             Amount          rates  interest rate
                                    -----------      ----------  -------------        -----------     ----------  -------------
<S>                                <C>               <C>                  <C>        <C>              <C>                  <C>  
Due within one year .............   $55,000,000      5.65%-5.80%          5.74%       $59,000,000     5.57%-6.70%          5.66%
 
After one but within ............    70,000,000      5.39%-5.99%          5.67%        70,000,000     5.39%-5.84%          5.59%
five years                       
                                    -----------                                       -----------
                                   $125,000,000                                      $129,000,000
                                    ===========                                      ============
</TABLE>


4. SHORT TERM BORROWINGS

Securities  sold under  agreements  to  repurchase  totaled  $16.0  million with
interest rates of 5.75%. All of the agreements are due within 90 days.




                                                                8
<PAGE>

5. REGULATORY CAPITAL

The following table  illustrates the compliance by Klamath First Federal Savings
and Loan Association (the  "Association") with currently  applicable  regulatory
capital requirements at December 31, 1997:
<TABLE>
<CAPTION>

                                                                                        Categorized as "Well
                                                                                          Capitalized" Under
                                                                     For Capital           Prompt Corrective
                                                Actual         Adequacy Purposes            Action Provision
                                 ---------------------     ---------------------     -----------------------
                                       Amount    Ratio           Amount    Ratio             Amount    Ratio
                                 ------------   ------     ------------   ------     --------------   ------
<S>                              <C>              <C>      <C>               <C>       <C>              <C>  
Total Capital: ...............   $106,195,497     24.3%    $ 34,908,952      8.0%      $ 43,636,190     10.0%
 (To Risk Weighted Assets)
Tier I Capital: ..............    104,824,046     24.0%             N/A      N/A         26,181,714      6.0%
 (To Risk Weighted Assets)
Tier I Capital: ..............    104,824,046     11.4%      27,498,130      3.0%        45,830,218      5.0%
 (To Total Assets)
Tangible Capital: ............    104,824,046     11.4%      13,749,065      1.5%               N/A      N/A
 (To Tangible Assets)

</TABLE>



6. EARNINGS PER SHARE

Earnings per share ("EPS") is computed in accordance with Statement of Financial
Accounting  Standards  ("SFAS") No. 128, "Earnings per Share," which was adopted
by the  Company as of December  31,  1997.  Diluted  EPS is  computed  using the
treasury stock method,  giving effect to potential additional common shares that
were  outstanding  during the period.  Potential  dilutive common shares include
shares held by the Company's  Employee  Stock  Ownership  Plan ("ESOP") that are
committed  for  release,  shares  awarded but not released  under the  Company's
Management  Recognition and Development Plan ("MRDP"), and stock options granted
under the Stock Option Plan. Following is a reconciliation of the numerators and
denominators of the basic and diluted EPS calculations:
<TABLE>
<CAPTION>

                                           For the Quarter Ended December 31, 1997
                                           ---------------------------------------
                                                Income         Shares    Per Share
                                            (Numerator)  (Denominator)     Amount
                                           ------------  -------------   ---------
Basic EPS
<S>                                          <C>             <C>            <C>   
Income available to ....................     $2,146,074      9,235,582      $ 0.23
 common stockholders                                                     =========

Effect of Dilutive Securities:
MRDP shares ............................           --           76,473
ESOP shares ............................           --           12,334
Stock options ..........................           --          391,705
                                           ------------  -------------
Diluted EPS:
Income available to common .............     $2,146,074      9,716,094      $ 0.22
stockholders + assumed
conversions
                                           ============  =============   =========
</TABLE>








                                                                9
<PAGE>
<TABLE>
<CAPTION>
                                           For the Quarter Ended December 31, 1996
                                           ---------------------------------------
                                                Income         Shares    Per Share
                                            (Numerator)  (Denominator)     Amount
                                           ------------  -------------   ---------
Basic EPS
<S>                                          <C>            <C>             <C>   
Income available to ....................     $1,913,087     10,239,751       $0.19
 common stockholders                                                     =========

Effect of Dilutive Securities:
MRDP shares ............................           --           23,495
ESOP shares ............................           --           12,334
Stock options ..........................           --          105,000
                                           ------------  -------------

Diluted EPS:
Income available to common .............     $1,913,087     10,380,580       $0.18
stockholders + assumed
conversions
                                           ============  =============   =========
</TABLE>


7. BRANCH ACQUISITION

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













                                       10

<PAGE>

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


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

General

The Company, an Oregon corporation,  became the unitary savings and loan holding
company for the Association upon the  Association's  conversion from a federally
chartered  mutual to a federally  chartered  stock savings and loan  association
("Conversion")  on October 4, 1995. At December 31, 1997,  the Company had total
consolidated assets of $975.2 million and consolidated  shareholders'  equity of
$147.0  million.  The Company is currently not engaged in any business  activity
other than holding the stock of the  Association.  Accordingly,  the information
set forth in this  report,  including  financial  statements  and related  data,
relates primarily to the Association.

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

Net  interest  income,  which is the  difference  between  interest and dividend
income on interest-earning  assets,  primarily loans and investment  securities,
and interest expense on interest-bearing  deposits and borrowings,  is the major
source of profit for the Company.  Because the Company depends  primarily on net
interest  income for its earnings,  the focus of the Company's  management is to
create and  implement  strategies  that will provide  stable,  positive  spreads
between the yield on  interest-earning  assets and the cost of  interest-bearing
liabilities.  Such  strategies  include  the  Association's  introduction  of  a
variable rate home equity lending  program that has an interest rate tied to the
Wall Street Journal  published prime rate with an additional  margin of 2.0% and
expansion  of  non-interest   bearing  checking   accounts  through  the  branch
acquisition and new deposit  products.  To a lesser degree, the net earnings of
the  Company  rely on the  level of its  non-interest  income.  The  Company  is
aggressively  pursuing  strategies to improve its service charge and fee income,
and control its non-interest  expense,  which includes employee compensation and
benefits,  occupancy  and  equipment  expense,  deposit  insurance  premiums and
miscellaneous  other expenses,  as well as federal and state income tax expense.
The Wells  Fargo  branch  acquisition  is  contributing  to  improvement  of the
Company's  non-interest  income by providing a larger  customer base to generate
service charge and fee income.








                                       11

<PAGE>



The Association is regulated by the Office of Thrift Supervision ("OTS") and its
deposits  are insured up to  applicable  limits  under the  Savings  Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").

The Association is a member of the Federal Home Loan Bank of Seattle, conducting
its  business  through  thirty-three  office  facilities,  with the main  office
located in Klamath Falls,  Oregon.  The primary market areas of the  Association
are the state of Oregon and adjoining areas of California and Washington.

Year 2000 Compliance

Data  processing  for the Company is provided by a third party  service  bureau.
Software purchased from a service bureau affiliate is used for applications such
as accounts  payable and fixed  assets.  As with other  organizations,  the data
processing  programs were  originally  designed to recognize  calendar  years by
their last two digits.  Calculations performed using these truncated fields will
not work  properly  with dates  beyond  1999.  The  Company  has  established  a
committee to address "Year 2000" issues related to data processing.  The service
bureau has stated that all their  processing  will be Year 2000 compliant by the
end of 1998,  including  the  application  software  used for fixed  assets  and
accounts payable. All personal computers ("PCs") and related software throughout
the Company have been inventoried and non-compliant PCs have been identified. As
of December 31, 1997,  approximately  90% of the  Company's PCs and software are
Year 2000 compliant. The Company believes that the Year 2000 issue will not pose
significant  operational  problems and is not  anticipated to be material to its
financial position or results of operations in any given year.

Branch Acquisition

The  Association   completed  the  purchase  of  25  branches  in  rural  Oregon
communities  from Wells  Fargo  Bank,  N.A. on July 18,  1997.  The  transaction
included  purchase of  approximately  $241.3 million in deposits and purchase of
branch facilities including  buildings,  improvements and furniture and fixtures
with a book value of $2.0 million.  This acquisition  expanded the Association's
primary  market area to include 33 offices in 22 Oregon  counties.  In twelve of
the locations,  the newly acquired  branch is the only financial  institution in
the  community.  The  acquired  offices  are  located in  communities  which are
compatible  with,  and  complement,   the  Association's   current  markets  and
philosophy.  While no loans were  acquired in the  transaction,  the addition of
these  branches  creates  new markets for the  Association's  lending  products,
including the expanded consumer and commercial product offerings.

The purchase of deposit  liabilities  increased  total  Association  deposits by
approximately  $241.3 million and increased the number of deposit  accounts from
40,000  to  82,000.  Approximately  23,000  of the  purchased  accounts,  $140.9
million,   were  demand  deposits  carrying  a  lower  interest  cost  than  the
Association's  previous deposit mix. As a result, the Association  experienced a
reduction in cost of funds.  The  acquisition  also resulted in the recording of
$13.4  million of core deposit  intangible,  which is being  amortized  over 8.1
years.  The impact of the branch  acquisition  is evident in  comparison  of the
quarters  ended  December  31, 1997 and 1996,  as discussed  under  non-interest
income and non-interest expense.

Recently Issued Accounting Pronouncements

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







                                       12
<PAGE>

Changes in Financial Condition

At December 31, 1997,  the  consolidated  assets of the Company  totaled  $975.2
million, a decrease of $4.9 million,  or 0.50%, from $980.1 million at September
30,  1997.  The  decrease  in total  assets was  primarily  the result of a $4.0
million  reduction  in FHLB  borrowings.  

Net loans receivable  increased by $21.8 million, or 3.97%, to $573.3 million at
December  31,  1997,  compared to $551.5  million at  September  30,  1997.  The
increase was primarily the result of continued  new loan demand  exceeding  loan
repayments,  augmented  by the  Company's  purchase  of $1.9  million  in higher
yielding loans on multi-family  residential and commercial  properties in Oregon
during the quarter ended December 31, 1997.

Investment securities decreased $36.8 million, or 12.91%, from $284.8 million at
September  30, 1997 to $248.0  million at December  31,  1997.  The decrease was
primarily  the result of scheduled  maturities of short term  investments  being
rolled into higher earning new loan production as part of the Company's ongoing
strategy to fund loan growth.

During the three  months  ended  December  31,  1997,  $4.8 million of principal
payments were  received on mortgage  backed and related  securities  ("MBS") and
$5.0 million in available  for sale MBS were  purchased,  leaving the balance of
MBS consistent from September 30, 1997 to December 31, 1997.

Deposit  liabilities  increased $4.8 million,  or 0.71%,  from $674.0 million at
September 30, 1997 to $678.8 million at December 31, 1997. Management attributes
the increase to the maintaining of competitive rates in our market areas as well
as the use of an  automated  on-line  personal  computer-based  system to market
deposits  nationally.  Interest  credited on accounts  also  contributed  to the
increase.  The increase in deposits has been experienced  throughout the network
of 32 branches.

Advances  from  borrowers for taxes and  insurance  decreased  $8.1 million from
September 30, 1997 to December 31, 1997. The decrease is the result of using the
reserves to pay the  required  real estate taxes due on the  Association's  loan
receivable portfolio in December.

Advances from the FHLB of Seattle  decreased $4.0 million,  or 3.1%, from $129.0
million at September 30, 1997 to $125.0  million at December 31, 1997.  Proceeds
from maturities of investment securities were used to reduce the borrowings.

Total shareholders'  equity increased $2.5 million, or 1.8%, from $144.5 million
at September 30, 1997 to $147.0 million at December 31, 1997.  This increase was
primarily  the  result  of $2.1  million  in  earnings  for the  first  quarter,
augmented  by $363,286 in  unrealized  gains on  securities  available  for sale
during the three month period from September 30, 1997 to December 31, 1997.

Results of Operations

     Comparison of Three Months Ended December 31, 1997 and 1996

General.  Net income  increased  $232,987,  or 12.2%,  from $1.9 million for the
three months ended  December 31, 1996 to $2.1 million for the three months ended
December 31, 1997.  This increase was primarily  attributable  to an increase in
net interest income and  non-interest  income  partially  offset by increases in
non-interest expense.







                                       13
<PAGE>
Interest Income.  The $331.4 million increase in average interest earning assets
contributed to an increase in interest income of $4.3 million, or 34.1%, for the
three months ended  December 31, 1997 compared to 1996. Of this  increase,  $1.8
million is attributable  to additional  loan income  generated by an increase in
loans receivable.  The remaining increase in interest income of $2.8 million was
a result of investing the $230 million proceeds of the acquisition in fixed rate
U.S.  Government and agency  securities with maturities of less than five years,
fixed and adjustable rate corporate securities, and overnight funds.

The  $230  million  increase  in  investments  resulted  in a  decrease  in  the
proportion of total interest income  generated by loans.  Because loans generate
higher average yields than  investments,  the average yield on interest  earning
assets  decreased 13 basis  points to 7.30% for the three months ended  December
31, 1997 compared to 7.43% for the same period ended December 31, 1996.

Interest Expense. Interest expense on deposit liabilities increased $2.1 million
for the three months  ended  December 31, 1997 as compared to the same period in
1996. Although total deposits increased by $277.0 million comparing December 31,
1996 to 1997, the average interest paid on  interest-bearing  deposits decreased
55 basis points from 5.17% for the three months ended December 31, 1996 to 4.62%
for the same  period  ended  December  31,  1997.  Both the  increase in deposit
balances and the decrease in the rate paid on deposits are primarily a result of
the deposits acquired with the Wells Fargo branch acquisition which consisted of
17% non-interest bearing deposit accounts.  The average balance of FHLB advances
increased  slightly from $109.9  million for the three months ended December 31,
1996 to $117.7  million for the same period ended December 31, 1997 resulting in
an increase in interest on FHLB  advances of $148,027 for the three months ended
December 31, 1997 compared with the same period ended December 31, 1996.

Provision  for Loan Losses.  The provision for loan losses was $75,000 and there
were no charge offs during the three months ended  December 31, 1997 compared to
a $30,000  provision  and no charge offs during the three months ended  December
31, 1996.  The  provision  was  increased  in response to  portfolio  growth and
continuing  purchases of loans secured by multi-family  residential property and
commercial  real estate,  which are considered to have more associated risk than
the  Company's  traditional   portfolio  of  one-  to  four-family   residential
mortgages.

Non-Interest  Income.  Non-interest  income increased  $584,157,  or 519.2%,  to
$696,667  for the three months  ended  December  31, 1997 from  $112,510 for the
three months ended December 31, 1996. The increase was primarily attributable to
a $533,706  increase in fee income  related to the increase in deposit  accounts
subject to service charges.

Non-Interest Expense.  Non-interest expense increased $2.2 million, or 85.4%, to
$4.8 million for the three months ended December 31, 1997,  from $2.6 million in
the comparable period in 1996. Of this increase, $900,566 was attributable to an
increase in  compensation  and benefit expense in 1997,  reflecting  addition of
staff  related to the Wells Fargo  acquisition  and an increase in  compensation
expense for the ESOP due to  increases  in the average  stock  price.  Occupancy
expense  increased  from  $168,771  for the quarter  ended  December 31, 1996 to
$520,511 for the quarter  ended  December 31, 1997 due to the addition of the 25
acquired branches. These increases were partially offset by a $162,089 reduction
in deposit insurance  premiums resulting from reduced assessment rates beginning
January 1, 1997. The ratio of  non-interest  expense to average total assets was
1.98%  and  1.52%  for the  three  months  ended  December  31,  1997 and  1996,
respectively.

Income Taxes.  The provision for income taxes  increased  $154,025 for the three
months ended  December  31, 1997  compared  with the prior year,  primarily as a
result of higher income for the quarter.









                                       14
<PAGE>


                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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


Item 2. Changes in Securities

     Not applicable.


Item 3. Defaults Upon Senior Securities

     Not applicable.


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

     Not applicable.


Item 5. Other Information

     Not applicable.


Item 6. Exhibits and Reports on Form 8-K

     a) Not applicable.

     b) No  Current  Reports on Form 8-K were filed  during  the  quarter  ended
        December 31, 1997.

 








                                       15
<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:    February 13, 1998                By:  /s/ Gerald V. Brown
                                          ------------------------------
                                          Gerald V. Brown, President and
                                          Chief Executive Officer

 
Date:    February 13, 1998                By: /s/ Marshall Jay Alexander
                                          ------------------------------
                                          Marshall Jay Alexander, Vice President
                                          and Chief Financial Officer







                                       16