SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549

                                 FORM 10-K

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

     For the Fiscal Year Ended March 31, 1999

                                OR

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

                      Commission File Number: 0-22953

                     OREGON TRAIL FINANCIAL CORP., INC.
------------------------------------------------------------------------------
           (Exact name of registrant as specified in its charter)


                 Oregon                                    91-1829481
----------------------------------------------      --------------------------
(State or other jurisdiction of incorporation            (I.R.S. Employer
or organization)                                           I.D. Number)


   2055 First Street, Baker City, Oregon                      97814
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 (Address of principal executive offices)                  (Zip Code)


Registrant's telephone number, including area code:       (541) 523-6327
                                                    --------------------------
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 disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy or
other information statements incorporated by reference in Part III of this
Form 10-K or any amendments to this Form 10-K.  YES   X     NO
                                                    -----      -----

     As of June 22, 1999, there were issued and outstanding 3,572,964 shares
of the Registrant's Common Stock.  The Registrant's voting stock is traded
over-the-counter and is listed on the Nasdaq National Market under the symbol
"OTFC."  The aggregate market value of the voting stock held by nonaffiliates
of the Registrant, based on the closing sales price of the Registrant's common
stock as quoted on the Nasdaq National Market on June 22, 1999 of $13.00, was
$38,926,277.

                    DOCUMENTS INCORPORATED BY REFERENCE

    1.   Portions of Registrant's Annual Report to Shareholders for the Fiscal
Year Ended March 31, 1999 ("Annual Report") (Parts I and II).

    2.   Portions of Registrant's Definitive Proxy Statement for the 1999
Annual Meeting of Shareholders (Part III).

<PAGE>

                                   PART I
Item 1.  Business
-----------------

General

     Oregon Trail Financial Corp. ("Company"), an Oregon corporation, was
organized on June 9, 1997 for the purpose of becoming the holding company for
Pioneer Bank, A Federal Savings Bank ("Bank") upon the Bank's conversion from
a federal mutual to a federal stock savings bank ("Conversion").  The
Conversion was completed on October 3, 1997.  At March 31, 1999, the Company
had total assets of $313.5 million, total deposits of $199.6 million and
shareholders' equity of $60.1 million.  All references to the Company herein
include the Bank where applicable.

     The Bank was organized in 1901.  The Bank 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 Bank also is a member of the
Federal Home Loan Bank ("FHLB") System.

     The Bank is a community oriented financial institution whose principal
business is attracting retail deposits from the general public and using these
funds to originate one- to- four family residential mortgage loans and
consumer loans within its primary market area.  The Bank also actively
originates home equity and second mortgage loans.  Beginning in 1996, the Bank
began supplementing its traditional lending activities with commercial
business loans, agricultural loans, and the purchase of dealer-originated
automobile contracts.

     In addition to its lending activities, the Bank invests excess liquidity
in short and intermediate term U.S. Government and government agency
securities and mortgage-backed and related securities issued by U.S.
Government agencies.  Investment securities and mortgage-backed and related
securities constituted 31.4% of total assets at March 31, 1999.  See "--
Investment Activities."

Market Area

     The Bank's primary market area encompasses those regions surrounding its
offices in Baker, Grant, Harney, Malheur, Union, Wallowa and Wheeler Counties
in Oregon and Payette and Washington Counties in Idaho.  The Bank's home
office is located in Baker City, Oregon with branches in Ontario, John Day,
Burns, Enterprise, La Grande, Island City and its newest location, Vale,
Oregon, which opened May 3, 1999.

     The principal industries of the market area are agriculture and timber
products.  The Bank's market area is largely rural, with most of the farms and
ranches being relatively small and family owned.  The local economies are also
dependent on retail trade with lumber, recreation and tourism providing
substantial contributions.  Major employers in the market area include U.S.
Forest Service, Bureau of Land Management, Snake River Correctional Institute,
Oregon Department of Transportation, Boise Cascade, Ore-Ida, Grande Ronde
Hospital, Holy Rosary Hospital, Powder River Correctional Facility, Treasure
Valley Community College, Eastern Oregon University, local school districts
and local government.

Lending Activities

     General.  The Bank's loan portfolio totaled $185.7 million at March 31,
1999, representing 59.3% of total assets at that date.  The Bank concentrates
its lending activities within its primary market area.  Historically, the
Bank's primary lending activity has been the origination of one- to- four
family residential mortgage loans.  To a lesser extent, the Bank makes
mortgage loans for the purpose of constructing primarily single-family
residences.

     As a result of management's expectation of minimal anticipated growth in
residential loan demand within the Bank's primary market area and a local
demand for agricultural, commercial business and consumer loans, the Bank has
significantly increased its origination of agricultural, indirect dealer
automobile and commercial business loans since

                                       1
<PAGE>

July 1996.  Commercial business and agricultural loans primarily include
operating lines of credit and term loans for fixed asset acquisitions.

     Historically, the Bank has been active in the origination of consumer
loans, which primarily consist of home equity loans, secured and unsecured
and, to a lesser extent, automobile loans, credit card loans, home improvement
loans, mobile home loans and loans secured by savings deposits.  More
recently, the Bank has increased its purchase of dealer-originated automobile
contracts.  Subject to market conditions and other factors, the Bank is
considering expansion of its purchase of dealer-originated automobile
contracts to include contracts secured by recreational vehicles, trailers,
motorcycles and other vehicles.

                                       2
<PAGE>

<TABLE>

     Loan Portfolio Analysis.  The following table sets forth the composition of the Bank's loan portfolio
(excluding loans held-for-sale) at the dates indicated. The Bank had no concentration of loans exceeding 10%
of total gross loans other than as presented below.

                                    At March 31,                                    At June 30,
             --------------------------------------------------------  ------------------------------------
                   1999                1998               1997               1996               1995
             -----------------   -----------------  -----------------  -----------------   ----------------
             Amount    Percent   Amount    Percent  Amount    Percent  Amount    Percent   Amount   Percent
             ------    -------   ------    -------  ------    -------  ------    -------   ------   -------
                                                   (Dollars in thousands)
<S>          <C>        <C>      <C>        <C>     <C>        <C>     <C>        <C>      <C>       <C>
Mortgage Loans:
 One-to-four-
  family. .  $109,089   58.00%   $100,740   64.65%  $101,792   71.99%  $101,199   74.71%   $93,436   72.95%
 Multi-
  family. .     2,810    1.49       1,194    0.77      1,844    1.30      1,927    1.42      1,935    1.51
 Commercial    10,657    5.67       7,906    5.07      4,768    3.37      4,724    3.49      5,166    4.03
Agricultural    2,240    1.19         725     .47         --      --         --      --         --      --
 Construction   2,825    1.50       1,616    1.04        853    0.60      1,745    1.29      1,798    1.40
 Land. . . .      330     .17         297    0.19        223    0.16         14    0.01         15    0.01
  Total      --------  ------    --------  ------   --------  ------   --------  ------   --------  ------
   mortgage
   loans . .  127,951   68.02     112,478   72.18    109,480   77.42    109,609   80.92    102,350   79.90
             --------  ------    --------  ------   --------  ------   --------  ------   --------  ------
Consumer Loans:
 Home equity
  and second
  mortgage .   16,262    8.65      19,231   12.34     17,514   12.39     12,751    9.41     12,120    9.46
 Credit card      949     .50         854    0.55        844    0.60        791    0.58        712    0.56
 Automobile
  (1). . . .   11,843    6.30       5,719    3.67      2,064    1.46      1,405    1.04      1,507    1.18
 Loans secured
  by deposit
  accounts .      416     .22         648    0.42        731    0.52        593    0.44        589    0.46
 Unsecured .    2,836    1.50       2,047    1.31      1,611    1.14      4,580    3.38      4,404    3.44
 Other . . .    2,985    1.59       4,623    2.97      2,627    1.85      2,587    1.91      3,585    2.80
             --------  ------    --------  ------   --------  ------   --------  ------   --------  ------
  Total
   consumer
   loans . .   35,291   18.76      33,122   21.26     25,391   17.96     22,707   16.76     22,917   17.90
             --------  ------    --------  ------   --------  ------   --------  ------   --------  ------
Commercial
 business
 loans . . .   15,077    8.02       5,968    3.83      4,066    2.88      3,142    2.32      2,822    2.20
             --------  ------    --------  ------   --------  ------   --------  ------   --------  ------
Agricultural
 loans . . .    9,781    5.20       4,254    3.19      2,466    1.74          -      --         --      --
             --------  ------    --------  ------   --------  ------   --------  ------   --------  ------
   Total
    loans. .  188,100  100.00%    155,822  100.00%   141,403  100.00%   135,458  100.00%   128,089  100.00%
                       ======              ======             ======             ======             ======
Less:
 Undisbursed
  portion of
  loans in
  process. .        0                 102                769              1,585              2,145
 Net deferred
  loan fees.    1,125               1,035              1,028                985              1,049
 Allowance for
  loan losses   1,228                 847                725                541                455
             --------            --------           --------           --------           --------
  Total loans
   receivable,
   net . . . $185,747            $153,838           $138,881           $132,347           $124,440
             ========            ========           ========           ========           ========

-------------------
(1) Includes dealer-originated automobile contracts of $9.3 million and $5.1 million at March 31, 1999 and
1998, respectively.

                                                         3
</TABLE>
<PAGE>

     One- to- Four Family Real Estate Lending.  Historically, the Bank has
concentrated its lending activities on the origination of loans secured by
first mortgages on existing one- to- four family residences located in its
primary market area.  At March 31, 1999, $109.1 million, or 58.0%, of the
Bank's total loan portfolio, consisted of such loans, with an average loan
balance of $53,000.

     Generally, the Bank's fixed-rate one- to- four family mortgage loans have
maturities of 15 to 30 years and are fully amortizing with monthly payments
sufficient to repay the total amount of the loan with interest by the end of
the loan term.  Generally, they are originated under terms, conditions and
documentation which permit them to be sold to private investors.  The Bank's
fixed-rate loans customarily include "due on sale" clauses, which give the
Bank the right to declare a loan immediately due and payable in the event the
borrower sells or otherwise disposes of the real property subject to the
mortgage and the loan is not paid.

     At March 31, 1999, $74.9 million, or 39.8%, of the total loans before net
items were fixed rate one- to- four family loans and $34.2 million, or 18.2%,
were adjustable rate mortgage loans ("ARM loans").  The Bank currently offers
an ARM product for its portfolio which adjusts on the anniversary date of the
origination based on the one year Treasury constant maturity index.  The
Bank's ARMs are typically based on a 30-year amortization schedule.  The Bank
offers discounted ARM loans where the initial interest rate is up to 1.08
percentage points below the prevailing interest rate.   The Bank, however,
qualifies the borrowers on its ARM loans based on the fully indexed rate.  The
Bank's current ARM loans do not provide for negative amortization and
generally provide for annual and lifetime interest rate adjustment limits of
2.0% and 6.0%, respectively.

     At March 31, 1999, $23.3 million, or 68.1% of the Bank's total ARM loans
had interest rates that adjusted annually based on the Eleventh District Cost
of Funds Index ("COFI").  The COFI is a lagging index which, together with the
periodic and overall interest rate caps, may cause the yield on such loans to
adjust more slowly than the cost of interest-bearing liabilities especially in
a rapidly rising rate environment.  In November 1995, the Bank discontinued
using the COFI index and began using the one year Treasury constant maturity
index.

     Borrower demand for ARM loans versus fixed-rate mortgage loans is a
function of the level of interest rates, the expectations of changes in the
level of interest rates and the difference between the initial interest rates
and fees charged for each type of loan.  The relative amount of fixed-rate
mortgage loans and ARM loans that can be originated at any time is largely
determined by the demand for each in a competitive environment.

     The retention of ARM loans in the Bank's loan portfolio helps reduce the
Bank's exposure to changes in interest rates.  There are, however,
unquantifiable credit risks resulting from the potential of increased costs
due to changed rates to be paid by the customer.  It is possible that during
periods of rising interest rates the risk of default on ARM loans may increase
as a result of repricing and the increased payments required by the borrower.
In addition, although ARM loans allow the Bank  to increase the sensitivity of
its asset base to changes in the interest rates, the extent of this interest
sensitivity is limited by the annual and lifetime interest rate adjustment
limits.  Because of these considerations, the Bank has no assurance that
yields on ARM loans will be sufficient to offset increases in the Bank's cost
of funds.  The Bank believes these risks, which have not had a material
adverse effect on the Bank to date, generally are less than the risks
associated with holding fixed-rate loans in portfolio during a rising interest
rate environment.

     The Bank generally requires title insurance insuring the status of its
lien on all loans where real estate is the primary source of security.  The
Bank generally requires the maintenance of fire and casualty insurance (and,
if appropriate, flood insurance).

     The Bank's one- to- four family residential mortgage loans typically do
not exceed 80% of the lower of cost or appraised value of the security
property.  Pursuant to underwriting guidelines adopted by the Bank's Board of
Directors, the Bank can lend up to 97% of the lower of cost or appraised value
of the property securing a one- to- four family residential loan; however, the
Bank generally obtains private mortgage insurance on the portion of the
principal amount that exceeds 80% of the appraised value of the security
property.

                                       4
<PAGE>

     Agricultural Lending.  Agriculture is the major industry in the Bank's
market area and the Bank has been making agricultural loans to satisfy the
demand of its market area.  Subject to market conditions, the Bank intends to
continue to emphasize agricultural loans.  In 1996, the Bank began originating
a significant number of loans to finance agriculture production and the
expense of farming and agricultural related operations.  Also, to a lesser
extent, the Bank has made agricultural loans for the purchase of farmland and
equipment which are secured by agricultural real estate and equipment.  At
March 31, 1999, agricultural loans amounted to $12.0 million, or 6.4%, of the
total loan portfolio; $2.2 million of these loans were secured by real estate.
The Bank has sought to limit its agricultural lending to borrowers with a
strong capital base, sufficient management depth, proven ability to operate
through agricultural business cycles, reliable cash flow and a willingness to
provide the Bank with the necessary financial reporting.

     Agricultural operating loans are made to finance farm operating expenses
(i.e., acquisition of seed, fertilizer, livestock and feed, among other
things) together with, in some cases, family living expenses, over the course
of a growing season and typically are made in amounts of $500,000 or less.
However, the Bank's largest agricultural operating loan had an original
commitment of $2.3 million (with $565,000 outstanding at March 31, 1999) and
was provided to finance a farming operation that grows mint and potatoes.
This loan was performing in accordance with its terms at March 31, 1999.
Agricultural operating loans generally are made in amounts of up to 80% of the
borrower's anticipated income (not including the value of the breeding herd in
the case of cattle loans) and are generally secured by a blanket lien on all
crops, livestock, equipment, accounts and products and proceeds thereof.  The
variables that effect income during the year are cattle production, the cost
of feed and related expenses and the fluctuating market conditions or in the
case of crops, the number of acres in production by the borrower, the crop to
be planted, the crop yield and the expected price to be received for harvested
crops.  The interest rate is adjusted monthly based on the prime rate as
published in The Wall Street Journal, plus a negotiated margin of up to 2%.
Because such loans are made to finance a farm's or ranch's annual operations,
they are written on a one-year renewable basis, and renewal is dependent upon
prior year's performance and the forthcoming year's projections as well as
overall financial strength of the borrower.  The Bank carefully monitors these
loans and prepares monthly variance reports on the income and expenses.  To
meet the seasonal operating needs of a farm, borrowers may qualify for single
payment notes, revolving lines of credit and/or non-revolving lines of credit.

     In underwriting agricultural operating loans, the Bank considers the cash
flow of the borrower based upon the farm or ranch operations expected income
stream as well as the value of collateral used to secure the loan.  Collateral
generally consists of cattle or cash crops produced by the farm, such as
grain, grass seed, peas, sugar beets, mint, onions, potatoes, corn and
alfalfa.  In addition to considering cash flow and obtaining a blanket
security interest in the farm's cash crop, the Bank may also collateralize an
operating loan with the farm's operating equipment, breeding stock, real
estate, and federal agricultural program payments to the borrower.

     The Bank also originates loans to finance the purchase of farm equipment
and will continue to pursue this type of lending in the future.  Loans to
purchase farm equipment are made for terms of up to seven years.  For fixed
rate loans for terms generally not to exceed five years, rates are established
at inception with margins set from 2% to 3.5% above the five-year Treasury
Note with a minimum rate of generally at least 7.75%.  For loans in excess of
five years, rates are established at inception with margins set from 2% to
3.5% above the five year Treasury Note with adjustments set at three to five
years and with a floor of generally at least 7.75%.

     Agricultural real estate loans primarily are secured by first liens on
farmland or buildings thereon located in the Bank's market area, primarily to
service the needs of the Bank's existing customers.  The largest such loan
totalled $995,000 at March 31, 1999.  Loans are generally written in amounts
up to 50% to 75% of the tax assessed or appraised value of the property for
terms of between 10 to 20 years. Such loans have interest rates that generally
adjust at least every five years based upon the current five year Treasury
Note, plus a negotiated margin up to 3%.  For fixed rate loans with terms
generally not to exceed five years, rates are established at inception with
margins set from 2.0% to 3.5% above the current five year Treasury Note.  In
originating an agricultural real estate loan, the Bank considers the debt
service coverage of the borrower's cash flow and the appraised value of the
underlying property, as well as the Bank's experience with and knowledge of
the borrower.

                                       5
<PAGE>

     Payments on an agricultural real estate loan depend to a large degree on
the results of operations of the related farm, and repayment is also subject
to adverse economic or weather conditions as well as market prices for
agricultural products, which can be highly volatile and are outside the
control of the farm borrower, among other things.  Such loans are not made to
start up businesses and are generally reserved for  profitable operators with
substantial equity and proven track records.  At March 31, 1999, agricultural
real estate loans totalled $2.2 million, or 1.2%, of the loan portfolio.

     In addition to disease, weather presents one of the greatest risks as
hail, drought, floods, or other conditions, can severely limit or destroy crop
yields and thus impair loan repayments and the value of the underlying
collateral.  This risk can be reduced substantially by the farmer with multi-
peril crop insurance which can guarantee yields to provide certainty of
repayment.  Because of its high cost to the borrower, the Bank encourages but
generally does not require multi-peril crop insurance.  Grain and livestock
prices also present a risk as prices may decline prior to sale resulting in a
failure to cover production costs.  These risks may be reduced by the use of
future set price contracts, which fixes in advance the price that the farmer
will receive for the harvested crops.  Generally operating margin reserves of
20% of the current year's budget usually cover any price declines for the
current year.

     In addition, the value of collateral securing agricultural real estate
loans may be affected in the coming years by the gradual release of farmland
from the federal government's Conservation Reserve Program, which began in the
mid-1980's and pays farmers to keep their land out of farming production for a
ten-year period. Because such farmland is being released gradually over a ten
year period, which began in 1995, and because of the anticipated high economic
costs associated with preparing such farmland for active cultivation that may
discourage renewed farming thereon, management does not anticipate that
release of this land will have any significant effect on the value of its
current collateral.

     Finally, many farms are dependent on a limited number of key individuals
whose injury or death may result in an inability to operate the farm
successfully.  Therefore, consideration is given to succession, life insurance
and business continuation plans during underwriting.

     Construction Lending.  On a limited basis, the Bank also offers
construction loans to qualified borrowers for construction of single-family
residences in the Bank's primary market area.  Typically, the Bank limits its
construction lending to a local builder for the construction of a single-
family dwelling where a permanent purchase commitment has been obtained or
individuals are building their primary residences.  At times, on a limited
basis, the Bank lends to contractors for housing construction where the house
is not presold.  The ability of a developer to sell developed lots or
completed dwelling units will depend on, among other things, demand, pricing,
availability of comparable properties and economic conditions.  Construction
loans generally have a six-month term with only interest being paid during the
term of the loan, and convert at the end of six months to permanent financing
and are underwritten in accordance with the same standards as the Bank's
mortgages on existing properties. Construction loans generally have a maximum
loan-to-value ratio of 80%. Borrowers must satisfy all credit requirements
which would apply to the Bank's permanent mortgage loan financing for the
subject property.

     Construction financing generally is considered to involve a higher degree
of risk of loss than long-term financing on improved, occupied real estate.
Risk of loss on a construction loan is dependent largely upon the accuracy of
the initial estimate of the property's value at completion of construction or
development and the estimated cost (including interest) of construction.
During the construction phase, a number of factors could result in delays and
cost overruns.  If the estimate of construction costs proves to be inaccurate,
the borrower may be required to fund the cost overruns or the Bank may advance
funds beyond the amount originally committed to permit completion of the
development.  The Bank has sought to minimize this risk by limiting
construction lending to qualified borrowers in the Bank's market area and by
limiting the aggregate amount of outstanding construction loans.  At March 31,
1999, construction loans amounted to $2.8 million, or 1.5%, of the loan
portfolio.

     Multi-Family and Commercial Real Estate Lending.  The multi-family
residential loan portfolio consists primarily of loans secured by small
apartment buildings and the commercial real estate loan portfolio includes
loans to finance the construction or acquisition of small office buildings,
retail stores, car dealerships.  The largest such loan

                                       6
<PAGE>

totalled $611,000 at March 31, 1999.  At March 31, 1999, the Bank had $2.8
million of multi-family residential and $10.7 million of commercial real
estate loans, which amounted to 1.5% and 5.7%, respectively, of the total loan
portfolio at such date.  Multi-family and commercial real estate loans are
generally underwritten with loan-to-value ratios of up to 75% of the lesser of
the appraised value or the purchase price of the property.  Such loans
generally are made based upon the five year Treasury Note yield, for 15 to 20
year terms and they adjust at a rate equal to the five year Treasury Note rate
plus a negotiated margin up to 3% with floors of generally at least 7.75%.  On
fixed rate loans for terms generally not to exceed ten years, rates are
established at inception with margins set from 2.0% to 3.5% above the current
five year Treasury Note.  Because of the inherently greater risk involved in
this type of lending, the Bank generally limits its multi-family and
commercial real estate lending to borrowers within its market area with which
it has had prior experience.

     Multi-family residential and commercial real estate lending entails
significant additional risks as compared with single-family residential
property lending.  Multi-family residential and commercial real estate loans
typically involve large loan balances to single borrowers or groups of related
borrowers. The payment experience on such loans typically is dependent on the
successful operation of the real estate project.  These risks can be
significantly impacted by supply and demand conditions in the market for
office, retail and residential space, and, as such, may be subject to a
greater extent to adverse conditions in the economy generally.  To minimize
these risks, the Bank generally limits itself to its market area or to
borrowers with which it has prior experience or who are otherwise well known
to the Bank.  In addition, in the case of commercial mortgage loans made to a
partnership or a corporation, the Bank seeks, whenever possible, to obtain
personal guarantees and annual financial statements of the principals of the
partnership or corporation.  The Bank reviews all significant commercial real
estate loans on an annual basis to ensure that the loan meets current
underwriting standards.  In addition, the Bank underwrites commercial real
estate loans at a rate of interest significantly above that carried on the
loan at the time of origination to evaluate the borrower's ability to meet
principal and interest payments on the loan in the event of upward adjustments
to the interest rate on the loan.

     Consumer and Other Lending.  The Bank originates a variety of consumer
loans.  Such loans generally have shorter terms to maturity and higher
interest rates than mortgage loans.  At March 31, 1999, the Bank's consumer
loans totaled approximately $35.3 million, or 18.8%, of the Bank's total
loans.  The Bank's consumer loans consist primarily of home improvement and
equity loans, automobile loans, boat and recreational vehicle loans, unsecured
loans, and deposit account loans.  The growth of the consumer loan portfolio
in the current year consisted primarily of an increase in the origination of
indirect dealer automobile loans, as discussed below.

     In recent periods, the Bank has emphasized the origination of consumer
loans, and, in particular, automobile loans due to their shorter terms and
higher yields than residential mortgage loans.  The Bank anticipates that it
will continue to be an active originator of automobile and other consumer
loans.  Factors that may affect the ability of the Bank to increase its
originations in this area include the demand for such loans, interest rates
and the state of the local and national economy.

     The Bank offers open-ended "preferred" lines of credit on either a
secured or unsecured basis.  Secured lines of credit are generally secured by
a second mortgage on the borrower's primary residence.  Secured lines of
credit have an interest rate that is two percentage points above the prime
lending rate, as published in The Wall Street Journal, while the rate on
unsecured lines is three percentage points above this prime lending rate.  In
both cases, the rate adjusts monthly. The majority of the approved lines of
credit at March 31, 1999 were equal or less than $25,000.  The Bank requires
repayment of at least 2% of the unpaid principal balance monthly.  At March
31, 1999, approved lines of credit totaled $10.6 million, of which $4.7
million was outstanding.

     The Bank offers closed-end, fixed-rate home equity loans that are made on
the security of primary residences.  Loans normally do not exceed 80% of the
appraised or tax assessed value of the residence, less the outstanding
principal of the first mortgage, and have terms of up to 15 years requiring
monthly payments of principal and interest.  At March 31, 1999, fixed rate
home equity loans and second mortgage loans amounted to $12.8 million, or
6.8%, of total loans.

                                       7
<PAGE>

     At March 31, 1999, the Bank's automobile loan portfolio amounted to $11.8
million, or 33.6%, of  consumer loans at such date.  Since January 1997, a
substantial portion of the Bank's automobile loans have been originated
indirectly by a network of approximately 15 automobile dealers located in the
Baker City,  La Grande, Ontario, Burns, John Day and Enterprise market areas.
Indirect automobile loans accounted for approximately 38.7% of the Bank's
total consumer loan originations during the year ended March 31, 1999.  The
applications for such loans are taken by employees of the dealer, the loans
are written on the dealer's contract pursuant to the Bank's underwriting
standards using the dealer's loan documents with terms substantially similar
to the Bank's.  All indirect loans must be approved by specific loan officers
of the Bank who have experience with this type of lending.  In addition to
indirect automobile lending, the Bank also originates automobile loans
directly.  Subject to market conditions and other factors, the Bank is
considering expanding its purchase of dealer-originated contracts to include
contracts secured by recreational vehicles, trailers, motorcycles, and other
vehicles.

     The maximum term for the Bank's automobile loans is 72 months.  The Bank
may lend up to 100% of the purchase price of the new or used automobile.  The
Bank requires all borrowers to maintain automobile insurance, including
collision, fire and theft, with a maximum allowable deductible and with the
Bank listed as loss payee.

     The Bank's consumer loans also include unsecured loans and loans secured
by deposit accounts and loans to purchase recreational vehicles, motor homes,
boats and credit card loans.  The Bank may lend up to 100% of the purchase
price of vehicles other than automobiles.

     At March 31, 1999, unsecured consumer loans amounted to $2.8 million, or
1.5%, of total loans.  These loans are made for a maximum of 60 months or less
with fixed rates of interest and are offered primarily to existing customers
of the Bank.

     Since December 1992, the Bank has offered credit card loans through its
participation as a VISA card issuer.  Management believes that providing
credit card services to its customers helps the Bank remain competitive by
offering customers an additional service.  The Bank does not actively solicit
credit card business beyond its customer base and market area and has not
engaged in mailing of pre-approved credit cards.  The rate currently charged
by the Bank on its credit card loans is the prime rate, as published in The
Wall Street Journal, plus 7%, and the Bank is permitted to change the interest
rate quarterly.  Processing of bills and payments is contracted to an outside
servicer.  At March 31, 1999, the Bank had a commitment to fund an aggregate
of $6.2 million of credit card loans, which represented the aggregate credit
limit on credit cards, and had $949,000 of credit card loans outstanding,
representing .5% of its total loan portfolio. The Bank intends to continue
credit card lending and estimates that at current levels of credit card loans,
it makes a small monthly profit net of service expenses and write-offs.

     Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of loans that are unsecured or secured by rapidly
depreciating assets such as automobiles and other vehicles.  In such cases,
any repossessed collateral for a defaulted consumer loan may not provide an
adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation.  The remaining
deficiency often does not warrant further substantial collection efforts
against the borrower beyond obtaining a deficiency judgment.  In addition,
consumer loan collections are dependent on the borrower's continuing financial
stability, and thus are more likely to be adversely affected by job loss,
divorce, illness or personal bankruptcy. Furthermore, the application of
various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount that can be recovered on such loans.  At
March 31, 1999, the Bank had $5,000 of consumer loans accounted for on a
nonaccrual basis.

     Commercial Business Lending.  The Bank originates commercial business
loans to small and medium sized businesses in its primary market area.
Commercial business loans are generally made to finance the purchase of
seasonal inventory needs, new or used equipment, and for short-term working
capital.  Such loans are generally secured by equipment, accounts receivable
and inventory, although commercial business loans are sometimes granted on an
unsecured basis.  Such loans are made for terms of five years or less,
depending on the purpose of the loan and the collateral, with loans to finance
operating expenses made for one year or less, with interest rates that adjust
at least

                                       8
<PAGE>

annually at a rate equal to the prime rate, as published in The Wall Street
Journal, plus a margin of up to 3%.  Loans to finance the purchase of
equipment are made for terms generally five years or less at a fixed rate
established at inception with margins set from 2% to 3% above the five-year
Treasury Note with a minimum rate of generally at least 7.75%.  For loans in
excess of five years, rates are established at inception with margins set from
2% to 3% above the five-year Treasury Note with adjustments set at three to
five years and with a floor of generally at least 7.75%.  At March 31, 1999,
the commercial business loans amounted to $15.1 million, or 8.0%, of the total
loan portfolio.

     At March 31, 1999, the largest outstanding commercial business loan was a
$1.0 million operating line of credit to a retail lumber and recreational
vehicle dealership.  Such loan was performing according to its terms at March
31, 1999.

     The Bank is an approved Small Business Administration ("SBA") lender and
at March 31, 1999, had two SBA loans that totalled $325,000.  The Bank intends
to continue to originate these loans to local businesses within its primary
market area.

     The Bank underwrites its commercial business loans on the basis of the
borrower's cash flow and ability to service the debt from earnings rather than
on the basis of underlying collateral value, and the Bank seeks to structure
such loans to have more than one source of repayment.  The borrower is
required to provide the Bank with sufficient information to allow the Bank to
make its lending determination.  In most instances, this information consists
of at least three years of financial statements, tax returns, a statement of
projected cash flows, current financial information on any guarantor and any
additional information on the collateral.  Generally, for loans with balances
exceeding $100,000, the Bank requires that borrowers and guarantors provide
updated financial information at least annually.

     The Bank's commercial business loans may be structured as term loans or
as lines of credit.  Commercial business term loans are generally made to
finance the purchase of assets and have maturities of five years or less.
Commercial business lines of credit are typically made for the purpose of
providing working capital and are usually approved with a term of between six
months and one year.

     Commercial business loans are often larger and may involve greater risk
than other types of lending.  Because payments on such loans are often
dependent on successful operation of the business involved, repayment of such
loans may be subject to a greater extent to adverse conditions in the economy.
The Bank seeks to minimize these risks through its underwriting guidelines,
which require that the loan be supported by adequate cash flow of the
borrower, profitability of the business, collateral and personal guarantees of
the individuals in the business.  In addition, the Bank limits this type of
lending to its market area and to borrowers with which it has prior experience
or who are otherwise well known to the Bank.

     Maturity of Loan Portfolio.  The following table sets forth certain
information at March 31, 1999 regarding the dollar amount of loans maturing in
the Bank's portfolio based on their contractual terms to maturity, but does
not include scheduled payments or potential prepayments.  Demand loans, loans
having no stated schedule of repayments and no stated maturity, and overdrafts
are reported as becoming due within one year.  Loan balances do not include
undisbursed loan proceeds, unearned discounts, unearned income and allowance
for loan losses.

                                       9
<PAGE>

                                       After    After
                                       One Year 3 Years
                             Within    Through  Through    Over
                             One Year  3 Years  5 Years  Five Years   Total
                             --------  -------  -------  ----------   -----
                                           (Dollars in thousands)
Mortgage loans:
 One- to- four family. . . . $    19   $  471   $ 1,314   $107,285   $109,089
 Multi-family. . . . . . . .      --       --       417      2,393      2,810
 Commercial. . . . . . . . .     108      324     1,081      9,144     10,657
 Agricultural. . . . . . . .      --       --        52      2,188      2,240
 Construction. . . . . . . .      --       --        --      2,825      2,825
 Land. . . . . . . . . . . .      --       --       102        228        330

Consumer loans:
 Home equity and second
  mortgage . . . . . . . . .     271      685     2,624     12,682     16,262
 Automobile. . . . . . . . .      45    1,226     7,002      3,570     11,843
 Credit card . . . . . . . .      17       77       113        742        949
 Loans secured by deposit
  accounts . . . . . . . . .     253       98        62          3        416
 Unsecured . . . . . . . . .     239      299       325      1,973      2,836
 Other . . . . . . . . . . .      51      471       851      1,612      2,985

Commercial business loans. .   4,846    1,690     3,086      5,455     15,077
Agricultural loans . . . . .   6,252      537     2,194        798      9,781
                             -------   ------   -------   --------   --------
     Total . . . . . . . . . $12,101   $5,878   $19,223   $150,898   $188,100
                             =======   ======   =======   ========   ========

     The following table sets forth the dollar amount of all loans due after
March 31, 2000, which have fixed interest rates and have floating or
adjustable interest rates.

                                        Fixed           Floating or
                                        Rates        Adjustable Rates
                                        -----        ----------------
                                             (In thousands)
Mortgage loans:
One- to- four family . . . . . .       $76,706            $32,364
 Multi-family. . . . . . . . . .           694              2,116
 Commercial. . . . . . . . . . .         4,097              6,452
 Agricultural. . . . . . . . . .           219              2,021
 Construction. . . . . . . . . .         1,841                984
 Land. . . . . . . . . . . . . .           330                 --

Consumer loans:
 Home equity and second mortgage        12,545              3,446
 Automobile. . . . . . . . . . .        11,798                 --
 Credit card . . . . . . . . . .            --                932
 Loans secured by deposit accounts         163                 --
 Unsecured . . . . . . . . . . .           119              2,478
 Other . . . . . . . . . . . . .         2,742                192

Commercial business loans. . . .         6,393              3,838
Agricultural loans . . . . . . .         2,081              1,448
                                      --------            -------
    Total. . . . . . . . . . . .      $119,728            $56,271
                                      ========            =======

                                       10
<PAGE>

     Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets.  The average life of a loan is substantially less
than its contractual terms because of prepayments.  In addition, due on sale
clauses on loans generally give the Bank the right to declare loans
immediately due and payable in the event, among other things, that the
borrower sells the real property subject to the mortgage and the loan is not
repaid.  The average life of mortgage loans tends to increase, however, when
current mortgage loan market rates are substantially higher than rates on
existing mortgage loans and, conversely, decrease when rates on existing
mortgage loans are substantially higher than current mortgage loan market
rates.  Furthermore, management believes that a significant number of the
Bank's residential mortgage loans are outstanding for a period less than their
contractual terms because of the transitory nature of many of the borrowers
who reside in its primary market area.

     Loan Solicitation and Processing.  The Bank's lending activities are
subject to the written, non-discriminatory, underwriting standards and loan
origination procedures established by the Bank's Board of Directors and
management.  The customary sources of loan originations are realtors, walk-in
customers, referrals and existing customers.  The Bank also advertises its
loan products by radio and newspaper.  The Bank does not employ commissioned
loan originators.

     Mortgage loan applications are initiated, underwritten and preliminarily
approved by loan officers before they are recommended for final review and
approval. Individual lending limits and credit approval limits are established
for branch and loan center personnel up to $175,000.  Commercial lenders' and
administrative credit approval limits are established up to $750,000 depending
on position and lending knowledge. Loans to borrowers with an aggregate
borrowing relationship over $750,000 but less than $1.5 million requires
approval of a quorum of the Level 1 Executive Loan Committee.  The Loan
Committee consists of the President/Chief Executive Officer, Executive Vice
President, Senior Credit Manager, Credit Manager, three commercial lenders and
six Board members.  A quorum of the committee consists of one of the
President/Chief Executive Officer or Executive Vice President; Senior Credit
Manager or Credit Manager; two Board members and if the loan is a commercial
loan, one commercial lender.  Loans to borrowers with an aggregate borrowing
relationship in excess of $1.5 million but less than $3 million require the
approval of the Level 2 Board Loan Committee, which consists of the same
members as the Executive Loan Committee, but requires a larger quorum.  Loans
to borrowers with an aggregate borrowing relationship exceeding $3 million
require approval by the same committee, but with an even larger quorum.

     Loan Originations, Sales and Purchases.  Historically, the Bank's primary
lending activity has been the origination of one- to- four family residential
mortgage loans. In recent periods, the Bank has increased its origination of
consumer, commercial business and agricultural loans.

     During the year ended March 31, 1999, the Bank did not sell a material
amount of its loans.  At March 31, 1999, the Bank was not servicing any loans
for investors.

                                       11
<PAGE>

     The following table sets forth total loans originated, purchased, sold
and repaid during the periods indicated.

                                                            Nine Months Ended
                                     Year Ended March 31,       March 31,
                                    ---------------------- ------------------
                                       1999       1998       1997      1996
                                       ----       ----       ----      ----
                                                  (In thousands)
Loans originated:
 Mortgage loans:
  One- to- four family . . . . . .  $ 38,178    $13,718    $ 8,966    $11,932
  Multi-family . . . . . . . . . .     1,736        400         --         --
  Commercial . . . . . . . . . . .     4,371        393         --        325
  Construction . . . . . . . . . .     6,713      4,448      2,216      2,856
  Land . . . . . . . . . . . . . .       155         19        173         27
 Consumer. . . . . . . . . . . . .    11,611     19,122      8,769      5,548
 Commercial business loans . . . .    20,096      7,860      2,346      1,367
 Agricultural loan . . . . . . . .    25,800     10,631      6,352         --
                                    --------    -------    -------    -------
    Total loans originated . . . .   108,660     56,591     28,822     22,055

Loans purchased:
 One-to four family mortgage . . .        --        203        183         47
 Dealer-originated automobile
  contracts. . . . . . . . . . . .     7,338      5,574        389         --
 Commercial real estate. . . . . .       366         --         --         --
                                    --------    -------    -------    -------
     Total loans purchased . . . .     7,693      5,777        572         47

Loans sold:
  Total whole loans sold . . . . .        --         --      1,149        652
                                    --------    -------    -------    -------
     Total loans sold. . . . . . .        --         --      1,149        652

Loan principal repayments. . . . .    84,444     47,411     21,711     16,712
                                    --------    -------    -------    -------
Net increase in loans receivable,
 net . . . . . . . . . . . . . . .  $ 31,909    $14,957    $ 6,534    $ 4,738
                                    ========    =======    =======    =======

     Loan Commitments.  The Bank issues commitments for loans and lines of
credit conditioned upon the occurrence of certain events.  Such commitments
are made in writing on specified terms and conditions and are honored for up
to 45 days from approval, depending on the type of transaction.  At March 31,
1999, the Bank had loan commitments of $31.6 million.  See Note 18 of Notes to
Consolidated Financial Statements.

     Loan Fees.  In addition to interest earned on loans, the Bank receives
income from fees in connection with loan originations, loan modification, late
payments and for miscellaneous service related to its loans.  Income from
these activities varies from period to period depending upon the volume and
type of loans made and competitive conditions.

     The Bank charges loan origination fees which are calculated as a
percentage of the amount borrowed.  In accordance with applicable accounting
procedures, loan origination fees and discount points in excess of loan
origination costs are deferred and recognized over the contractual remaining
lives of the related loans on a level yield basis.  Discounts and premiums on
loans purchased are accredited and amortized in the same manner.  The Bank
recognized $248,000, $184,000 and $144,000 of deferred loan fees during the
years ended March 31, 1999 and 1998 and the nine months ended March 31, 1997,
respectively, in connection with loan refinancings, payoffs, sales and ongoing
amortization of outstanding loans.

     Nonperforming Assets and Delinquencies.  Generally, the borrowers are
allowed to pay up to the 15th day following the due date before the Bank
initiates collection procedures.  When a borrower fails to make a required
payment on a loan, the Bank attempts to cure the deficiency by contacting the
borrower and seeking the payment.

                                       12
<PAGE>

Contacts are generally made 16 days after the due date.  In most cases,
delinquencies are cured promptly.  If a delinquency continues, additional
contact is made through a telephone call around the 20th day.  While the Bank
generally prefers to work with borrowers to resolve such problems, the Bank
will institute foreclosure or other proceedings after the 90th day of
delinquency, as necessary, to minimize any potential loss.

     Loans are placed on nonaccrual status when the loan becomes contractually
past due 90 days or more.  Interest payments received on nonaccrual loans are
applied to principal if collection of principal is doubtful or reflected as
interest income on a cash basis.  Loans may be reinstated to accrual status
when current and collectibility of principal and interest is no longer
doubtful.

     The Bank's Board of Directors is informed monthly of the status of all
loans delinquent more than 30 days, all loans in foreclosure and all
foreclosed and repossessed property owned by the Bank.

                                       13
<PAGE>

     The following table sets forth information with respect to the Bank's
nonperforming assets and restructured loans at the dates indicated.

                                         At March 31,           At June 30,
                                   -----------------------     ------------
                                   1999     1998      1997     1996    1995
                                   ----     ----      ----     -----   ----
                                              (Dollars in thousands)
Loans accounted for on a
 nonaccrual basis:
 Mortgage loans:
  One- to- four family . . . .     $ 133    $ 258    $ 167    $ 111    $  47
 Consumer loans. . . . . . . .         5       17       23       52       20
                                   -----    -----    -----    -----    -----
      Total. . . . . . . . . .       138      275      190      163       67

Accruing loans which are
 contractually past due 90 days
 or more . . . . . . . . . . .        --       --       --       --       --
                                   -----    -----    -----    -----    -----
      Total. . . . . . . . . .        --       --       --       --       --

Total of nonaccrual and 90 days
 past due loans. . . . . . . .       138      275      190      163       67

Foreclosed real estate . . . .        37       --       --       13       --

Other repossessed assets . . .        --      313       10       34       --
                                   -----    -----    -----    -----    -----
     Total nonperforming assets    $ 175    $ 588    $ 200    $ 210    $  67
                                   -----    -----    -----    -----    -----
Restructured loans . . . . . .     $   0    $   0    $  --    $  --    $  --
                                   =====    =====    =====    =====    =====
Nonaccrual and 90 days or more
 past due loans as a percentage
 of loans receivable, net. . .      0.07%    0.18%    0.14%    0.12%    0.05%

Nonaccrual and 90 days or more
 past due loans as a percentage
 of total assets . . . . . . .      0.04%    0.10%    0.09%    0.08%    0.03%

Nonperforming assets as a
 percentage of total assets. .      0.06%    0.22%    0.10%    0.10%    0.03%

Loans receivable, net. . . . .  $185,747 $153,838 $138,881 $132,347 $124,440

Total assets . . . . . . . . .  $313,473 $263,224 $204,213 $203,457 $205,400

     Interest income that would have been recorded for the year ended March
31, 1999 had nonaccruing loans been current in accordance with their original
terms, and the amount of interest included in interest income on such loans
for such periods was immaterial.

     Real Estate Acquired in Settlement of Loans.  See Note 1 of Notes to
Consolidated Financial Statements regarding the Bank's accounting for
foreclosed real estate.  At March 31, 1999, the Bank had $37,000 of foreclosed
real estate.

     Asset Classification.  The OTS has adopted various regulations regarding
problem assets of savings institutions.  The regulations require that each
insured institution review and classify its assets on a regular basis.  In
addition, in connection with examinations of insured institutions, OTS
examiners have authority to identify problem

                                       14
<PAGE>

assets and, if appropriate, require them to be classified.  There are three
classifications for problem assets:  substandard, doubtful and loss.
Substandard assets have one or more defined weaknesses and are characterized
by the distinct possibility that the insured institution will sustain some
loss if the deficiencies are not corrected.  Doubtful assets have the
weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss.  An asset classified as loss is considered uncollectible
and of such little value that continuance as an asset of the institution is
not warranted.  If an asset or portion thereof is classified as loss, the
insured institution establishes specific allowances for loan losses for the
full amount of the portion of the asset classified as loss.  All or a portion
of general loan loss allowances established to cover possible losses related
to assets classified substandard or doubtful can be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital.  Assets that do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are designated "special mention" and monitored by the Bank.

     The aggregate amounts of the Bank's classified and special mention
assets, and of the Bank's general and specific loss allowances at the dates
indicated, were as follows:

                                                   At March 31,
                                     -----------------------------------------
                                        1999           1998            1997
                                        ----           ----            ----
                                                  (In thousands)

Loss . . . . . . . . . . . . .       $     10       $     15         $    7
Doubtful . . . . . . . . . . .              7             --             22
Substandard assets . . . . . .            671            568            796
Special mention. . . . . . . .          8,438          1,501            838

General loss allowances. . . .          1,218            832            718
Specific loss allowances . . .             10             15              7

     At March 31, 1999, substandard assets consisted of 12 one- to- four
family mortgage loans, three secured consumer loans, two unsecured consumer
loans, nine VISA credit card accounts and one commercial loan.

     At March 31, 1999, special mention assets consisted of 30 one- to- four
family mortgage loans, 15 secured consumer loans, two unsecured consumer
loans, nine VISA credit card accounts, 12 agricultural loans, three
agricultural real estate loans and 14 commercial loans.

     Allowance for Loan Losses.  The Bank has established a systematic
methodology for the determination of provisions for loan losses.  The
methodology is set forth in a formal policy and takes into consideration the
need for an overall general valuation allowance as well as specific allowances
that are tied to individual loans.

     In originating loans, the Bank recognizes that losses will be experienced
and that the risk of loss will vary with, among other things, the type of loan
being made, the creditworthiness of the borrower over the term of the loan,
general economic conditions and, in the case of a secured loan, the quality of
the security for the loan.  The Bank increases its allowance for loan losses
by charging provisions for loan losses against the Bank's income.

     Allowances for losses on specific problem loans and real estate owned are
charged to earnings when it is determined that the value of these loans and
properties, in the judgement of management, is impaired.  In addition to
specific reserves, the Bank also maintains general provisions for loan losses
based on evaluating known and inherent risks in the loan portfolio, including
management's continuing analysis of the factors and trends underlying the
quality of the loan portfolio.  These factors include changes in the size and
composition of the loan portfolio, actual loan loss experience, current and
anticipated economic conditions, detailed analysis of individual loans for
which full collectibility may not be assured, and determination of the
existence and realizable value of the collateral and guarantees securing

                                       15
<PAGE>

the loans.  The ultimate recovery of loans is susceptible to future market
factors beyond the Bank's control, which may result in losses or recoveries
differing significantly from those provided in the consolidated financial
statement.  In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's valuation allowance
on loans and real estate owned.  Generally, a provision for losses is charged
against income quarterly to maintain the allowance for loan losses.

     At March 31, 1999, the Bank had an allowance for loan losses of $1.2
million, which management believes was adequate to absorb losses inherent in
the portfolio at that date.  Although management believes that it uses the
best information available to make such determinations, future adjustments to
the allowance for loan losses may be necessary and results of operations could
be significantly and adversely affected if circumstances differ substantially
from the assumptions used in making the determinations.  Furthermore, while
the Bank believes it has established its existing allowance for loan losses in
accordance with GAAP, there can be no assurance that regulators, in reviewing
the Bank's loan portfolio, will not request the Bank to increase significantly
its allowance for loan losses.  In addition, because future events affecting
borrowers and collateral cannot be predicted with certainty, there can be no
assurance that the existing allowance for loan losses is adequate or that
substantial increases will not be necessary should the quality of any loans
deteriorate as a result of the factors discussed above.  Any material increase
in the allowance for loan losses may adversely affect the Bank's financial
condition and results of operations.

                                       16
<PAGE>

     The following table sets forth an analysis of the Bank's allowance for
possible loan losses for the periods indicated.

                                                  Nine Months
                                 Year Ended         Ended         Year Ended
                                  March 31,        March 31,       June 30,
                                -------------    ------------    ------------
                                1999     1998    1997    1996    1996    1995
                                ----     ----    ----    ----    ----    ----
                                          (Dollars in thousands)

Allowance at beginning of
 period. . . . . . . . . . . . $  847    $725    $541    $455    $455    $403
                               ------    ----    ----    ----    ----    ----
Provision (credit) for loan
 losses. . . . . . . . . . . .    483     138     216      91     115      67
Recoveries:
 Mortgage loans:
  One- to- four family . . . .     --       4      --       9      12       5
 Consumer loans:
  Credit card. . . . . . . . .      9       4       4       1       1      --
  Other. . . . . . . . . . . .      4      25       3      --       1      --
                               ------    ----    ----    ----    ----    ----
   Total recoveries. . . . . .     13      33       7      10      14       5
                               ------    ----    ----    ----    ----    ----
Charge-offs:
 Mortgage loans:
  One- to- four family . . . .      4       5       5      --      --      --
 Consumer loans:
  Credit card. . . . . . . . .     82      36      26      25      41      --
  Automobile . . . . . . . . .     15       8      --      --      --      --
  Unsecured. . . . . . . . . .     --      --      --      --      --      --
  Other. . . . . . . . . . . .     14      --       8      --       2      20
                               ------    ----    ----    ----    ----    ----
   Total charge-offs . . . . .    115      49      39      25      43      20
                               ------    ----    ----    ----    ----    ----
   Net charge-offs . . . . . .    102      16     (32)    (15)    (29)    (15)
                               ------    ----    ----    ----    ----    ----
    Allowance at end of period $1,228    $847    $725    $531    $541    $455
                               ======    ====    ====    ====    ====    ====

Allowance for loan losses as
 a percentage of total loans
 outstanding at the end of the
 period. . . . . . . . . . . .   0.66%   0.55%   0.52%   0.41%   0.41%   0.37%

Net charge-offs as a percentage
 of average loans outstanding
 during the period . . . . . .   0.06%   0.01%   0.03%   0.02%   0.02%   0.01%

Allowance for loan losses as
 a percentage of nonperforming
 loans at end of period. . . . 889.86% 308.07% 381.58% 424.80% 331.90% 679.10%

                                       17
<PAGE>

<TABLE>

     The following table sets forth the breakdown of the allowance for loan losses by loan category at the
dates indicated.  Management believes that the allowance can be allocated by category only on an approximate
basis.  The allocation of the allowance to each category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any other category.

                                                  At March 31,                         At June 30,
                                --------------------------------------------- ------------------------------
                                       1999           1998         1997           1996            1995
                                ---------------- ------------- -------------- -------------- ---------------
                                         Percent        Percent       Percent         Percent       Percent
                                         of             of            of              of            of
                                         Loans in       Loans in      Loans in        Loans in      Loans in
                                         Category       Category      Category        Category      Category
                                         to             to            to              to            to
                                         Total          Total         Total           Total         Total
                                Amount   Loans  Amount  Loans Amount  Loans   Amount  Loans Amount  Loans
                                ------   -----  ------  ----- ------  -----   ------  ----- ------  -----
                                                           (Dollars in thousands)
<S>                             <C>     <C>      <C>   <C>      <C>  <C>       <C>   <C>      <C>    <C>
Mortgage loans:
 One- to- four
  family . . . . . . . . . . .  $  381   31.03%  $329   66.65%  $357  74.05%   $354   80.92%  $284   79.90%
Non-mortgage loans . . . . . .     265   21.58    236   20.29    173   16.84    174   18.06    162   19.08
Commercial business and
 real estate . . . . . . . . .     300   24.43    164    8.90    105    6.25     --      --     --      --
Agricultural loans . . . . . .     250   20.36     87    3.19     61    1.74     --      --     --      --
 Credit cards. . . . . . . . .      29    2.36     26     .55     24    0.60      9    0.58      5    0.56
 Loans secured by deposit
  accounts . . . . . . . . . .       3     .24      5     .42      5    0.52      4    0.44      4    0.46
   Total allowance              ------  ------   ----  ------   ----  ------   ----  ------   ----  ------
    for loan losses. . . . . .  $1,228  100.00%  $847  100.00%  $725  100.00%  $541  100.00%  $455  100.00%
                                ======  ======   ====  ======   ====  ======   ====  ======   ====  ======

                                                         18
</TABLE>
<PAGE>

Investment Activities

     The Bank is permitted under federal law to invest in various types of
liquid assets, including U.S. Treasury obligations, securities of various
federal agencies and of state and municipal governments, deposits at the FHLB-
Seattle, certificates of deposit of federally insured institutions, certain
bankers' acceptances and federal funds.  Subject to various restrictions, the
Bank may also invest a portion of its assets in commercial paper and corporate
debt securities.  Savings institutions like the Bank are also required to
maintain an investment in FHLB stock.  The Bank is required under federal
regulations to maintain a minimum amount of liquid assets.  See "REGULATION"
herein and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Liquidity and Capital Resources" in the Annual
Report.

     The Bank purchases investment securities with excess liquidity arising
when investable funds exceed loan demand.  The Bank's investment securities
purchases have generally been limited to U.S. Government and government agency
securities with contractual maturities of between one and ten years and
mortgage-backed and related securities issued by the Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC") and
Government National Mortgage Association ("GNMA") with maturities of up to 30
years.  During the year ended March 31, 1999, the Bank began purchasing AAA
rated municipal bonds of various local Oregon governmental units with
maturities of from 10 to 19 years.  Such municipal bonds totalled $8.8 million
at March 31, 1999.

     At March 31, 1999, the Bank held securities classified as
available-for-sale and held-to-maturity under SFAS 115.  There were no trading
securities at March 31, 1999.  See Note 2 of Notes to Consolidated Financial
Statements.  Trading of investment securities is not part of the Bank's
operating strategy.

     The Bank's investment policies generally limit investments to U.S.
Government and government agency securities, municipal bonds, certificates of
deposits, marketable corporate debt obligations, mortgage-backed and related
securities and certain types of mutual funds.  The Bank's investment policy
does not permit engaging directly in hedging activities or purchasing high
risk mortgage derivative products or non-investment grade corporate bonds.
Investments are made based on certain considerations, which include the
interest rate, yield, settlement date and maturity of the investment, the
Bank's liquidity position, and anticipated cash needs and sources (which in
turn include outstanding commitments, upcoming maturities, estimated deposits
and anticipated loan amortization and repayments).   The effect that the
proposed investment would have on the Bank's credit and interest rate risk and
risk-based capital is also considered.

     At March 31, 1999, the Bank did not have any securities (other than U.S.
government and agency securities) which had an aggregate book value in excess
of 10% of the Bank's shareholders' equity at that date.

                                       19
<PAGE>

     The following table sets forth the amortized cost and fair value of the
Bank's debt and mortgage-based and related securities, by accounting
classification and by type of security, at the dates indicated.

                                               At March 31,
                        ------------------------------------------------------
                               1999               1998              1997
                        -----------------  ----------------- -----------------
                                  Percent            Percent           Percent
                        Carrying   of      Carrying   of     Carrying   of
                        Value(1)  Total    Value(1)  Total   Value(1)  Total
                        --------  -----    --------  -----   --------  -----
                                           (Dollars in thousands)
Held to Maturity:
  U.S. Government agency
   obligations . . . .  $     --      --%  $    --      --%  $    --      --%
  Mortgage-backed and
   related securities.     9,338    8.67    12,805   16.46    15,302   30.03
                        --------  ------   -------  ------   -------  ------
Total held to maturity
 securities. . . . . .     9,338    8.67    12,805   16.46    15,302   30.03

Available for Sale:
U.S. Government agency
 obligations . . . . .    37,965   35.26    37,175   47.78    15,857   31.12
Mortgage-backed and
 related securities. .    60,371   56.07    27,778   35.70    19,745   38.75
Other. . . . . . . . .        --      --        50     .06        50    0.10
  Total available for   --------  ------   -------  ------   -------  ------
   sale securities . .    98,336   91.33    65,003   83.54    35,652   69.97

Total. . . . . . . . .  $107,674  100.00%  $77,808  100.00%  $50,954  100.00%
                        ========  =======  =======  ======   =======  ======
---------------
(1)  The market value of the Bank's investment portfolio amounted to $107.8
million,  $78.2 million and $51.0 million at March 31, 1999, 1998 and 1997,
respectively.  At March 31, 1999, the market value of the principal components
of the Bank's investment securities portfolio was as follows: U.S. Government
securities, $38.0 million; mortgage-backed and related securities, $69.8
million.

     The following table sets forth the maturities and weighted average yields
of the debt and mortgage-backed and related securities in the Bank's
investment securities portfolio at March 31, 1999.
<TABLE>


                             Less Than         One to           Five to             Over Ten
                              One Year       Five Years        Ten Years             Years
                           --------------  --------------   ----------------   ----------------
                           Amount   Yield  Amount   Yield   Amount     Yield   Amount     Yield    Total
                           ------   -----  ------   -----   ------     -----   ------     -----    -----
                                                          (Dollars in thousands)
<S>                        <C>       <C>   <C>       <C>    <C>        <C>     <C>         <C>     <C>
Held to Maturity:
 Mortgage-backed and related
  securities. . .  . . . . $ --      --%   $    --     --%   $    --     --%    $ 9,338    6.36%   $  9,338

Available for Sale:
 U.S. Government agency
  obligations. . . . . . .   --      --      5,043   6.75     19,233   6.33      13,689    5.34      37,965
 Mortgage-backed and
  related securities . . .   --      --        223   6.60          4   8.30      60,144    6.64      60,371
     Total available for   ----             ------           -------            -------            --------
      sale securities. . .   --      --      5,266            19,237             73,833              98,336

Total. . . . . . . . . . . $ --             $5,266           $19,237            $83,171            $107,674
                           ====             ======           =======            =======            ========

                                                         20
</TABLE>
<PAGE>

Deposit Activities and Other Sources of Funds

     General.  Deposits are the major external source of funds for the Bank's
lending and other investment activities.  In addition, the Bank also generates
funds internally from loan principal repayments and prepayments and maturing
investment securities.  Scheduled loan repayments are a relatively stable
source of funds, while deposit inflows and outflows and loan prepayments are
influenced significantly by general interest rates and money market
conditions.  Borrowings from the FHLB-Seattle may be used on a short-term
basis to compensate for reductions in the availability of funds from other
sources.  Presently, the Bank has no other borrowing arrangements.

     Deposit Accounts.  A substantial number of the Bank's depositors reside
in Oregon.  The Bank's deposit products include a broad selection of deposit
instruments, including NOW accounts, demand deposit accounts, money market
accounts, statement savings accounts and term certificate accounts.  Deposit
account terms vary with the principal difference being the minimum balance
deposit, early withdrawal penalties and the interest rate.  The Bank reviews
its deposit mix and pricing weekly.  The Bank does not utilize brokered
deposits, nor has it aggressively sought jumbo certificates of deposit.  The
Bank has also begun to seek business checking accounts in connection with its
community banking activities.

     The Bank believes it is competitive in the type of accounts and interest
rates it offers on its deposit products.   The Bank does not seek to pay the
highest deposit rates but a competitive rate.  The Bank determines the rates
paid based on a number of conditions, including rates paid by competitors,
rates on U.S. Treasury securities, rates offered on various FHLB-Seattle
lending programs, and the deposit growth rate the Bank is seeking to achieve.

     In the unlikely event the Bank is liquidated, depositors will be entitled
to full payment of their deposit accounts before any payment is made to the
Company as the sole stockholder of the Bank.

                                       21
<PAGE>

     The following table sets forth information concerning the Bank's time
deposits and other interest-bearing deposits at March 31, 1999.

Weighted
Average                                                             Percentage
Interest                                                    Minimum  of Total
Rate   Term         Category                      Amount    Balance  Deposits
----   ----         --------                      ------    -------  --------
                                                     (In thousands except
                                                        minimum balance)

N/A%   N/A          Non-interest-bearing          $ 11,594       10     5.81%
1.36   N/A          NOW accounts                    36,676       10    18.38
4.14   N/A          Money market accounts           30,486    1,000    15.27
2.35   N/A          Passbook savings accounts       21,083        5    10.56

       Certificates of Deposit
       -----------------------

5.61   3 to 5 years Fixed-term, fixed-rate         20,416     1,000    10.23
4.50   3 1/2 years  Fixed-term, fixed-rate            120     1,000      .05
4.05   91 day       Fixed-term, fixed-rate          2,412     1,000     1.21
4.72   182 day      Fixed-term, fixed-rate         12,107     1,000     6.07
5.00   1 year       Fixed-term, variable-rate      34,004     1,000    17.04
5.34   2 1/2 year   Fixed-term, variable-rate      10,706     1,000     5.36
5.31   5 year       Fixed-term, variable-rate         570     1,000      .29
4.46   18 month     Fixed-term, adjustable- rate    1,853         5      .93
5.07   20 month     Fixed-term, adjustable-rate     5,185     1,000     2.60
4.71   6 year       Fixed-term, adjustable-rate       643         0      .32
5.26   Varies       Various term, fixed-rate        2,530     1,000     1.27
5.51   Varies       Jumbo certificates              9,204   100,000     4.61
                                                 --------             ------
                      TOTAL                      $199,589             100.00%
                                                 ========             ======

     The following table indicates the amount of the Bank's jumbo certificates
of deposit by time remaining until maturity as of March 31, 1999.  Jumbo
certificates of deposit have principal balances of $100,000 or more and
generally have negotiable interest rates.

                                         Certificates
Maturity Period                           of Deposits
---------------                           -----------
                                         (In thousands)

Three months or less . . . . . . .           $3,432
Over three through six months. . .            2,104
Over six through twelve months . .            1,533
Over twelve months . . . . . . . .            2,135
                                             ------
    Total. . . . . . . . . . . . .           $9,204
                                             ======

                                       22
<PAGE>

<TABLE>

     Deposit Flow.  The following table sets forth the balances (inclusive of interest credited) and changes
in dollar amounts of deposits in the various types of accounts offered by the Bank between the dates
indicated.

                                                                At March 31,
                      -------------------------------------------------------------------------------------
                                   1999                             1998                       1997
                      -----------------------------   --------------------------------  -------------------
                                  Percent                          Percent                          Percent
                                  of      Increase                 of        Increase               of
                      Amount      Total  (Decrease)   Amount       Total    (Decrease)  Amount      Total
                      ------      -----  ----------   ------       -----    ----------  ------      -----
                                                    (Dollars in thousands)

<S>                  <C>         <C>       <C>        <C>         <C>        <C>        <C>         <C>
Non-interest-bearing $ 11,594      5.81%   $ 2,946    $  8,648      4.49%    $ 2,366    $  6,282      3.51%
NOW checking . . . .   36,676     18.38      3,311      33,365     17.31       6,104      27,261     15.22
Passbook savings
 accounts. . . . . .   21,083     10.56     (2,658)     23,741     12.32        (263)     24,004     13.40
Money market deposit   30,486     15.27      8,405      22,081     11.46       5,296      16,785      9.37
Fixed-rate certificates
 which mature:
  Within 1 year. . .   70,533     35.34     (1,746)     72,279     37.50      (5,161)     77,440     43.22
  After 1 year, but
   within 3 years .    24,734     12.39     (1,262)     25,996     13.49       6,738      19,258     10.75
  After 3 years, but
   within 5 years .     2,434      1.22     (2,147)      4,581      2.37      (2,071)      6,652      3.71
  Certificates maturing
   thereafter . . .     2,049      1.03          5       2,044      1.06         568       1,476      0.82
                     --------    ------     ------    --------    ------     -------    --------    ------
     Total. . . . .  $199,589    100.00%    $6,854    $192,735    100.00%    $13,577    $179,158    100.00%
                     ========    ======     ======    ========    ======     =======    ========    ======

</TABLE>

     Time Deposits by Rates.  The following table sets forth the amount of
time deposits in the Bank categorized by rates at the dates indicated.

                                                At March 31,
                                   ---------------------------------------
                                     1999           1998           1997
                                     ----           ----           ----
                                                (In thousands)

2.00 - 3.99% . . . . .             $    --       $    229        $    952
4.00 - 4.99% . . . . .              42,960         23,094          21,618
5.00 - 5.99% . . . . .              49,460         74,946          58,210
6.00 - 6.99% . . . . .               6,490          5,390          16,342
7.00% and over . . . .                 840          1,241           7,704
                                   -------       --------        --------
Total. . . . . . . . .             $99,750       $104,900        $104,826
                                   =======       ========        ========

     Deposit Activity.  The following table sets forth the deposit activity of
the Bank for the periods indicated.

                                                                 Nine
                                                              Months Ended
                                      Year Ended March 31,      March 31,
                                     -----------------------    ---------
                                       1999          1998         1997
                                       ----          ----         ----
                                                (In thousands)

Beginning balance. . . . . . . .     $192,735      $179,158      $176,619
                                     --------      --------      --------
Net (withdrawals) deposits
  before interest credited . . .         (366)        5,964        (2,946)
Interest credited. . . . . . . .        7,221         7,613         5,485
                                     --------      --------      --------
Net increase (decrease)
  in deposits. . . . . . . . . .        6,855        13,577         2,539
                                     --------      --------      --------
Ending balance . . . . . . . . .     $199,589      $192,735      $179,158
                                     ========      ========      ========

     Borrowings.  The Bank utilizes advances from the FHLB-Seattle to
supplement its supply of lendable funds and to meet deposit withdrawal
requirements.  The FHLB-Seattle functions as a central reserve bank providing
credit

                                       23
<PAGE>

for savings associations and certain other member financial institutions.  As
a member of the FHLB-Seattle, the Bank is required to own capital stock in the
FHLB-Seattle and is authorized to apply for advances on the security of such
stock and certain of its mortgage loans and other assets (principally
securities that are obligations of, or guaranteed by, the U.S. Government)
provided certain creditworthiness standards have been met.  Advances are made
pursuant to several different credit programs.  Each credit program has its
own interest rate and range of maturities.  Depending on the program,
limitations on the amount of advances are based on the financial condition of
the member institution and the adequacy of collateral pledged to secure the
credit.  The Bank is currently authorized to borrow from the FHLB up to an
amount equal to 30% of total assets.  The Bank may increase the amount of its
FHLB advances if loan demand exceeds deposit growth.

     Prior to December 1997, the Bank also used retail repurchase agreements
due generally within one day as a source of funds, but discontinued their use
in December 1997.  See Note _ of Notes to Consolidated Financial Statements.

     The following table sets forth certain information regarding borrowings
by the Bank at the end of and during the periods indicated:

                                                            At or For the
                                        At or For the      Nine Months Ended
                                     Year Ended March 31,       March 31,
                                     -------------------   -----------------
                                        1999       1998      1997      1996
                                        ----       ----      ----      ----
                                               (Dollars in thousands)

Maximum amount of borrowings outstanding
  at any month end:
 Securities sold under agreements
    to repurchase. . . . . . . . . .   $    --    $1,473    $1,459    $1,432
 FHLB advances . . . . . . . . . . .    50,250     8,000     2,850     9,100

Approximate average borrowings outstanding
  with respect to:
   Securities sold under agreements
    to repurchase. . . . . . . . . .        --       924     1,396     1,215
   FHLB advances . . . . . . . . . .    17,108     3,024       861     7,939

Approximate weighted average rate paid on:
 Securities sold under agreements
    to repurchase. . . . . . . . . .        --%     3.55%     3.50%     3.57%
 FHLB advances . . . . . . . . . . .      5.03      5.85      4.88      6.08

                                       REGULATION

General

     The Bank is subject to extensive regulation, examination and supervision
by the OTS as its chartering agency, and the FDIC, as the insurer of its
deposits.  The activities of federal savings institutions are governed by the
Home Owner's Loan Act ("HOLA") and, in certain respects, the Federal Deposit
Insurance Act ("FDIA"), and the regulations issued by the OTS and the FDIC to
implement these statutes.  These laws and regulations delineate the nature and
extent of the activities in which federal savings associations may engage.
Lending activities and other investments must comply with various statutory
and regulatory capital requirements.  In addition, the Bank's relationship
with its depositors and borrowers is also regulated to a great extent,
especially in such matters as the ownership of deposit

                                       24
<PAGE>

accounts and the form and content of the Bank's mortgage documents.  The Bank
must file reports with the OTS and the FDIC concerning its activities and
financial condition in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with, or acquisitions of,
other financial institutions.  There are periodic examinations by the OTS to
review the Bank's compliance with various regulatory requirements.  The
regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of
assets and the establishment of adequate loan loss reserves for regulatory
purposes.  Any change in such policies, whether by the OTS, the FDIC or
Congress, could have a material adverse impact on the Company, the Bank and
their operations.

Federal Regulation of Savings Associations

     Office of Thrift Supervision.  The OTS is an office in the Department of
the Treasury subject to the general oversight of the Secretary of the
Treasury.  The OTS generally possesses the supervisory and regulatory duties
and responsibilities formerly vested in the Federal Home Loan Bank Board.
Among other functions, the OTS issues and enforces regulations affecting
federally insured savings associations and regularly examines these
institutions.

     Federal Home Loan Bank System.  The FHLB System, consisting of 12 FHLBs,
is under the jurisdiction of the Federal Housing Finance Board ("FHFB").  The
designated duties of the FHFB are to  supervise the FHLBs, to ensure that the
FHLBs carry out their housing finance mission, to ensure that the FHLBs remain
adequately capitalized and able to raise funds in the capital markets, and to
ensure that the FHLBs operate in a safe and sound manner.

     The Bank, as a member of the FHLB-Seattle, is required to acquire and
hold shares of capital stock in the FHLB-Seattle in an amount equal to the
greater of (i) 1.0% of the aggregate outstanding principal amount of
residential mortgage loans, home purchase contracts and similar obligations at
the beginning of each year, or (ii) 1/20 of its advances (i.e., borrowings)
from the FHLB-Seattle.  The Bank is in compliance with this requirement with
an investment in FHLB-Seattle stock of $3.2 million at March 31, 1999.

     Among other benefits, the FHLB provides a central credit facility
primarily for member institutions.  It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System.  It
makes advances to members in accordance with policies and procedures
established by the FHFB and the Board of Directors of the FHLB-Seattle.

     Federal Deposit Insurance Corporation.  The FDIC is an independent
federal agency established originally to insure the deposits, up to prescribed
statutory limits, of federally insured banks and to preserve the safety and
soundness of the banking industry.  The FDIC maintains two separate insurance
funds: the Bank Insurance Fund ("BIF") and the SAIF.  The Bank's deposit
accounts are insured by the FDIC under the SAIF to the maximum extent
permitted by law.  As insurer of the Bank's deposits, the FDIC has
examination, supervisory and enforcement authority over all savings
associations.

     Under applicable regulations, the FDIC assigns an institution to one of
three capital categories based on the institution's financial information, as
of the reporting period ending seven months before the assessment period.
The capital categories are: (i) well-capitalized, (ii) adequately capitalized,
or (iii) undercapitalized.  An institution is also placed in one of three
supervisory subcategories within each capital group.  The supervisory subgroup
to which an institution is assigned is based on a supervisory evaluation
provided to the FDIC by the institution's primary federal regulator and
information that the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance funds.  An
institution's assessment rate depends on the capital category and supervisory
category to which it is assigned with the most well-capitalized, healthy
institutions receiving the lowest rates.

     On September 30, 1996, the Deposit Insurance Funds Act ("DIF Act") was
enacted, which, among other things, imposed a special one-time assessment on
SAIF member institutions, including the Bank, to recapitalize the SAIF.  As a
result of the DIF Act and the special one-time assessment, the FDIC reduced
the assessment schedule for SAIF members, effective January 1, 1997, to a
range of 0% to 0.27%, with most institutions, including the Bank, paying 0%.

                                       25
<PAGE>

This assessment schedule is the same as that for the BIF, which reached its
designated reserve ratio in 1995.  In addition, since January 1, 1997, SAIF
members are charged an assessment of 0.065% of SAIF-assessable deposits for
the purpose of paying interest on the obligations issued by the Financing
Corporation ("FICO") in the 1980s to help fund the thrift industry cleanup.
BIF-assessable deposits are charged an assessment to help pay interest on the
FICO bonds at a rate of approximately .013%.  Full pro rata sharing of the
FICO payments between BIF and SAIF members will occur until the earlier of
December 31, 1999, or the date the BIF and SAIF are merged.

     The FDIC is authorized to raise the assessment rates in certain
circumstances.  The FDIC has exercised this authority several times in the
past and may raise insurance premiums in the future.  If such action is taken
by the FDIC, it could have an adverse effect on the earnings of the Bank.

     Under the FDIA, insurance of deposits may be terminated by the FDIC upon
a finding that the institution has engaged in unsafe or unsound practices, is
in an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or
the OTS.  Management of the Bank does not know of any practice, condition or
violation that might lead to termination of deposit insurance.

     Liquidity Requirements.  Under OTS regulations, each savings institution
is required to maintain an average daily balance of liquid assets (cash,
certain time deposits and savings accounts, bankers' acceptances, and
specified U.S. Government, state or federal agency obligations,
mortgage-backed securities and certain other investments) equal to a monthly
average of not less than a specified percentage (currently 4.0%) of its net
withdrawable accounts plus short-term borrowings.  Monetary penalties may be
imposed for failure to meet liquidity requirements.

     Prompt Corrective Action.  The FDIA requires each federal banking agency
to implement a system of prompt corrective action for institutions that it
regulates.  The federal banking agencies have promulgated substantially
similar regulations to implement this system of prompt corrective action.
Under the regulations, an institution shall be deemed to be (i) "well
capitalized" if it has a total risk-based capital ratio of 10.0% or more, has
a Tier I risk-based capital ratio of 6.0% or more, has a leverage ratio of
5.0% or more and is not subject to specified requirements to meet and maintain
a specific capital level for any capital measure; (ii) "adequately
capitalized" if it has a total risk-based capital ratio of 8.0% or more, a
Tier I risk-based capital ratio of 4.0% or more and a leverage ratio of 4.0%
or more (3.0% under certain circumstances) and does not meet the definition of
"well capitalized;" (iii) "undercapitalized" if it has a total risk-based
capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that
is less than 4.0% or a leverage ratio that is less than 4.0% (3.0% under
certain circumstances); (iv) "significantly undercapitalized" if it has a
total risk-based capital ratio that is less than 6.0%, a Tier I risk-based
capital ratio that is less than 3.0% or a leverage ratio that is less than
3.0%; and (v) "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to or less than 2.0%.

     The FDIA also provides that a federal banking agency may, after notice
and an opportunity for a hearing, reclassify a well capitalized institution as
adequately capitalized and may require an adequately capitalized institution
or an undercapitalized institution to comply with supervisory actions as if it
were in the next lower category if the institution is in an unsafe or unsound
condition or is engaging in an unsafe or unsound practice.  The OTS may not,
however, reclassify a significantly undercapitalized institution as critically
undercapitalized.

     An institution generally must file a written capital restoration plan
that meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with the appropriate federal banking
agency within 45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized.  Immediately upon becoming
undercapitalized, an institution shall become subject to various mandatory and
discretionary restrictions on its operations.

     At March 31, 1999, the Bank was categorized as "well capitalized" under
the prompt corrective action regulations of the OTS.

                                       26
<PAGE>

     Standards for Safety and Soundness.  The federal banking regulatory
agencies have prescribed, by regulation, standards for all insured depository
institutions relating to: (i) internal controls, information systems and
internal audit systems; (ii) loan documentation; (iii) credit underwriting;
(iv) interest rate risk exposure; (v) asset growth; (vi) asset quality; (vii)
earnings; and (viii) compensation, fees and benefits ("Guidelines").  The
Guidelines set forth the safety and soundness standards that the federal
banking agencies use to identify and address problems at insured depository
institutions before capital becomes impaired.  If the OTS determines that the
Bank fails to meet any standard prescribed by the Guidelines, the agency may
require the Bank to submit to the agency an acceptable plan to achieve
compliance with the standard.  Management is aware of no conditions relating
to these safety and soundness standards which would require submission of a
plan of compliance.

     Qualified Thrift Lender Test.  All savings associations, including the
Bank, are required to meet a qualified thrift lender ("QTL") test to avoid
certain restrictions on their operations.  This test requires a savings
association to have at least 65% of its portfolio asset (as defined by
regulation) in qualified thrift investments on a monthly average for nine out
of every 12 months on a rolling basis.  As an alternative, the savings
association may maintain 60% of its assets in those assets specified in
Section 7701(a)(19) of the Internal Revenue Code ("Code").  Under either test,
such assets primarily consist of residential housing related loans and
investments.  At March 31, 1999, the Bank met the test and its QTL percentage
was 96%.

     Any savings association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL.  If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF.   If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings association and a national bank, and it is
limited to national bank branching rights in its home state.  In addition, the
association is immediately ineligible to receive any new FHLB borrowings and
is subject to national bank limits for payment of dividends.  If such
association has not requalified or converted to a national bank within three
years after the failure, it must divest of all investments and cease all
activities not permissible for a national bank.  In addition, it must repay
promptly any outstanding FHLB borrowings, which may result in prepayment
penalties.  If any association that fails the QTL test is controlled by a
holding company, then within one year after the failure, the holding company
must register as a bank holding company and become subject to all restrictions
on bank holding companies.

     Capital Requirements.  Under OTS regulations a savings association must
satisfy three minimum capital requirements: core capital, tangible capital and
risk-based capital.  Savings associations must meet all of the standards in
order to comply with the capital requirements.  The Company is not subject to
any minimum capital requirements.

     OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets).  Core capital
is defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries," which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities.  In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion
of certain assets from capital and to account appropriately for the
investments in and assets of both includable and nonincludable subsidiaries.
Institutions that fail to meet the core capital requirement would be required
to file with the OTS a capital plan that details the steps they will take to
reach compliance.  In addition, the OTS' prompt corrective action regulation
provides that a savings institution that has a leverage ratio of less than 4%
(3% for institutions receiving the highest CAMEL examination rating) will be
deemed to be "undercapitalized" and may be subject to certain restrictions.
See "-- Federal Regulation of Savings Associations -- Prompt Corrective
Action."

     As required by federal law, the OTS has proposed a rule revising its
minimum core capital requirement to be no less stringent than that imposed on
national banks.  The OTS has proposed that only those savings associations
rated a composite one (the highest rating) under the CAMEL rating system for
savings associations will be permitted to

                                       27
<PAGE>

operate at or near the regulatory minimum leverage ratio of 3%.  All other
savings associations will be required to maintain a minimum leverage ratio of
4% to 5%.  The OTS will assess each individual savings association through the
supervisory process on a case-by-case basis to determine the applicable
requirement.  No assurance can be given as to the final form of any such
regulation, the date of its effectiveness or the requirement applicable to the
Bank.

     Savings associations also must maintain "tangible capital" not less than
1.5% of the Bank's adjusted total assets. "Tangible capital" is defined,
generally, as core capital minus any "intangible assets" other than purchased
mortgage servicing rights.

     Each savings institution must maintain total risk-based capital equal to
at least 8% of risk-weighted assets.  Total risk-based capital consists of the
sum of core and supplementary capital, provided that supplementary capital
cannot exceed core capital, as previously defined.  Supplementary capital
includes (i) permanent capital instruments such as cumulative perpetual
preferred stock, perpetual subordinated debt and mandatory convertible
subordinated debt, (ii) maturing capital instruments such as subordinated
debt, intermediate-term preferred stock and mandatory convertible subordinated
debt, subject to an amortization schedule, and (iii) general valuation loan
and lease loss allowances up to 1.25% of risk-weighted assets.

     The risk-based capital regulation assigns each balance sheet asset held
by a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets.  Assets not
included for purposes of calculating capital are not included in calculating
risk-weighted assets.  The categories range from 0% for cash and securities
that are backed by the full faith and credit of the U.S. Government to 100%
for repossessed assets or assets more than 90 days past due.  Qualifying
residential mortgage loans (including multi-family mortgage loans) are
assigned a 50% risk weight.  Consumer, commercial, home equity and residential
construction loans are assigned a 100% risk weight, as are nonqualifying
residential mortgage loans and that portion of land loans and nonresidential
construction loans that do not exceed an 80% loan-to-value ratio.  The book
value of assets in each category is multiplied by the weighing factor (from 0%
to 100%) assigned to that category.  These products are then totalled to
arrive at total risk-weighted assets.  Off-balance sheet items are included in
risk-weighted assets by converting them to an approximate balance sheet
"credit equivalent amount" based on a conversion schedule.  These credit
equivalent amounts are then assigned to risk categories in the same manner as
balance sheet assets and included as risk-weighted assets.

     The following table presents the Bank's regulatory capital compliance as
of March 31, 1999.

                                                          Percent of
                                                        Adjusted Total
                                           Amount          Assets(1)
                                           ------          ---------
                                           (Dollars in thousands)

Tangible capital . . . . . . . . .         $50,288           16.1%
Minimum required tangible capital.           4,695            1.5%
                                           -------           ----
Excess . . . . . . . . . . . . . .         $45,593           14.6%
                                           =======           ====

Core capital . . . . . . . . . . .         $50,288           16.1%
Minimum required core capital(2) .          12,521            4.0%
                                           -------           ----
Excess . . . . . . . . . . . . . .         $37,767           12.1%
                                           =======           ====

Risk-based capital(3). . . . . . .         $51,516           33.1%
Minimum risk-based capital
 requirement . . . . . . . . . . .          12,455            8.0%
                                           -------           ----
Excess . . . . . . . . . . . . . .         $39,061           25.1%
                                           =======           ====
-------------------
(1)  Based on adjusted total assets of $313.0 million for purposes of the
     tangible and core capital requirements, and risk-weighted assets of
     $155.6 million for purposes of the risk-based capital requirement.

                                       28
<PAGE>

(2)  The current OTS core capital requirement for savings associations is 3%
     of total adjusted assets.
(3)  Percentage represents total core and supplementary capital divided by
     total risk-weighted assets.

     Limitations on Capital Distributions.  OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers.  In addition, OTS regulations require the Bank to give the OTS 30
days' advance notice of any proposed declaration of dividends, and the OTS has
the authority under its supervisory powers to prohibit the payment of
dividends.  The regulation utilizes a three-tiered approach which permits
various levels of distributions based primarily upon a savings association's
capital level.

     A Tier 1 savings association has capital in excess of its fully phased-in
capital requirement (both before and after the proposed capital distribution).
A Tier 1 savings association may make (without application but upon prior
notice to, and no objection made by, the OTS) capital distributions during a
calendar year up to 100% of its net income to date during the calendar year
plus one-half its surplus capital ratio (i.e., the amount of capital in excess
of its fully phased-in requirement) at the beginning of the calendar year or
the amount authorized for a Tier 2 association.  Capital distributions in
excess of such amount require advance notice to the OTS.  A Tier 2 savings
association has capital equal to or in excess of its minimum capital
requirement but below its fully phased-in capital requirement (both before and
after the proposed capital distribution).  Such an association may make
(without application) capital distributions up to an amount equal to 75% of
its net income during the previous four quarters depending on how close the
association is to meeting its fully phased-in capital requirement.  Capital
distributions exceeding this amount require prior OTS approval.  A Tier 3
savings association has capital below the minimum capital requirement (either
before or after the proposed capital distribution).  A Tier 3 savings
association may not make any capital distributions without prior approval from
the OTS.

     The Bank currently meets the criteria to be designated a Tier 1
association and, consequently, could at its option (after prior notice to, and
no objection made by, the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of
the calendar year less any distributions previously paid during the year.

     Loans to One Borrower.  Under the HOLA, savings institutions are
generally subject to the national bank limit on loans to one borrower.
Generally, this limit is 15% of the Bank's unimpaired capital and surplus,
plus an additional 10% of unimpaired capital and surplus, if such loan is
secured by readily-marketable collateral, which is defined to include certain
financial instruments and bullion.  The OTS by regulation has amended the
loans to one borrower rule to permit savings associations meeting certain
requirements, including capital requirements, to extend loans to one borrower
in additional amounts under circumstances limited essentially to loans to
develop or complete residential housing units.  At March 31, 1999, the Bank's
regulatory limit on loans to one borrower was $7.5 million.  However, the
Bank's current loans to one borrower limit as set by policy is generally $3.0
million.  At March 31, 1999, the Bank's largest aggregate amount of loans to
one borrower was $2.4 million, which was performing according to their
original terms.

     Activities of Associations and Their Subsidiaries.  When a savings
association establishes or acquires a subsidiary or elects to conduct any new
activity through a subsidiary that the association controls, the savings
association must notify the FDIC and the OTS 30 days in advance and provide
the information each agency may, by regulation, require.  Savings associations
also must conduct the activities of subsidiaries in accordance with existing
regulations and orders.

     The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary.  The
FDIC also may determine by regulation or order that any specific activity
poses a serious threat to the SAIF.  If so, it may require that no SAIF member
engage in that activity directly.

                                       29
<PAGE>

     Transactions with Affiliates.  Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank.  A
savings and loan holding company, its subsidiaries and any other company under
common control are considered affiliates of the subsidiary savings association
under the HOLA.  Generally, Sections 23A and 23B:  (i) limit the extent to
which the insured association or its subsidiaries may engage in certain
covered transactions with an affiliate to an amount equal to 10% of such
institution's capital and surplus and place an aggregate limit on all such
transactions with affiliates to an amount equal to 20% of such capital and
surplus, and (ii) require that all such transactions be on terms substantially
the same, or at least as favorable to the institution or subsidiary, as those
provided to a non-affiliate.  The term "covered transaction" includes the
making of loans, the purchase of assets, the issuance of a guaranty and
similar types of transactions.  Any loan or extension of credit by the Bank to
an affiliate must be secured by collateral in accordance with Section 23A.

     Three additional rules apply to savings associations:  (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank
holding companies; (ii) a savings association may not purchase or invest in
securities issued by an affiliate (other than securities of a subsidiary); and
(iii) the OTS may, for reasons of safety and soundness, impose more stringent
restrictions on savings associations but may not exempt transactions from or
otherwise abridge Section 23A or 23B.  Exemptions from Section 23A or 23B may
be granted only by the Federal Reserve Board, as is currently the case with
respect to all FDIC-insured banks.  The Bank has not been significantly
affected by the rules regarding transactions with affiliates.

     The Bank's authority to extend credit to executive officers, directors
and 10% shareholders, as well as entities controlled by such persons, is
governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and
Regulation O thereunder.  Among other things, these regulations require that
such loans be made on terms and conditions substantially the same as those
offered to unaffiliated individuals and not involve more than the normal risk
of repayment.  Regulation O also places individual and aggregate limits on the
amount of loans the Bank may make to such persons based, in part, on the
Bank's capital position, and requires certain board approval procedures to be
followed.  The OTS regulations, with certain minor variances, apply Regulation
O to savings institutions.

     Community Reinvestment Act.  Under the federal Community Reinvestment Act
("CRA"), all federally-insured financial institutions have a continuing and
affirmative obligation consistent with safe and sound operations to help meet
all the credit needs of its delineated community.  The CRA does not establish
specific lending requirements or programs nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to meet all the credit needs of its delineated community.  The CRA
requires the federal banking agencies, in connection with regulatory
examinations, to assess an institution's record of meeting the credit needs of
its delineated community and to take such record into account in evaluating
regulatory applications to establish a new branch office that will accept
deposits, relocate an existing office, or merge or consolidate with, or
acquire the assets or assume the liabilities of, a federally regulated
financial institution, among others.  The CRA requires public disclosure of an
institution's CRA rating.  The Bank received a "satisfactory" rating as a
result of its latest evaluation.

     Regulatory and Criminal Enforcement Provisions.  The OTS has primary
enforcement responsibility over savings institutions and has the authority to
bring action against all "institution-affiliated parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on
an insured institution.  Formal enforcement action may range from the issuance
of a capital directive or cease and desist order to removal of officers or
directors, receivership, conservatorship or termination of deposit insurance.
Civil penalties cover a wide range of violations and can amount to $27,500 per
day, or $1.1 million per day in especially egregious cases.  Under the FDIA,
the FDIC has the authority to recommend to the Director of the OTS that
enforcement action be taken with respect to a particular savings institution.
If action is not taken by the Director, the FDIC has authority to take such
action under certain circumstances.  Federal law also establishes criminal
penalties for certain violations.

                                       30
<PAGE>

Savings and Loan Holding Company Regulations

     Holding Company Acquisitions.  The HOLA and OTS regulations issued
thereunder generally prohibit a savings and loan holding company, without
prior OTS approval, from acquiring more than 5% of the voting stock of any
other savings association or savings and loan holding company or controlling
the assets thereof.  They also prohibit, among other things, any director or
officer of a savings and loan holding company, or any individual who owns or
controls more than 25% of the voting shares of such holding company, from
acquiring control of any savings association not a subsidiary of such savings
and loan holding company, unless the acquisition is approved by the OTS.

     Holding Company Activities.  As a unitary savings and loan holding
company, the Company generally is not subject to activity restrictions under
the HOLA.  If the Company acquires control of another savings association as a
separate subsidiary other than in a supervisory acquisition, it would become a
multiple savings and loan holding company.  There generally are more
restrictions on the activities of a multiple savings and loan holding company
than on those of a unitary savings and loan holding company.  The HOLA
provides that, among other things, no multiple savings and loan holding
company or subsidiary thereof which is not an insured association shall
commence or continue for more than two years after becoming a multiple savings
and loan association holding company or subsidiary thereof, any business
activity other than:  (i) furnishing or performing management services for a
subsidiary insured institution, (ii) conducting an insurance agency or escrow
business, (iii) holding, managing, or liquidating assets owned by or acquired
from a subsidiary insured institution, (iv) holding or managing properties
used or occupied by a subsidiary insured institution, (v) acting as trustee
under deeds of trust, (vi) those activities previously directly authorized by
regulation as of March 5, 1987 to be engaged in by multiple holding companies
or (vii) those activities authorized by the Federal Reserve Board as
permissible for bank holding companies, unless the OTS by regulation,
prohibits or limits such activities for savings and loan holding companies.
Those activities described in (vii) above also must be approved by the OTS
prior to being engaged in by a multiple savings and loan holding company.

     Qualified Thrift Lender Test.  The HOLA provides that any savings and
loan holding company that controls a savings association that fails the QTL
test, as explained under "-- Federal Regulation of Banks -- Qualified Thrift
Lender Test," must, within one year after the date on which the association
ceases to be a QTL, register as and be deemed a bank holding company subject
to all applicable laws and regulations.

                                  TAXATION

Federal Taxation

     General.  The Company and the Bank report their income on a fiscal year
basis using the accrual method of accounting and are subject to federal income
taxation in the same manner as other corporations with some exceptions,
including particularly the Bank's reserve for bad debts discussed below.  The
following discussion of tax matters is intended only as a summary and does not
purport to be a comprehensive description of the tax rules applicable to the
Bank or the Company.

     Bad Debt Reserve.  Historically, savings institutions such as the Bank
which met certain definitional tests primarily related to their assets and the
nature of their business ("qualifying thrift") were permitted to establish a
reserve for bad debts and to make annual additions thereto, which may have
been deducted in arriving at their taxable income.  The Bank's deductions with
respect to "qualifying real property loans," which are generally loans secured
by certain interest in real property, were computed using an amount based on
the Bank's actual loss experience, or a percentage equal to 8% of the Bank's
taxable income, computed with certain modifications and reduced by the amount
of any permitted additions to the non-qualifying reserve.  Due to the Bank's
loss experience, the Bank generally recognized a bad debt deduction equal to
8% of taxable income.

     The thrift bad debt rules were revised by Congress in 1996.  The new
rules eliminated the 8% of taxable income method for deducting additions to
the tax bad debt reserves for all thrifts for tax years beginning after
December

                                       31
<PAGE>

31, 1995.  These rules also required that all institutions recapture all or a
portion of their bad debt reserves added since the base year (last taxable
year beginning before January 1, 1988).  The Bank has no post-1987 reserves
subject to recapture.  For taxable years beginning after December 31, 1995,
the Bank's bad debt deduction will be determined under the experience method
using a formula based on actual bad debt experience over a period of years.
The unrecaptured base year reserves will not be subject to recapture as long
as the institution continues to carry on the business of banking.  In
addition, the balance of the pre-1988 bad debt reserves continue to be subject
to provisions of present law referred to below that require recapture in the
case of certain excess distributions to shareholders.

     Distributions.  To the extent that the Bank makes "nondividend
distributions" to the Company, such distributions will be considered to result
in distributions from the balance of its bad debt reserve as of December 31,
1987 (or a lesser amount if the Bank's loan portfolio decreased since December
31, 1987) and then from the supplemental reserve for losses on loans ("Excess
Distributions"), and an amount based on the Excess Distributions will be
included in the Bank's taxable income.  Nondividend distributions include
distributions in excess of the Bank's current and accumulated earnings and
profits, distributions in redemption of stock and distributions in partial or
complete liquidation.  However, dividends paid out of the Bank's current or
accumulated earnings and profits, as calculated for federal income tax
purposes, will not be considered to result in a distribution from the Bank's
bad debt reserve.  The amount of additional taxable income created from an
Excess Distribution is an amount that, when reduced by the tax attributable to
the income, is equal to the amount of the distribution.  Thus, if, after the
Conversion, the Bank makes a "nondividend distribution," then approximately
one and one-half times the Excess Distribution would be includable in gross
income for federal income tax purposes, assuming a 34% corporate income tax
rate (exclusive of state and local taxes).  See "Regulation" for limits on the
payment of dividends by the Bank.  The Bank does not intend to pay dividends
that would result in a recapture of any portion of its tax bad debt reserve.

     Corporate Alternative Minimum Tax.  The Code imposes a tax on alternative
minimum taxable income ("AMTI") at a rate of 20%.  The excess of the tax bad
debt reserve deduction using the percentage of taxable income method over the
deduction that would have been allowable under the experience method is
treated as a preference item for purposes of computing the AMTI.  In addition,
only 90% of AMTI can be offset by net operating loss carryovers.  AMTI is
increased by an amount equal to 75% of the amount by which the Bank's adjusted
current earnings exceeds its AMTI (determined without regard to this
preference and prior to reduction for net operating losses).  For taxable
years beginning after December 31, 1986, and before January 1, 1996, an
environmental tax of 0.12% of the excess of AMTI (with certain modification)
over $2.0 million is imposed on corporations, including the Bank, whether or
not an Alternative Minimum Tax is paid.

     Dividends-Received Deduction.  The Company may exclude from its income
100% of dividends received from the Bank as a member of the same affiliated
group of corporations.  The corporate dividends-received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Company and the Bank will not file a consolidated tax return,
except that if the Company or the Bank owns more than 20% of the stock of a
corporation distributing a dividend, then 80% of any dividends received may be
deducted.

     Audits.  The Bank's federal income tax returns have not been audited
within the past five years.

State Taxation

     The Bank is subject to an Oregon corporate excise tax at a statutory rate
of 6.6% of income.  The Bank's state income tax returns have not been audited
during the past five years.

Competition

     The Bank faces strong competition in its primary market area for the
attraction of savings deposits (its primary source of lendable funds) and in
the origination of loans.  Its most direct competition for savings deposits
has historically come from commercial banks, credit unions, other thrifts
operating in its market area.  As of March 31, 1999, there were eight
commercial banks and three other thrifts operating in the Bank's primary
market area.

                                       32
<PAGE>

<PAGE>
Particularly in times of high interest rates, the Bank has faced additional
significant competition for investors' funds from short-term money market
securities and other corporate and government securities.  The Bank's
competition for loans comes from commercial banks, thrift institutions, credit
unions and mortgage bankers.  Such competition for deposits and the
origination of loans may limit the Bank's growth in the future.

Subsidiary Activities

     The Bank has two subsidiaries, Pioneer Development Corporation ("PDC")
and Pioneer Bank Investment Corporation ("PBIC").  PDC's primary interest is
to purchase land sale contracts.  PBIC's primary interest is to hold the
Bank's non-conforming assets.  At March 31, 1999, the Bank's equity investment
in PDC and PBIC was $1.9 million and $210,000, respectively, including a loan
to PBIC with an outstanding balance of $190,000.

     Federal savings associations generally may invest up to 3% of their
assets in service corporations, provided that at least one-half of any amount
in excess of 1% is used primarily for community, inner-city and community
development projects.  The Bank's investment in its subsidiaries did not
exceed these limits at March 31, 1999.

Personnel

     As of March 31, 1999, the Bank had 113 full-time and 21 part-time
employees, none of whom is represented by a collective bargaining unit.  The
Bank believes its relationship with its employees is good.

     Executive Officers.  The following table sets forth certain information
regarding the executive officers of the Company.

Name               Age(1)  Position
----               ------  --------

Jerry F. Aldape    50      President and Chief Executive Officer

Zane F. Lockwood   44      Executive Vice President

--------------
(1) At March 31, 1999.

     Jerry F. Aldape has served as President and Chief Executive Officer of
the Company and the Bank since March 1998, succeeding Dan L. Webber.  He
served as the Bank's Senior Vice President since 1994 and Corporate Secretary
since 1997.  Mr. Aldape served as Controller of Insight Distributing, Inc.,
Sandpoint, Idaho, from 1993 to 1994.  Before 1994 he served as the Senior Vice
President/Chief Financial Officer for United First Federal Bank, a Federal
Bank, located in Boise, Idaho, for seven years.  Mr.  Aldape has over 25 years
of business and banking experience.

     Zane F. Lockwood has served as the Bank's Executive Vice President since
March of 1999 and Senior Vice President from March 1998 to March 1999.  Prior
to that time, he served as Senior Commercial Lender after joining the Bank in
October 1997.  Mr. Lockwood was employed by U.S. Bank for over 24 years in
various capacities before joining the Bank.  During his last ten years with
U.S. Bank, he was a team leader in their Regional Business Loan Center located
in Pendleton, Oregon.  In that position he supervised the commercial and
agricultural lending in Union, Baker, Wallowa, Grant and Malheur counties.
Mr. Lockwood was very involved in the communities he has resided in having
held numerous board memberships, including president of the La Grande/Union
County Chamber of Commerce.

Item 2.  Properties
-------------------

     The following table sets forth certain information regarding the Bank's
offices at March 31, 1999, all of which are owned.
                                       33
<PAGE>

<PAGE>
                                                          Approximate
Location              Year Opened       Square Footage    Deposits
--------              -----------       --------------    --------
                                                         (In thousands)
Main Office:

2055 First Street        1979               10,700        $ 60,782
Baker City, Oregon 97814

Branch Offices:

La Grande Branch         1975                6,758          45,374
1215 Adams Avenue
La Grande, Oregon 97850

Island City Branch       1997                4,200          14,050
3106 Island Avenue
La Grande, Oregon 97850

Ontario Branch           1960                3,700          28,687
225 SW Fourth Avenue
Ontario, Oregon 97914

John Day Branch          1973                2,420          12,942
150 West Main Street
John Day, Oregon 97845

Burns Branch             1975                3,968          16,315
77 W. Adams Street
Burns, Oregon  97720

Enterprise Branch        1976                3,360          21,439
205 West Main Street
Enterprise, Oregon  97828

    The Bank uses the services of an in-house data processing system.  At
March 31, 1999, the Bank had 13 proprietary automated teller machines, eight
of which were located in existing branches.  At March 31, 1999, the net book
value of the Bank's office properties and the Bank's fixtures, furniture and
equipment was $7.8 million or 2.5% of total assets.  See Note 6 of the
Consolidated Financial Statements in the Annual Report.

Item 3.  Legal Proceedings
--------------------------

     Periodically, there have been various claims and lawsuits involving the
Bank, mainly as a defendant, such as claims to enforce liens, condemnation
proceedings on properties in which the Bank holds security interests, claims
involving the making and servicing of real property loans and other issues
incident to the Bank's business.  The Bank is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of the Bank.

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

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 1999.


                                       34
<PAGE>

                                  PART II

Item 5.  Market for the Registrant's Common Equity and Related Shareholder
--------------------------------------------------------------------------
Matters
-------

     The information contained under the section captioned "Stock Listing" on
the inside back cover of the Annual Report is incorporated herein by
reference.

Item 6.  Selected Financial Data
--------------------------------

     The information contained under the section captioned "SELECTED
CONSOLIDATED FINANCIAL DATA" on pages 9 and 10 of the Annual Report is
incorporated herein by reference.

Item 7.  Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------

     The information contained in the section captioned "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
beginning on page 11 of the Annual Report is incorporated herein by reference.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------

     The information contained in the section captioned "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Market Risk and Asset and Liability Management" on pages 20 and 21 of the
Annual Report are incorporated herein by reference.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

         (a)  Financial Statements
              Independent Auditors' Reports*
              Consolidated Balance Sheets as of March 31, 1999 and 1998*
              Consolidated Statements of Income for the Year Ended March 31,
                1999 and 1998 and the Nine Months Ended March 31, 1997*
              Consolidated Statements of Shareholder's Equity for the Year
                Ended March 31, 1999 and 1998 and the Nine Months Ended March
                31, 1997*
              Consolidated Statements of Cash Flows for the Year Ended March
                31, 1999 and 1998 and the Nine Months Ended March 31, 1997*
              Notes to the Consolidated Financial Statements*

         *  Included in the Annual Report attached as Exhibit 13 hereto and
         incorporated herein by reference. All schedules have been omitted as
         the required information is either inapplicable or included in the
         Consolidated Financial Statements or related Notes contained in the
         Annual Report.

        (b)  Supplementary Data

     The information contained in Note 22 to the Consolidated Financial
Statements included in the Annual Report is incorporated herein by reference.


Item 9.  Changes in and Disagreements with Accountants on Accounting and
------------------------------------------------------------------------
Financial Disclosure
--------------------

     Not applicable.


                                       35
<PAGE>

                                  PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

     The information contained under the section captioned "Proposal I -
Election of Directors" contained in the Company's Proxy Statement, and "Part I
-- Business -- Personnel -- Executive Officers" of this report, is
incorporated herein by reference.  Reference is made to the cover page of this
report for information regarding compliance with Section 16(a) of the Exchange
Act.

Item 11.  Executive Compensation
--------------------------------

     The information contained under the sections captioned "Executive
Compensation," "Directors' Compensation" and "Benefits" under "Proposal I -
Election of Directors" in the Proxy Statement is incorporated herein by
reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

         (a)  Security Ownership of Certain Beneficial Owners

              Information required by this item is incorporated herein by
              reference to the section captioned "Security Ownership of
              Certain Beneficial Owners and Management" of the Proxy Statement

         (b)  Security Ownership of Management

              The information required by this item is incorporated herein by
              reference to the sections captioned "Proposal I - Election of
              Directors" and "Security Ownership of Certain Beneficial owners
              and Management" of the Proxy Statement.

         (c)  Changes in Control

              The Company is not aware of any arrangements, including any
              pledge by any person of securities of the Company, the operation
              of which may at a subsequent date result in a change in control
              of the Company.

     The information required by this item is incorporated herein by reference
to the sections captioned "Proposal I - Election of Directors" and "Security
Ownership of Certain Beneficial Owners and Management" of the Proxy Statement.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

     The information set forth under the section captioned "Proposal I -
Election of Directors - Certain Transactions with the Bank" in the Proxy
Statement is incorporated herein by reference.

                                       36
<PAGE>

                                  PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------------------------------------------------------------------------

     (a)       Exhibits

               3(a)  Articles of Incorporation of the Registrant*
               3(b)  Bylaws of the Registrant*
               10(a) Employment Agreement with Jerry F. Aldape**
               10(b) Severance Agreement with Nadine J. Johnson**
               10(c) Severance Agreement with William H. Winegar**
               10(d) Employment Agreement with Zane Lockwood****
               10(e) Severance Agreement with Thomas F. Bennett****
               10(f) Severance Agreement with Jerry Kincaid****
               10(g) Employee Severance Compensation Plan**
               10(h) Pioneer Bank, a Federal Savings Bank Employee Stock
                     Ownership Plan**
               10(i) Pioneer Bank, a Federal Savings Bank 401(k) Plan*
               10(j) Pioneer Bank Director Emeritus Plan***
               10(k) 1998 Stock Option Plan***
               10(l) 1998 Management Recognition and Development Plan***
               13    Annual Report to Shareholders****
               21    Subsidiaries of the Registrant****
               23    Consent of Independent Auditors****
               27    Financial Data Schedule
               99    Former Independent Auditor's Report****

----------------
*    Incorporated by reference to the Registrant's Registration Statement on
     Form S-1 (333-30051), as amended.
**   Incorporated by reference to the Registrant's Form 10-Q for the quarter
     ended September 30, 1997.
***  Incorporated by reference to the Registrant's Definitive Proxy Statement
     for the 1998 Annual Meeting of Shareholders.
**** Incorporated by reference to the Registrant's Form 10-Q for the quarter
     ended September 30, 1998.

     (b)  Reports on Form 8-K

          No Form 8-Ks were filed during the year ended March 31, 1999.

                                       37
<PAGE>

                                 SIGNATURES

     Pursuant to the requirements of section 13 or 15(d) 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.

                                OREGON TRAIL FINANCIAL CORP.


Date:  June 29, 1999            By: /s/ Jerry F. Aldape
                                    --------------------------------------
                                    Jerry F. Aldape
                                    President and Chief Executive Officer
                                    (Duly Authorized Representative)

     Pursuant to the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

SIGNATURES                     TITLE                        DATE

/s/ Jerry F. Aldape       President, Chief Executive Officer   June 29, 1999
------------------------- and Director
Jerry F. Aldape           (Principal Executive Officer)

/s/ Nadine J. Johnson     Chief Financial Officer              June 29, 1999
------------------------- (Principal Financial Officer)
Nadine J. Johnson

/s/ Stephen R. Whittemore Chairman of the Board                June 29, 1999
-------------------------
Stephen R. Whittemore

/s/ John Gentry           Director                             June 29, 1999
-------------------------
John Gentry

/s/ Albert H. Durgan      Director                             June 29, 1999
-------------------------
Albert H. Durgan

/s/ Edward H. Elms        Director                             June 29, 1999
-------------------------
Edward H. Elms

/s/ John A. Lienkaemper   Director                             June 29, 1999
-------------------------
John A. Lienkaemper


/s/ Charles Rouse         Director                             June 29, 1999
-------------------------
Charles Rouse

<PAGE>

                                 EXHIBIT 13

                     1999 Annual Report to Shareholders

<PAGE>

                           1999 Annual Report







                  Oregon Trail Financial Corporation

<PAGE>


[Picture]

                         Do business with a friend.

<PAGE>

                             [LOGO] OREGON
                                     TRAIL
                                      FINANCIAL CORP.

Dear Shareholders:

  In 1998, we at Pioneer Bank enhanced our distinguished heritage of providing
quality retail financial services. We continued our investment in technology,
facilities, and human resources in order to position this company for our
customer's needs, now and in the future.
  Our commitment to being the most responsive bank in a competitive
marketplace compels us to have knowledgeable employees available to the
customer with information and state-of-the-art technology. The philosophy of
operating from core values of service to expand and further develop our
business is the basis for our sustained growth and is initiated by the loyal,
skilled and dedicated employees of the bank. I thank them for making it all
possible.
  The Fall 1997 conversion to a publicly held stock organization provided the
financial basis for expansion. Pioneer Bank's planned development of greater
diversity of our product line is evident and the marketplace has responded.
Earnings have risen to $3.2 million, which established another record level.
Further growth will occur as opportunities arise and can be properly
capitalized upon.
  We will continue to enjoy growth without sacrificing the quality of our
established objectives, which makes Pioneer Bank pre-eminently the customer's
bank.

Sincerely,

/s/ Stephen R. Whittemore

Stephen R. Whittemore
Chairman of the Board

Dear Shareholders:

  Reflecting back over our first full year as a publicly traded federal stock
savings bank, I remain impressed with the significant strides we have
accomplished in our business strategy. Our employees took great pride in
providing exceptional customer service while broadening relationships with our
existing customers and actively pursuing a new customer base. Our commitment
to investing in new market areas, new products and the latest technology
allows us to blend a highly technical approach with a high-touch concept in
serving our customers.
  Our first year was marked with many important milestones. Mortgage lending
grew by 14%, increasing by nearly $15.4 million. Our heightened focus in
agricultural and business lending allowed us to grow these loans by 143%
during the last year. Eight new automobile dealers joined our program helping
to boost the portfolio of indirect dealer loans to $9.3 million.
  Banking customers in our market are becoming more discriminating and
demanding of personalized services. Pioneer Bank prides itself on growing with
our customers and accepting the challenge to meet every banking need of the
communities we serve. As we add on-line banking to our list of products and
services, we will truly become the region's full-service community bank.

Sincerely,

/s/ Jerry F. Aldape

Jerry F. Aldape
President/CEO

<PAGE>

                               [Picture]
                 You're never too old to be a Pioneer.
                              Or too young.
<PAGE>

[Picture on right hand side of page]

Board of Directors
(Standing left to right)
Charles H. Rouse
John Gentry
John A. Lienkaemper
Edward H. Elms

(Seated left to right)
Albert H. Durgan
Stephen R. Whittemore
Jerry F. Aldape

[Pictures on right hand side of page]

Stephen R. Whittemore
Chairman of the Board

Jerry F. Aldape
President/CEO

Zane F. Lockwood
Executive Vice President


Partners In Progress
     One word, progress, sums up the strategy and activities of Pioneer Bank
in this first full year as a publicly traded bank: progress in financial
growth, branch development and improvements, new products and services, and
personnel  development.
Building Relationships Branch By Branch
     With every new brick laid, every new teller window opened, Pioneer Bank
continues to prove its commitment to personal customer service and convenience
in each community it serves. A new branch building was opened in Harney
County, between Burns and Hines, in October 1998, featuring more space for
tellers and loan officers, a drive-up teller window and a 24-hour ATM, as well
as more parking space. This bright, new state-of-the-art facility is clearly
filling a community need with a growth in deposits at March 31, 1999 of 25%
since the new branch opened.
     A comprehensive remodel of the John Day branch brought a new look to this
town's main street. The branch now offers a 24-hour walk-up ATM, drive-up
teller window and full service loan department. During the past year, this
branch experienced mortgage lending growth of 17%.
     Renovations at the Enterprise branch are due for completion in early
summer 1999. Located in the heart of downtown, the remodeled facility will
improve service with more interior space, an improved drive-up teller window,
and a 24-hour walk-up ATM. This project exemplifies Pioneer Bank's efforts to
build strong customer relationships in this important community.

                                       3
<PAGE>

                              [Picture]

                           Together we're a team.

<PAGE>

[Picture on right hand side of page]

Senior Management Team
(left to right)

MARV SUMNER
Senior Vice President
Deposit Sales/Service Manager

JERRY KINCAID
Senior Vice President
Commercial Lending Manager

NADINE JOHNSON
Senior Vice President
Chief Financial Officer

TOM BENNETT
Senior Vice President
Senior Credit Manager

HANK WINEGAR
Senior Vice President
Chief Operations Officer

     The La Grande branch remodel is also scheduled for completion in the
summer of 1999. The branch will feature improved customer areas, increased
drive-up teller window capacity, and a new office for the representative of
Investment Centers of America. The Island City branch continues to grow with
the addition of another senior commercial lender. The Ontario branch will also
be remodeled to accommodate safe deposit boxes by late fall 1999.
     In Baker City, efforts will be two-fold. The branch will move to a newly
remodeled building across the street from its current location. This move is
scheduled for December 1999. The new location will also house the expanding
lending center. The current Baker City location will be used for corporate
offices.
Blazing A Trail To Vale
     Pioneer Bank chose Vale as its newest location, primarily due to the lack
of a community bank presence. A temporary facility opened in May 1999 and a
full-service branch building will be completed by September 1999.
Doing Business With A Friend
     Along with up-to-date facilities, Pioneer Bank has placed a major
emphasis on efficient delivery of quality products and services to all types
of customers.
     Responsive commercial lending is key to the future success of the region
and Pioneer Bank. As this department continues to grow, Pioneer Bank

                                       5
<PAGE>

                                [Picture]

                        They believed in me. I believe in them.

<PAGE>


[Map on right hand side of page of the States of Oregon, Washington and Idaho]

Harney - Harney County added the highest percentage of jobs in the state.

Grant - Sports Afield magazine's
Feb. 1999 issue named John Day one of the Top 50 recreation towns in America.

Union - A diversified business base has helped non-farm employment increase 12
of the last 13 years.

Wallowa - A surge in visitor spending and other factors led to a 33% increase
in the number of businesses in the 1990s.

Baker - Baker County enjoys record high job counts and balanced growth between
factory and service-type businesses.

Malheur - Non-farm job growth in the 1990s grew over 20%, the best of all
Eastern Oregon counties.

reinforced its commitment to business and agricultural lending by adding staff
with business and agricultural lending expertise.
     Mortgage loans will always be a strong foundation of Pioneer Bank's
product line, showing consistent annual increases. With region-wide growth
last year, Pioneer Bank was able to maintain its position as Eastern Oregon's
top mortgage lender.
     Early in 1999, Image Statements were introduced to streamline operations
and give customers an easier check filing system. Customers have responded to
the change enthusiastically.
     Next for Pioneer Bank is on-line (Internet) banking for customers wanting
the convenience of remote banking 24 hours a day. The website, www.
pioneerbankfsb.com, is already operational. On-line banking is expected to
begin in early summer 1999.
The New Pioneers
     Pioneer Bank's growing employee base also demonstrates important progress
and commitment to personal customer service. Over 30 new jobs were created
during the last year. Training has been emphasized for all employees to make
them better resources for customers. It is people as staff and as customers
who are the key to the future of Pioneer Bank.

                                       7
<PAGE>

FINANCIAL INDEX

Selected Consolidated
Financial and Other Data                    9

Management's Discussion and Analysis
of Financial Condition and Results of
Operations                                 11

Independent Auditors' Report               23

Consolidated Financial Statements          24

Notes to Consolidated
Financial Statements                       29

                                       8
<PAGE>

Oregon Trail Financial Corp. and Subsidiary
Selected Consolidated Financial and Other Data

Financial Condition Data            At March 31,              At June 30,
(in thousands)          -------------------------------  --------------------
                            1999       1998      1997       1996       1995

Total assets            $ 313,473  $ 263,224  $ 204,213  $ 203,457  $ 205,400
Loans receivable, net     185,747    153,838    138,881    132,347    124,440
Loans held-for-sale             -          -        428          -          -
Investment securities
 held to maturity           3,221      2,985      2,763      2,609     21,657
Investment securities
 available for sale        37,965     37,225     15,907     19,950      2,902
Mortgage-backed and
 related securities
 held for trading               -          -          -      2,569      3,786
Mortgage-backed and
 related securities
 available for sale        60,371     27,778     19,745     19,451          -
Mortgage-backed and
 related securities
 held to maturity           9,338     12,805     15,302     17,011     42,245
Cash and cash equivalents   6,276     20,311      4,975      3,416      4,844
Deposits                  199,589    192,734    179,158    176,619    172,569
Advances from Federal
 Home Loan Bank            50,250          -      2,231      4,082     12,161
Total shareholders'
 equity                    60,083     67,301     21,027     20,004     17,812
Shares outstanding          3,764      4,346        N/A        N/A        N/A
<TABLE>
Operating Data
(in thousands except per share data)
                                      Year Ended              Nine Months Ended        Year Ended
                                       March 31,                  March 31,              June 30,
                          --------------------------------  --------------------  --------------------
                              1999       1998       1997       1997       1996       1996       1995
<S>                       <C>        <C>        <C>        <C>        <C>        <C>        <C>
Interest income           $  20,582  $  18,511  $  16,082  $  12,030  $  11,960  $  16,012  $  14,807
Interest expense              8,064      7,824      7,475      5,553      6,134      8,057      7,083
                          ---------   --------  ---------  ---------  ----------  --------  ---------
Net interest income          12,518     10,687      8,607      6,477      5,826      7,955      7,724
Provision for loan losses       483        138        226        216         91        115         67
Net interest income after ---------   --------  ---------  ---------  ----------  --------  ---------
 provision for loan losses   12,035     10,549      8,381      6,261      5,735      7,840      7,657
Gains (losses) from sale
 of securities                    -          -        (51)         -         34         34          -
Noninterest income            1,098      1,046        828        661         563       677      1,141
Noninterest expenses (1)      8,182      6,533      6,454      5,074       3,647     5,009      5,027
                          ---------   --------  ---------  ---------  ----------  --------  ---------
Income before income taxes    4,951      5,062      2,704      1,848       2,685     3,542      3,771
Provision for income taxes    1,797      2,026      1,080        750       1,033     1,363      1,512
                          ---------   --------  ---------  ---------  ----------  --------  ---------
Net income                $   3,154   $  3,036  $   1,624  $   1,098  $    1,652  $  2,179  $   2,259
                          =========   ========  =========  =========  ==========  ========  =========
Basic earnings per
 share (2)                $    0.78   $   0.38        N/A        N/A         N/A       N/A        N/A
Weighted average common
 shares outstanding (2)       4,065      4,326        N/A        N/A         N/A       N/A        N/A
Diluted earnings per
 share                    $    0.76   $   0.38        N/A        N/A         N/A       N/A        N/A
Weighted average common
 dilutive shares              4,160      4,326        N/A        N/A         N/A       N/A        N/A

                                                         9
</TABLE>
<PAGE>

Selected Consolidated Financial and Other Data

Other Data
                                        At March 31,             At June 30,
                                --------------------------    ---------------
                                  1999      1998      1997      1996     1995
Number of:
Real estate loans outstanding    2,346     2,245     2,381     2,493    2,527
Deposit accounts                28,820    28,781    29,455    30,524   30,136
Full-service offices                 7         7         7         7        7


                             At or for the       At or for Nine
                              Year Ended          Months Ended   Year Ended
Selected Financial             March 31,           March 31,       June 30,
 Ratios                -----------------------   -------------   -------------
                         1999    1998    1997    1997    1996    1996    1995
Performance Ratios: (3)
Return on average
 assets (4)              1.14%   1.25%   0.80%   0.72%   1.06%   1.06%   1.12%
Return on average
 equity (5)              4.90    6.65    7.96    7.09   11.67   11.40   13.59
Interest rate spread (6) 3.85    3.73    3.89    3.90    3.45    3.56    3.61
Net interest margin (7)  4.70    4.60    4.37    4.40    3.87    3.97    3.94
Average interest-
 earning assets to
 average interest-
 bearing liabilities   128.10  125.92  112.74  113.20  110.33  110.64  109.27
Noninterest expense
 as a percent of
 average total assets    2.96    2.69    3.16    3.31    1.76    2.43    2.49
Efficiency ratio (8)    60.09   55.68   68.77   71.09   56.78   57.80   56.71
Dividend payout
 ratio (9)              28.95   13.16     N/A     N/A     N/A     N/A     N/A

Asset Quality Ratios:
Nonaccrual and 90
 days or more past
 due loans as a
 percent of total
 loans, net              0.07    0.18    0.14    0.14    0.10    0.12    0.05
Nonperforming assets
 as a percent of
 total assets            0.01    0.22    0.10    0.10    0.06    0.10    0.03
Allowance for losses
 as a percent of gross
 loans receivable        0.66    0.55    0.52    0.52    0.41    0.41    0.37
Allowance for losses
 as a percent of
 nonperforming loans   889.86  308.07  381.58  381.58  424.80  331.90  679.10
Net charge-offs to
 average outstanding
 loans                   0.06    0.01    0.02    0.03    0.02    0.02    0.01
Capital Ratios:
Total equity-to-
 assets ratio           19.17   25.57   10.30   10.30    8.68    9.83    8.67
Average equity to
 average assets (10)    23.27   18.82   10.01   10.14    9.11    9.26    8.25


(1)  Includes FDIC SAIF assessment of $1.1 million during the nine months and
     year ended March 31, 1997.
(2)  Weighted average shares outstanding for fiscal year 1998 included shares
     from conversion on October 3, 1997 to year end.  Earnings per share
     include only earnings from date of conversion to year end.
(3)  Annualized, where appropriate for the nine months ended March 31, 1997
     and 1996.
(4)  Net earnings divided by average total assets.
(5)  Net earnings divided by average equity.
(6)  Difference between weighted average yield on interest-earning assets and
     weighted average cost of interest-bearing liabilities.
(7)  Net interest income as a percentage of average interest-earning assets.
(8)  Other expenses divided by the sum of net interest income and other
     income.  Efficiency ratio without FDIC SAIF assessment was 56.75% and
     57.95% for the nine and twelve months ended March 31, 1997, respectively.
(9)  Dividends declared per share divided by net income per share.
(10) Average total equity divided by average total assets.

                                       10
<PAGE>

Management's Discussion and Analysis of
Financial Condition and Results of Operations

Forward Looking Statements
     Management's Discussion and Analysis and other portions of the report
contain certain "forward-looking statements" concerning the expected future
operations of Oregon Trail Financial Corp. (the "Company"). Management wishes
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 our Annual Report.
"Forward-looking statements" are used to describe future plans and strategies,
including 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, 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.

General
     Management's Discussion and Analysis of Financial Condition and Results
of Operations is intended to assist in understanding the financial condition
and results of operations of the Company. The information contained in this
section should be read in conjunction with the Consolidated Financial
Statements and accompanying Notes thereto contained in this report.
     The Company, an Oregon Corporation, became the unitary savings and loan
holding company of Pioneer Bank, a Federal Savings Bank (the "Bank") upon the
Bank's conversion from a federally chartered mutual to a federally chartered
stock savings bank (the "Conversion") on October 3, 1997.  Accordingly, the
Company is primarily engaged in the business of planning, directing and
coordinating the business activities of the Bank, the deposits of which are
insured by the Federal Deposit Insurance Corporation ("FDIC") under the
Savings Association Insurance Fund ("SAIF").  The Bank conducts business from
its main office in Baker City, Oregon and its eight branch offices located in
Eastern Oregon.  On May 3, 1999, the Bank opened its eighth full service
branch in Vale, Oregon.  Management chose Vale as a new location primarily due
to the lack of a community bank presence.  Vale, with a population of 1,600,
is the county seat for Malheur County, population of 29,200.
     The Bank operates as a community oriented financial institution devoted
to serving the needs of its customers.  The Bank's business consists primarily
of  attracting retail deposits from the general public and using those funds
to originate one-to-four family residential and consumer loans in its primary
market area.  To a lesser but growing extent, the Bank also originates
agricultural loans, commercial business loans and indirect automobile loans.
     The Bank's results of operations depend primarily on net interest income,
which is the difference between the income earned on its interest-earning
assets, such as loans and investments, and the cost of its interest-bearing
liabilities, consisting of deposits and Federal Home Loan Bank of Seattle
("FHLB") borrowings.  The Bank's net income is also affected by, among other
things, fee income, provisions for loan losses, operating expenses and income
tax provisions.  The Bank's results of operations are also significantly
affected by general economic and competitive conditions, particularly changes
in market interest rates, government legislation and policies concerning
monetary  and fiscal affairs, housing and financial institutions and the
attendant actions of the regulatory authorities.

Comparision of Financial Condition at March 31, 1999 and March 31, 1998
     Total assets at March 31, 1999 amounted to $313.5 million compared to
$263.2 million at March 31, 1998.  The primary reason for the $50.3 million or
19.1% increase in total assets was a $31.9 million increase in net loans
receivable and a $29.9 million increase in securities, partially offset by a
$14.0 million decrease in cash and cash equivalents.

[Graph appears here]

Total Assets
IN THOUSANDS

FYE 96 - $203,457
FYE 97 - $204,213
FYE 98 - $263,224
FYE 99 - $313,473

                                       11
<PAGE>

[Graph appears here}

Total Loans
IN THOUSANDS

FYE 96 - $132,347
FYE 97 - $138,881
FYE 98 - $153,838
FYE 99 - $185,747

     Loans receivable, net, were $185.7 million at March 31, 1999 compared to
$153.8 million at March 31, 1998, a 20.7% increase.  A substantial portion of
the Bank's loan portfolio is secured by real estate, either as primary or
secondary collateral, located in its primary market area.  In addition, the
year ended March 31, 1999 saw a continuing trend in the growth of the
consumer, commercial business, and agricultural loan portfolios as the Bank
emphasized the origination of loans with shorter maturities for asset and
liability management purposes.  Total consumer loans increased 6.6% or $2.2
million from $33.1 million at March 31, 1998 to $35.3 million at fiscal year
end 1999, primarily due to the purchase of $7.7 million of indirect dealer
automobile loans.  The indirect automobile dealer program has been very
successful with eight dealers joining the program during fiscal 1999,
increasing the total indirect portfolio to $9.3 million at March 31, 1999 with
delinquencies of only .29% of total loans.  Consumer loans other than indirect
automobile loans decreased $2.1 million or 7.6% during the year as borrowers
took advantage of lower fixed rate mortgage loan rates to refinance consumer
debt.  Commercial business loans increased $9.1 million or 151.7% from $6.0
million at March 31, 1998 to $15.1 million at March 31, 1999.  Commercial real
estate loans increased $2.8 million or 35.4% from $7.9 million to $10.7
million.  The development of the agricultural loan portfolio including
agricultural real estate loans continued with a 140.0% increase for the year
from $5.0 million at March 31, 1998 to $12.0 million at March 31, 1999.
Management continued its strategy of balancing the interest rate risk of a
fixed rate portfolio of primarily long term real estate loans, with the
fulfillment of local demand for shorter term agricultural, commercial business
and indirect dealer automobile loans.  There is greater credit risk associated
with these types of loans than with traditional residential mortgage lending.
As a result of the increased emphasis on other types of lending, mortgage
loans on one-to-four family dwellings, although increasing by $8.4 million or
8.3% from $100.7 million at the prior year-end to $109.1 million at March 31,
1999, actually decreased as a percentage of total gross loans receivable from
64.6% at March 31, 1998 to 58.0% at March 31, 1999.
     Cash and cash equivalents were $6.3 million at March 31, 1999 compared to
$20.3 million at March 31, 1998.  The $14.0 million decrease was primarily due
to the use of cash to fund lending and investment activities including stock
repurchases.
     Available-for-sale securities were $98.3 million at March 31, 1999
compared to $65.0 million at March 31, 1998.  This increase was primarily due
to the purchase of approximately $20.5 million in U.S. government agency
obligations, $39.5 million in U.S. government agency mortgage-backed and
related securities and $8.8 million of AAA rated municipal bonds of various
local Oregon governmental units.  The purchases were partially offset by $23.2
million of U.S. government securities called by the issuer due to a lower
interest rate environment and $2.0 million in maturities of the same type
securities.  Principal pay-downs amounted to $8.9 million on U.S. government
agency mortgage-backed and related securities.

[Graph appears here]

Ag & Commercial Loans
IN THOUSANDS

FYE 96 - $7,866
FYE 97 - $11,300
FYE 98 - $18,852
FYE 99 - $37,775


     Held-to-maturity securities declined to $9.3 million at March 31, 1999
from $12.8 million at March 31, 1998 because of principal reductions on U.S.
government agency mortgage-backed and related securities.  Subsequent to March
31, 1999, effective April 1, 1999, in accordance with Statement of Financial
Accounting Standards ("SFAS") 133, Accounting for Derivative Instruments and
Hedging Activities, all securities classified as held-to-maturity were
reclassified to available-for-sale.  The transfer was recorded as a direct
increase to other comprehensive income of $111,000 (net of income tax of
$69,000). See Note 1 to Consolidated Financial Statements.
     Premises and equipment, net, increased to $7.8 million at March 31, 1999
from $5.6 million at March 31, 1998 primarily as a result of the completion of
the Burns branch office in October 1998 for a total cost of $797,000.  In
addition, construction in process totaled $676,000 at March 31, 1999 relating
to several branch remodeling projects in process.  The remaining increase was
primarily due to the purchase of $450,000 of data processing equipment used in
the centralization of the daily proof of deposit process whereby daily
transactions are entered into the records.

                                       12
<PAGE>

[Graph appears here]

                      Deposits
                   IN THOUSANDS
          Core Deposits      Total Deposits

FYE 96 -    $71,274              $176,619
FYE 97 -    $74,332              $179,158
FYE 98 -    $87,834              $192,734
FYE 99 -    $99,839              $199,589

     Total deposits were $199.6 million at March 31, 1999, compared to $192.7
million at March 31, 1998.  Management attributes the $6.9 million increase
primarily to successful efforts to attract core deposits, i.e. savings
passbook accounts and checking accounts, enhanced by the consolidation of
larger banks in its marketplace and a commitment to personal customer service.
As large national banks have consolidated and reduced staff at branches in the
Bank's marketplace, many customers have demonstrated their preference for
personalized customer service by moving their relationships to the Bank.  The
Bank has also been able to attract the core deposits of its new agricultural
and commercial lending clients.
     The Bank had $50.3 million in outstanding advances from the FHLB compared
to none at March 31, 1998.  The increase in borrowings was used to fund net
loan growth of $31.9 million as well as the net growth in the investment
portfolio of $29.9 million.
     Total shareholders' equity decreased to $60.1 million at March 31, 1999
from   $67.3 million at March 31, 1998 primarily due to the repurchase of
636,205 shares of the Company's stock at an average price of $14.72 per share
totaling $9.4 million.  A portion of the stock repurchased, or 147,322 shares,
was used to fund grants under the Company's Management Recognition and
Development Plan (the "MRDP") which was approved by shareholders at the
Company's annual meeting in August 1998.  The remaining shares were either
retired or will be used to fund the Company's Stock Option Plan which was also
approved by shareholders at the Company's annual meeting.  Cash dividends paid
amounting to $916,000 also decreased total shareholders' equity.  The
decreases were partially offset by net income of $3.2 million, a $723,000
increase due to the release of the Employee Stock Ownership Plan (the "ESOP")
shares and $189,000 due to the accrual of MRDP shares which vest ratably over
a five to six year period.

Comparison of Operating Results for the Years Ended March 31, 1999 and 1998
     Net Income.  Net income was $3.2 million for the year ended March 31,
1999 compared to $3.0 million for the year ended March 31, 1998.  This 3.9%
increase resulted primarily from an increase in net interest income of $1.8
million and a $52,000 increase in noninterest income partially offset by a
$345,000 increase in the loan loss provision and a $1.6 million increase in
noninterest expense.

[Graph appears here]

Net Interest Margin

FYE 96 - 3.97%
FYE 97 - 4.40%
FYE 98 - 4.60%
FYE 99 - 4.70%

     Net Interest Income.  Net interest income increased 16.8% to $12.5
million for the year ended March 31, 1999 from $10.7 million for the year
ended March 31, 1998.  Interest income increased 11.4% to $20.6 million for
the year ended March 31, 1999 compared to $18.5 million for the same period
ended March 31, 1998. The increase was primarily due to increases in earning
assets as loans outstanding increased $31.9 million and investments increased
$29.9 million.  Interest expense increased 3.8% from $7.8 million for the year
ended March 31, 1998 to $8.1 million for the year ended March 31, 1999.  The
increase was relatively small as a result of a change in the mix of deposits
used to fund interest-earning assets with core deposits increasing $12.0
million from the prior year.  Such deposits have a lower interest cost than
time deposits.  The average cost of deposits decreased from 4.22% for the year
ended March 31, 1998 to 4.00% for the year ended March 31, 1999, primarily as
a result of a higher average balance of lower cost core deposits compared to
higher cost time deposits.  To date, the Bank has been able to maintain its
deposit base without resorting to aggressive deposit pricing.  The average
rate paid on FHLB advances decreased from 5.85% for the year ended March 31,
1998 to 5.03% for the year ended March 31, 1999, as a result of the decline in
short term interest rates.  The interest rate spread decreased to 3.65% for
the year ended March 31, 1999 from 3.73% for the year ended March 31, 1998.
The decrease is attributed to a 31 basis point decrease in the yield on the
Bank's loan portfolio and a 29 basis point decrease in the yield on the
mortgage-backed securities portfolio, partially offset by the decrease in the
cost of deposits.
     Provision for Loan Losses.  The provisions for loan losses are charges to
earnings to bring the total allowance for loan losses to levels considered by
management as adequate to provide for known and inherent risks in the loan
portfolio, including management's continuing analysis of factors underlying
the quality of the loan portfolio.  These factors include changes in portfolio
size and composition, actual loan loss experience, current and anticipated
economic conditions, detailed analysis of individual loans for which full
collectibility may not be assured, and determination of the existence and
realizable value of the collateral and guarantees securing the loans.  See
Note 1 to Consolidated Financial Statements.

                                       13
<PAGE>

     The provision for loan losses was $483,000 for the year ended March 31,
1999 compared to $138,000 for the same period in 1998.  This increase was
primarily attributable to the growth of the loan portfolio, particularly in
agricultural, commercial business and consumer loans, which are inherently
riskier than one-to-four family mortgage loans.
     Other Income.  Other income was $1.1 million for the year ended March 31,
1999, compared to $1.0 million for the year ended March 31, 1998.  This 10.0%
increase resulted primarily from increased core deposit fees and fees related
to lending activities.
     Other Expenses.  Other expenses were $8.2 million for the year ended
March 31, 1999 compared to $6.5 million for the year ended March 31, 1998.
The increase from the prior year was primarily due to an $884,000 increase in
compensation and benefits expense.  Increases in this area were due to an
additional $252,000 of expense related to the ESOP (See Note 1 and Note 12 to
Consolidated Financial Statements) when compared to the prior year.  An
increase of $189,000 was due to non-cash expense related to the MRDP.  Total
non-cash compensation expense related to stock based compensation and benefits
amounted to $912,000 for the year.  These expenses, when incurred, result in
an increase in expense and in increase in paid-in-capital rather than a cash
outlay.  Additional increases in other expense related to increased
compensation and benefits expense of $443,000 due to an increase in the number
of employees and regular salary increases.  Depreciation expense increased
$93,000 due to additional buildings and other capital expenditures.
Advertising expense increased $210,000 due to increased advertising on radio
and in local newspapers and increased costs associated with shareholder
communication.  For the year ended March 31, 1999 compared to the year ended
March 31, 1998, other expense fluctuations included a $67,000 increase in
supplies, postage and telephone expense,  primarily due to increased core
deposits and upgrading of several telephone systems, as well as a general
increase in business activities.  Occupancy and equipment maintenance expense
increased $76,000 due to the new branch building in Burns and the placement of
additional ATM's in new locations, as well as general increases in janitorial
and other expense levels.  Other expenses increased $232,000 primarily due to
increased staff training efforts and moving costs associated with new
employees.
     Income Taxes.  The provision for income taxes was $1.8 million for the
year ended March 31, 1999 compared to $2.0 million for the year ended March
31, 1998 decreasing the effective tax rate from 40.0% for the prior year to
36.3% for the current year.  The decrease in the effective tax rate was due to
a $125,000 rebate received from the State of Oregon because the statutory rate
paid on fiscal year end March 31, 1998 income was reduced from 6.6% to 3.3%.
Legislative action to reduce the rate did not occur until well after March 31,
1998, and accordingly, the credit was taken in the year ended March 31, 1999.
Tax expense was also reduced in the current year because of the tax-exempt
interest earned on the $8.8 million of municipal bonds purchased.

Comparision of Operating Results for the Years Ended March 31, 1998 and 1997
     General.  Subsequent to June 30, 1996, the Bank changed its fiscal year
end from June 30 to March 31.  To assist in the analysis of the results of
operations for the year ended March 31, 1998, the results of operations for
such period have been compared to the unaudited results of operations for the
twelve months ended March 31, 1997, rather than the nine month fiscal year
ended March 31, 1997.  See "SELECTED CONSOLIDATED FINANCIAL INFORMATION" for
summary numerical information regarding the results of operations for the
twelve months ended March 31, 1997.
     Net Income.  Net income was $3.0 million for the year ended March 31,
1998, compared to $1.6 million for the twelve months ended March 31, 1997.
This 87.5% increase resulted primarily from an increase in net interest income
of $2.1 million and a $218,000 increase in noninterest income partially offset
by a $79,000 increase in noninterest expense. Noninterest expense would have
increased $1.2 million except that the prior twelve month period included the
legislatively mandated, one-time assessment levied by the FDIC on all
SAIF-insured institutions to recapitalize the SAIF.  Without this assessment,
which amounted to $1.1 million ($707,000 after tax), net income would have
been $2.3 million for the twelve months ended March 31, 1997.
     Net Interest Income.  Net interest income increased 24.4% to $10.7
million for the year ended March 31, 1998 from $8.6 million for the twelve
months ended March 31, 1997.   The increase was primarily due to using the net
proceeds or $45.7 million from the mutual-to-stock conversion to fund a $14.9
million increase in loans outstanding as well as a $26.8 million net increase
in the investment portfolio.  Core deposits also increased by $13.5 million.
Such deposits are at a lower interest cost than time deposits.  Interest
income increased 15.6% to $18.5 million for the twelve months ended March 31,
1998 compared to $16.0 million for the same period ended March 31, 1997.
Interest expense increased only  4.0% from $7.5 million for the twelve months
ended March 31, 1997 to $7.8 million for the twelve months ended March 31,
1998.  The increase was relatively small due to a decrease in the volume of
interest-bearing liabilities required to fund interest-earning assets as a
result of the mutual-to-stock conversion net proceeds.  The average cost of
deposits decreased from 4.27% for the twelve months ended March 31, 1997 to
4.22% for the twelve months ended March 31, 1998, primarily as a result of a
higher average balance of core deposits compared to higher interest costing
time deposits.  Through March 31, 1998, the Bank was able to maintain its
deposit base without resorting to aggressive deposit pricing. The average rate
paid on securities sold under agreements to repurchase increased from 3.43%
for the twelve months ended March 31, 1997 to 3.68% for the year ended March
31, 1998.  In December, 1997 the Bank discontinued the use of this product as
a funding source.  Customer balances were transferred to other deposit account
products.  The average rate paid on FHLB advances increased from 5.48% for the
twelve months ended March 31, 1997 to 5.85% for the twelve months ended

                                       14
<PAGE>

March 31, 1998, as a result of the use of a higher rate term advance in the
months just preceding the mutual to stock conversion.  Interest rate spread
decreased to 3.73% for the twelve months ended March 31, 1998 from 3.89% for
the twelve months ended March 31, 1997.  The decrease is attributed to a 10
basis point decrease in the yield on the Bank's loan portfolio, a 29 basis
point decrease in the yield on the mortgage-backed securities portfolio and a
higher volume of assets in the investment portfolio which has a lower yield
than the loan portfolio.
     Provision for Loan Losses.  The provision for loan losses was $138,000
for the year ended March 31, 1998 compared to $226,000 for the same period in
1997.  During the 1997 period management deemed an increase in the provision
for loan losses necessary in light of the increase in the relative level of
estimated losses caused by the growth of the loan portfolio, particularly in
agricultural, commercial business and consumer loans, which are inherently
riskier than one-to-four family mortgage loans.  Considering the same factors,
management deemed the allowance for loan losses adequate at March 31, 1998.
     Other Income.  Other income was $1.0 million for the year ended March 31,
1998, compared to $828,000 for the twelve months ended March 31, 1997.  This
20.8% increase resulted primarily from an approximate $50,000 gain on sale on
one of the La Grande Branches when operations were moved to the new Island
City branch, as well as increased core deposit fees and fees related to
lending activities.
     Other Expenses.  Other expenses were $6.5 million for both the year ended
March 31, 1998 and the twelve months ended March 31, 1997.  The 1997 period
included the FDIC special assessment on all SAIF-insured institutions to
recapitalize the SAIF.  The Bank's assessment amounted to $1.1 million,
pre-tax, and was accrued at September 30, 1996.  Prior to the SAIF
recapitalization, the Bank's total annual deposit insurance premiums amounted
to 0.23% of assessable deposits.  Effective January 1, 1997, the rate
decreased to 0.065% of assessable deposits.  See Note 16 to Consolidated
Financial Statements.  Without the special assessment other expenses would
have been only $5.3 million for the twelve months ended March 31, 1997
compared to $6.5 million for the twelve months ended March 31, 1998, a $1.2
million or 22.6% increase.  The increase from the prior twelve-month period
was primarily due to a $1.1 million increase in compensation and benefits
expense.  The increases in this area were due to $471,000 of expense related
to the ESOP (See Note 1 and Note 12 to Consolidated Financial Statements), as
well as $559,000 of increased salaries.  An increase of $200,000 of salary
expense was due to the severance paid and/or accrued for Dan Webber, former
President and Chief Executive Officer upon his resignation in March 1998.  The
remaining $359,000 was due to the addition of two loan personnel, an
accounting professional and several staff support positions, as well as a
general increase in salary levels particularly for customer service positions.
A primary goal of the Bank is to recruit and retain a quality staff and during
fiscal year 1998 management made an effort to increase salaries of certain
positions to more nearly equate to those of the industry and the Bank's
marketplace.  The remaining increase of approximately $100,000 included
increased Directors' fees due to the formation of the Holding Company, general
increases in the cost of employee medical insurance and increased payroll
taxes related to increased salary expense.
     For the year ended March 31, 1998 compared to the twelve months ended
March 31, 1997, other expense fluctuations included a $132,000 increase in
supplies, postage and telephone expense, primarily due to increased core
deposits and upgrading of several telephone systems, as well as a general
increase in business activities.  Depreciation expense increased $46,000 due
to the opening of the new Island City branch, as well as computer hardware and
core software purchases.  Occupancy and equipment maintenance expense
increased $84,000 due to the placement of additional ATM's in new locations in
an attempt to improve customer service and due to the opening of the Island
City branch.  These increases were partially offset by a $178,000 decrease in
deposit insurance expense.
     Income Taxes.  The provision for income taxes was $2.0 million for the
twelve months ended March 31, 1998 compared to $1.1 million for the twelve
months ended March 31, 1997 as a result of higher income before income taxes.
The effective tax rate for the year ended March 31, 1998 increased from 39.9%
in the prior year to 40.0%.  The decrease was due to slight differences in the
level of expenses which are not fully tax deductible.

Average Balances, Interest and Average Yields/Costs
     The following table sets forth certain information for the periods
indicated regarding average balances of assets and liabilities as well as the
total dollar amounts of interest income from average interest-earning assets
and interest expense on average interest-bearing liabilities and average
yields and costs.  Such yields and costs for the periods indicated are derived
by dividing income or expense by the average balances of assets or
liabilities, respectively, for the periods presented.  Average balances are
derived from daily balances for the year ended March 31, 1999.  For other
years presented average balances are derived from monthly balances.
Management does not believe that the use of month-end balances instead of
daily balances has caused any material inconsistencies in the information
presented.  Certain month-end balances were adjusted to approximate daily
balances for the months of September 1997 through November 1997 due to the
cash position and investment activity related to the $45.7 million of net
proceeds from the stock conversion and the over subscription proceeds of $78.0
million.

                                       15
<PAGE>

<TABLE>

Oregon Trail Financial Corp. and Subsidiary
Analysis of Net Interest Spread
(Dollars in thousands)


                                       Year Ended March 31, 1999             Year Ended March 31, 1998
                                   --------------------------------     ---------------------------------
                                   Average     Interest &    Yield/     Average      Interest &    Yield/
                                   Balance     Dividends      Cost      Balance      Dividends      Cost
                                   -------     ----------    ------     -------      ----------    ------
<S>                                <C>         <C>           <C>        <C>          <C>           <C>
Interest-earning assets
Loans receivable, net (1)          $168,226    $ 14,072      8.36%      $146,043     $ 12,661      8.67%
Mortgage-backed securities           55,786       3,819      6.85%        38,251        2,733      7.14%
Investment securities                31,475       2,304      7.32%        35,171        2,345      6.67%
FHLB stock                            3,073         236      7.68%         2,855          222      7.78%
Federal funds sold and overnight
 interest-bearing deposits            7,607         151      1.99%         9,946          550      5.53%
                                   --------    --------                 --------     --------
  Total interest-earning assets     266,167      20,582      7.73%       232,266       18,511      7.97%
                                   --------    --------                 --------     --------
Non-interest-earning assets          10,557                               10,497
                                   --------                             --------
  Total assets                     $276,724                             $242,763
                                   ========                             ========
Interest-bearing liabilities
Passbook accounts                  $ 21,800    $    579      2.66%      $ 27,236    $     779      2.86%
Money market accounts                24,412         889      3.64%        18,972          687      3.62%
NOW accounts                         35,537         532      1.50%        30,516          519      1.70%
Certificates of deposit              98,533       5,203      5.28%       103,790        5,628      5.42%
                                   --------    --------                 --------     --------
  Total interest-bearing deposits   180,282       7,203      4.00%       180,514        7,613      4.22%
Securities sold under              --------    --------                 --------     --------
 agreements to repurchase                 -           -       N/A            924           34      3.68%
FHLB advances                        17,108         861      5.03%         3,024          177      5.85%
  Total interest-bearing           --------    --------                 --------     --------
   liabilities                      197,390       8,064      4.09%       184,462        7,824      4.24%
                                   --------    --------                 --------     --------
Non-interest-bearing
 liabilities                         14,938                               12,618
                                   --------                             --------
  Total liabilities                 212,328                              197,080
                                   --------                             --------
Shareholders' equity                 64,396                               45,683
                                   --------                             --------
  Total liabilities and
   shareholders' equity            $276,724                             $242,763
                                   ========                             ========

Net interest income                            $ 12,518                              $ 10,687
                                               ========                              ========

Interest rate spread                                         3.65%                                 3.73%

Net interest margin                                          4.70%                                 4.60%

Ratio of average interest-
 earning assets to average
 interest-bearing liabilities        134.84%                              125.92%

----------------------
(1) Does not include interest on loans 90 days or more past due.  Includes loans originated for sale.

                                                         16
</TABLE>
<PAGE>

<TABLE>
            Year Ended March 31, 1997    Nine Months Ended March 31, 1997   Nine Months Ended March 31, 1996
            -------------------------    --------------------------------   --------------------------------
            Average  Interest &  Yield/  Average     Interest &    Yield/   Average    Interest &    Yield/
            Balance  Dividends    Cost   Balance     Dividends      Cost    Balance    Dividends      Cost
            -------  ---------   ------  -------     ----------    ------   -------    ----------    ------
<S>         <C>      <C>         <C>     <C>         <C>           <C>      <C>        <C>           <C>
Interest-
 earning
 assets
Loans
 receivable,
 net (1)    $134,478 $ 11,788    8.77%   $135,768      $ 8,916     8.75%    $128,305    $  8,284     8.59%
Mortgage-
backed
 securi-
 ties         37,720    2,803    7.43%     36,942        2,058     7.42%      43,580       2,378     7.26%
Investment
 securities   17,833    1,194    6.70%     17,181          860     6.67%      20,788       1,122     7.18%
FHLB stock     2,646      203    7.67%      2,672          154     7.69%       2,477         135     7.25%
Federal funds
 sold and
 overnight
 interest-
 bearing
 deposits      4,222       94    2.23%      3,584           42     1.55%       5,078          43     1.12%
  Total     --------  -------            --------      -------              --------     -------
  interest-
  earning
  assets     196,899   16,082    8.17%    196,147       12,030     8.17%     200,228      11,962     7.95%
            --------  -------            --------      -------              --------     -------
Non-
 interest-
 earning
 assets        7,039                        7,161                              6,607
            --------                     --------                           --------
  Total
   assets   $203,938                     $203,308                           $206,835
            ========                     ========                           ========
Interest-
 bearing
 liabili-
 ties
Passbook
 accounts   $ 24,393  $   705    2.89%   $ 24,245      $   525     2.89%    $ 25,640     $   555     2.88%
Money market
 accounts     15,228      539    3.54%     15,195          404     3.54%      14,242         396     3.70%
NOW accounts  27,156      424    1.56%     27,102          318     1.56%      28,470         422     1.97%
Certificates
 of deposit  104,619    5,658    5.41%    104,480        4,238     5.40%     103,971       4,365     5.59%
            --------  -------            --------      -------              --------     -------
  Total
  interest-
  bearing
  deposits   171,396    7,325    4.27%    171,022        5,485     4.27%     172,323       5,738     4.43%
            --------  -------            --------      -------              --------     -------
Securities
 sold under
 agreements
 to re-
 purchase      1,399       48    3.43%      1,396           36     3.47%       1,215          33     3.58%
FHLB advances  1,860      102    5.48%        862           32     4.88%       7,939         363     6.08%
            --------  -------            --------      -------              --------     -------
  Total
  interest-
  bearing
  liabili-
  ties       174,655    7,475    4.28%    173,280        5,553     4.27%     181,477       6,133     4.50%
            --------  -------            --------      -------              --------     -------
Non-interest-
 bearing
 liabilities   8,872                        9,418                              6,522
            --------                     --------                           --------
  Total
  liabili-
  ties       183,527                      182,698                            187,999
            --------                     --------                           --------
Shareholders'
 equity       20,411                       20,610                             18,836
            --------                     --------                           --------
  Total
  liabili-
  ties and
  share-
  holders'
  equity    $203,938                     $203,308                           $206,835
            ========                     ========                           ========

Net interest
 income              $  8,607                         $  6,477                           $ 5,828
                     ========                         ========                           =======
Interest rate
 spread                          3.89%                             3.90%                             3.45%

Net interest
 margin                          4.37%                             4.40%                             3.87%

Ratio of
 average
 interest-
 earning
 assets to
 average
 interest-
 bearing
 liabilities  112.74%                      113.20%                            110.33%

                                                         17
</TABLE>
<PAGE>



The following table sets forth the effects of changing rates and volumes on
net interest income of the Bank.  Information is provided with respect to (i)
effects on interest income attributable to changes in rate (changes in rate
multiplied by prior volume); (ii) effects on interest income attributable to
changes in volume (changes in volume multiplied by prior rate); (iii) the net
change attributable to the combined impact of volume and rate; and (iv) the
total change (the sum of the prior columns).

                    Year Ended March 31, 1999     Year Ended March 31, 1998
                   Compared to Year Ended           Compared to Year Ended
                        March 31, 1998                  March 31, 1997
                    Increase (Decrease) Due to    Increase (Decrease) Due to
                  ----------------------------    --------------------------
Rate/Volume                       Rate/                          Rate/
 Analysis         Rate    Volume  Volume  Total  Rate  Volume   Volume  Total
(Dollars in       ----    ------  ------  -----  ----  ------   ------  -----
 Thousands)

Interest-earning
 assets:
 Loans receiv-
  able (1)       $ (453) $ 1,923 $ (59) $ 1,411 $(129) $ 1,014  $ (12) $  873
 Mortgage-backed
  and related
  securities       (111)   1,252   (56)   1,085  (107)      39     (2)    (70)
 Investment
  securities        229     (247)  (23)     (41)   (6)   1,162     (5)  1,151
 FHLB stock          (3)      17     -       14     3       16      -      19
 Federal funds
  sold and overnight
  interest-bearing
  deposits         (352)    (129)   83     (398)  139      128    189     456
  Total net change
   in income on   ------  ------- -----  -------  ------ ------- -----  ------
   interest-earning
   assets          (690)   2,816   (55)   2,071  (100)   2,359    170   2,429
                 ------  ------- -----  -------  ------ ------- -----  ------
Interest-bearing
 liabilities:
 Passbook accounts  (54)    (155)    9     (200)   (7)      82     (1)     74
 Money market
  accounts            4      197     1      202     12      134     3     149
 NOW accounts       (61)      85   (11)      13     38       52     5      95
 Certificate
  accounts         (145)    (285)    5     (425)    15      (45)    -     (30)
 Securities sold
  under agreements
  to repurchase     (34)     (34)   34      (34)     3      (16)   (1)    (14)
 FHLB advances      (25)     824  (115)     684      7       64     4      75
  Total net change
   in expense on ------  ------- -----  -------  ------ ------- -----  ------
   interest-bearing
   liabilities     (315)     632   (77)     240     68      271    10     349
                 ------  ------- -----  -------  ------ ------- -----  ------
Net change in net
 interest income $ (375) $ 2,184 $  22  $ 1,831 $ (168) $ 2,088 $ 160  $2,080
                 ======  ======= =====  ======= ======  ======= =====  ======

-----------------
(1) Does not include interest on loans 90 days or more past due. Includes
    loans originated for sale.

                                       18
<PAGE>

Year 2000 Issues
     The Year 2000 issue exists because many computer systems and applications
use two-digit fields to designate a year.  As the century date change occurs,
date-sensitive systems may recognize the Year 2000 as 1900, or not at all.
This inability to recognize or properly treat the Year 2000 may cause systems
to fail or to process financial and operational information incorrectly.
     The Bank established a committee in 1997 to address Year 2000 issues.
The committee consists of executive management and technical staff and reports
to the Board of Directors on a monthly basis.  The committee has conducted a
comprehensive review of its computer systems and equipment to identify
applications that could be affected by Year 2000 issues and has implemented a
plan designed to ensure that all software used in connection with the Bank's
business will function correctly with dates past 1999.  In conducting their
review, the committee used the Office of Thrift Supervision Year 2000
checklist and the Federal Financial Institutions Examination Council ("FFIEC")
guideline s for Year 2000 project management.  These guidelines identify the
five steps for Year 2000 conversion programs.
     The first step is the Awareness Phase in which the Bank is to define the
Year 2000 problem and establish a Year 2000 program team and overall strategy.
The Bank as of March 31, 1998 completed this step.  In the next phase, the
Assessment Phase, the Bank is to assess the size and complexity of the problem
and detail the magnitude of effort  necessary to address Year 2000 issues,
including hardware, software, networks, automated teller machines, etc.  This
step was approximately 96% complete by March 31, 1999.
     The third step or Renovation Phase includes hardware and software
upgrades, system replacements, vendor certification and associated changes.
Data processing for the Bank is done in-house primarily on an AS/400 IBM
computer.  In December 1997, the Bank converted to new core software from Jack
Henry and Associates Inc., which was purchased at a cost of approximately
$250,000.  The software purchased is used to process all savings, loan and
related general ledger transactions.  The vendor has given assurance their
software is Year 2000 compliant and that no problems will arise from the turn
of the century.  The Bank has joined a User Group, which began testing the
Jack Henry system in September 1998.  Testing was completed December 31, 1998
and the results were satisfactory.  The Bank has also subscribed to a third
party independent review of the User Group Testing.  The Y2K committee has
evaluated the third party review.  In July 1998, the Bank upgraded its IBM
AS/400 computer hardware and upgraded the operating system to OS400 V4R2MO, at
a cost of approximately $84,500, both of which are Year 2000 compatible as
represented by IBM.  Century rollover testing has been done on the upgraded
AS/400 with satisfactory results.
     In addition to the core software, the Bank uses various personal computer
software products, the majority of which are already Year 2000 compliant.
Others are being monitored and the Bank is proactively communicating with
vendors to determine their course of action to become fully compliant.  The
Bank replaced all necessary computer hardware to become Year 2000 compliant.
The total cost of hardware approximated $125,000.  That cost combined with the
cost of the new software brings the total cost of compliance to $375,000,
which is very close to the Bank's initial estimate.  With the final
replacement of some personal computers and attendant software, the Bank is 98%
complete with renovation.
     The next phase is the Validation/Testing Phase, which primarily includes
the previously mentioned testing of the core Jack Henry software, as well as
various other tests with vendors, including the Federal Reserve Fedline system
and ATM processing.  This phase is 85% complete as of March 31, 1999.
     The final phase, Implementation Phase, is in process.  Systems
successfully tested will be certified Year 2000 compliant.  This phase is
scheduled for completion by June 30, 1999.  All personal computers and related
software have been tested for Year 2000 compliance.  As of March 31, 1999, all
of the Bank's personal computers and software are Year 2000 compliant.  The
Bank's wide area network and various local area networks have also been
upgraded, tested, and determined to be Year 2000 compliant.  All mission
critical data processing applications have been identified and are Year 2000
compliant.  Third party vendors were sent questionnaires in 1998 regarding
their preparation for Year 2000.  Responses have been received and further
updates will be requested in order to monitor vendors' status.
     In addition, contingency plans are being developed.  The contingency plan
will address actions to be taken to continue operations in the event of system
failure due to areas that cannot be tested in advance, such as power and
telephone service, which are vital to business continuation.  To assist
customers in understanding Year 2000 issues and to inform them of the Bank's
action to prepare, brochures regarding Year 2000 preparedness have been
distributed to all customers.  Another mailing is anticipated before the end
of the calendar year.
     In addition to the Year 2000 preparations described above, the Bank has
required that lending personnel ascertain loan customer awareness and intent
to timely achieve Year 2000 compliance.  The Bank's credit risk associated
with borrowers may increase to the extent borrowers fail to adequately address
Year 2000 issues.
     The Bank believes that the Year 2000 issue will not pose significant
operational problems and does not anticipate a material effect on its
financial position or results of operations.

                                       19
<PAGE>

Market Risk and Asset and Liability Management
     Market risk is the risk of loss from adverse changes in market prices and
rates.  The Bank's market risk arises principally from interest rate risk
inherent in its lending, investment, deposit and borrowing activities.
Management actively monitors and manages its interest rate risk exposure.
Although the Bank manages other risks, such as credit quality and liquidity
risk, in the normal course of business, management considers interest rate
risk to be its most significant market risk that could potentially have the
largest material effect on the Bank's financial condition and results of
operations.  Other types of market risks, such as foreign currency exchange
rate risk and commodity price risk, do not arise in the normal course of the
Bank's business activities.
     The Bank's principal financial objective is to achieve long-term
profitability while reducing its exposure to fluctuating market interest
rates.  The Bank has sought to reduce the exposure of its earnings to changes
in market interest rates by attempting to manage the mismatch between asset
and liability maturities and interest rates.  The principal element in
achieving this objective is to increase the interest- rate sensitivity of the
Bank's interest-earning assets by originating for its portfolio an increasing
proportion of loans with interest rates subject to periodic adjustment to
market conditions (including commercial business, agricultural and consumer
loans).  In addition, the Bank maintains an investment portfolio of U.S.
government and government agency securities with contractual maturities of
generally between one and ten years.  The Bank relies on retail deposits as
its primary source of funds.  Management believes retail deposits and in
particular core deposits (checking and passbook savings accounts), compared to
brokered deposits, reduce the effects of interest rate risk management
strategy.  The Bank promotes transaction accounts and certificates of deposit
with terms up to six years.
     The Bank's primary monitoring tool for assessing interest rate risk is
asset/liability simulation modeling, which is performed for the Bank by the
FHLB.  The modeling process is designed to capture the dynamics of balance
sheet, interest rate and spread movements and to quantify variations in net
interest income resulting from those movements under different rate
environments.  The interest rate sensitivity analysis performed by the FHLB
for the Bank incorporates end of period rate, balance and maturity data
compiled by the Bank's management using various levels of aggregation of that
data.
     The following table is provided by the FHLB and sets forth the change in
the Bank's net portfolio value ("NPV") at March 31, 1999, based on FHLB
assumptions, that would occur in the event of an immediate change in interest
rates, with no effect given to any steps that management might take to
counteract that change.  NPV is defined as the present value of expected net
cash flows from existing assets minus the present value of expected net cash
flows from existing liabilities plus the present values of net expected cash
inflows from existing off-balance sheet contracts.

                                Estimated Change in
 Basis Point ("bp")             Net Portfolio Value
 Change in Rates               (Dollars in Thousands)

      400                     $(28,508)       (54.25)%
      300                      (21,145)       (40.24)
      200                      (13,725)       (26.12)
      100                       (6,409)       (12.20)
       -0-                          -0-           -0-
     (100)                       2,929          5.57
     (200)                       4,789          9.11
     (300)                       8,094         15.40
     (400)                      12,130         23.09

     The above table illustrates, for example, that an instantaneous 200 basis
point increase in market interest rates at March 31, 1999 would reduce the
Bank's NPV by approximately $13.7 million, or 26.1%, at that date.
     Certain assumptions utilized by the FHLB in assessing the interest rate
risk of savings associations within its region were utilized in preparing the
preceding table.  These assumptions relate to interest rates, loan prepayment
rates, deposit decay rates, and the market values of certain assets under
differing interest rate scenarios, among others.

     As with any method of measuring interest rate risk, certain shortcomings
are inherent in the method of analysis presented in the foregoing table.  In
the event of a change in interest rates, expected rates of prepayments on
loans and early withdrawals from certificates could deviate significantly from
those assumed in calculating the table.  The model assumes a parallel change
in rates, whereas actual market interest rates would not necessarily react in
a parallel manner.  Further, call provisions of certain securities, which
shorten the actual term to maturity if exercised, are not taken into account
in the model.

                                       20
<PAGE>

     The following table presents the Bank's financial instruments that are
sensitive to changes in interest rates, categorized by expected maturity, and
the instruments' fair value at March 31, 1999.  Market risk sensitive
instruments are generally defined as on- and off-balance sheet derivatives and
other financial instruments.
                                     One     After
                                     Year    Three
                                     to      to      Beyond
                    Average  Within  Three   Five    Five              Fair
                      Rate  One Year Years   Years   Years     Total   Value
(Dollars in Thousands)
Interest Sensitive
 Assets:
Loans receivable      7.92% $87,039 $37,050 $24,715 $36,943 $185,747 $189,930
Mortgage-backed
 securities           6.79%  21,953  14,134   9,842  23,780   69,709   69,889
Tax free municipal
 bonds                4.48%       -       -       -   8,691    8,691   8,691
Investments and
 other interest-
 earning assets       6.44%       -       -       -  29,274   29,274  29,274
FHLB stock            7.75%       -       -       -   3,221    3,221   3,221

INTEREST SENSITIVE
 LIABILITIES:
NOW checking          1.36%  11,206  12,990   6,365   6,115   36,676  36,676
Passbook savings      2.35%   6,324   7,527   3,688   3,544   21,083  21,083
Money market
 deposits             4.14%  23,774   6,166     388     158   30,486  30,486
Time certificates     5.15%  71,410  23,943   2,399   1,998   99,750  99,965

OFF-BALANCE SHEET
 ITEMS:
Commitments to
 extend credit        8.00%  14,816   6,307   4,207   6,289   31,619  31,619

LIQUIDITY AND CAPITAL RESOURCES
     The Bank's primary sources of funds are customer deposits, proceeds from
principal and interest payments on and the sale of loans, maturing securities
and FHLB advances.  While maturities and scheduled amortization of loans are a
predictable source of funds, deposit flows, mortgage prepayments and maturing
securities, cash flows and anticipated maturities of mortgage-backed bonds and
agency securities are greatly influenced by general interest rates, economic
conditions and competition.
     The Bank must maintain an adequate level of liquidity to ensure
sufficient funds to fund loan originations and deposit withdrawals, to satisfy
other financial commitments and to take advantage of investment opportunities.
The Bank generally maintains sufficient cash and short-term investments to
meet short-term liquidity needs.  At March 31, 1999 cash and cash equivalents
totaled $6.3 million, or 2.0% of totals assets.  The Bank also maintained an
uncommitted credit facility with the FHLB, which provided for immediately
available advances up to an aggregate amount of $94.0 million, under which
$50.3 million in advances were outstanding at March 31, 1999.
     Office of Thrift Supervision regulations require savings institutions to
maintain an average balance of liquid assets (cash and eligible investments)
equal to at least 4.0% of the average daily balance of its net withdrawable
deposits and short-term borrowings.  The Bank's liquidity ratio at March 31,
1999 was 10.24%.
     The Bank's primary investing activity is the origination of one-to-four
family mortgage loans within its primary market area.  During the year ended
March 31, 1999 and the year ended March 31, 1998 and the nine months ended
March 31, 1997, the Bank originated $38.8 million, $21.8 million, $9.0 million
of such loans, respectively.  At March 31, 1999, the Bank had commitments to
extend credit totaling $31.6 million.  The Bank anticipates that it will have
sufficient funds available to meet current loan commitments.  Certificates of
deposit that are scheduled to mature in less than one year from March 31, 1999
totaled $70.5 million.  Historically, the Bank has been able to retain a
significant amount of its deposits as they mature.
     Office of Thrift Supervision regulations require the Bank to maintain
specific amounts of regulatory capital.  As of March 31, 1999, the Bank
complied with all regulatory capital requirements as of that date with
tangible, core and total capital ratios of 16.1%, 16.1% and 33.1%,
respectively.  See Note 16 of the Consolidated Financial Statements.

                                       21
<PAGE>

Effect of Inflation and Changing Prices

The consolidated financial statements and related financial data presented
herein have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time due to inflation.  The primary
impact of inflation is reflected in the increased cost of the Bank's
operations.  Unlike most industrial companies, virtually all the assets and
liabilities of a financial institution are monetary in nature.  As a result,
interest rates generally have a more significant impact on a financial
institution's  performance than do general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the
prices of goods and services.

                                       22
<PAGE>

Independent Auditors' Report

To the Board of Directors
Oregon Trail Financial Corp. and Subsidiary
Baker City, Oregon

     We have audited the accompanying consolidated balance sheets of Oregon
Trail Financial Corp. and Subsidiary (the "Company", formerly known as Pioneer
Bank, a Federal Savings Bank, prior to the October 3, 1997 conversion
discussed in Note 11) as of March 31, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity and cash flows for the
years ended March 31, 1999 and 1998, and the nine-month period ended March 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
     In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Oregon Trail Financial Corp.
and Subsidiary as of March 31, 1999 and 1998, and the results of their
operations and their cash flows for the years ended March 31, 1999 and 1998,
and the nine-month period ended March 31, 1997, in conformity with generally
accepted accounting principles.

/s/ Deloitte & Touche LLP

Portland, Oregon
May 7, 1999

                                       23
<PAGE>

Oregon Trail Financial Corp. and Subsidiary
Consolidated Balance Sheets
March 31, 1999 and 1998
(In thousands, except share data)

Assets                                                   1999          1998

Cash and due from banks                              $   1,756     $   1,644
Interest-bearing deposits                                4,520        18,667
                                                     ---------     ---------
  Total cash and cash equivalents                        6,276        20,311

Securities:
Investment securities available for sale, at fair
 value (amortized cost of $38,249 and $36,821)          37,965        37,225
Mortgage-backed and related securities available
 for sale, at fair value (amortized cost of $60,278
 and $26,745)                                           60,371        27,778
Mortgage-backed and related securities held
 to maturity, at amortized cost (fair value of
 $9,518 and $13,225)                                     9,338        12,805
Loans receivable, net of allowance for loan
 losses of $1,228 and $847                             185,747       153,838
Accrued interest receivable                              2,012         1,676
Premises and equipment, net                              7,825         5,582
Stock in Federal Home Loan Bank of Seattle, at cost      3,221         2,985
Real estate owned                                           37           313
Other assets                                               681           711
                                                     ---------     ---------
TOTAL ASSETS                                         $ 313,473     $ 263,224
                                                     =========     =========
Liabilities and shareholders' equity

LIABILITIES:
Deposits:
Interest-bearing                                     $  88,245     $  79,187
Noninterest-bearing                                     11,594         8,647
Time certificates                                       99,750       104,900
                                                     ---------     ---------
  Total deposits                                       199,589       192,734

Advances from Federal Home Loan Bank of Seattle         50,250             -
Accrued expenses and other liabilities                   2,399         1,259
Net deferred tax liability                                 455         1,141
Advances from borrowers for taxes and insurance            697           789
                                                     ---------     ---------
  Total liabilities                                    253,390       195,923
                                                     ---------     ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
 Preferred stock, $.01 par value; 1,000,000
  shares authorized; no shares issued or
  outstanding                                                -             -
 Common stock, $.01 par value; 8,000,000 shares
  authorized; March 31, 1999, 4,694,875 issued,
  3,763,564 outstanding; March 31, 1998, 4,694,875
 issued, 4,346,113 outstanding                              42            47
Additional paid-in capital                              38,357        45,885
Retained earnings (substantially restricted)            26,206        23,968
Unearned shares issued to the Employee Stock
 Ownership Plan                                         (2,951)       (3,488)
Unearned shares issued to the Management
 Recognition and Development Plan                       (1,453)            -
Accumulated other comprehensive income                    (118)          889
                                                     ---------     ---------
  Total shareholders' equity                            60,083        67,301
                                                     ---------     ---------
  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $ 313,473     $ 263,224
                                                     =========     =========
See Notes to Consolidated Financial Statements.

                                       24
<PAGE>

Oregon Trail Financial Corp. and Subsidiary
Consolidated Statements of Income
Years Ended March 31, 1999 and 1998 and the Nine Months Ended March 31, 1997
(In thousands, except share data)

                                              1999        1998         1997
INTEREST INCOME:
 Interest and fees on loans receivable    $  14,072    $  12,661    $  8,916
Securities:
 Mortgage-backed and related  securities      3,819        2,734       2,058
 U.S. government and government agencies
  and other                                   2,455        2,894         902
 Federal Home Loan Bank of Seattle
  dividends                                     236          222         154
                                          ---------    ---------    --------
  Total interest income                      20,582       18,511      12,030
                                          ---------    ---------    --------
INTEREST EXPENSE:
 Deposits                                     7,203        7,613       5,485
 Securities sold under agreements to
  repurchase                                      -           34          36
 FHLB of Seattle advances                       861          177          32
                                          ---------    ---------    --------
  Total interest expense                      8,064        7,824       5,553
                                          ---------    ---------    --------

Net interest income                          12,518       10,687       6,477
PROVISION FOR LOAN LOSSES                       483          138         216
Net interest income after provision for   ---------    ---------    --------
 loan losses                                 12,035       10,549       6,261
                                          ---------    ---------    --------
NONINTEREST INCOME:
 Service charges on deposit accounts            757          687         483
 Loan servicing fees                            294          244          50
 Other income                                    47          115         128
                                          ---------    ---------    --------
  Total noninterest income                    1,098        1,046         661
                                          ---------    ---------    --------
NONINTEREST EXPENSES:
 Employee compensation and benefits           4,862        3,978       2,168
 Supplies, postage, and telephone               579          512         285
 Depreciation                                   493          400         271
 Occupancy and equipment                        459          383         232
 Customer accounts                              292          274         187
 Advertising                                    442          232         173
 Professional fees                              295          213         126
 FDIC insurance premium                         120          133         209
 Special SAIF assessment                          -            -       1,146
 Other                                          640          408         277
                                          ---------    ---------    --------
  Total noninterest expenses                  8,182        6,533       5,074
                                          ---------    ---------    --------
 Income before income taxes                   4,951        5,062       1,848
PROVISION FOR INCOME TAXES                    1,797        2,026         750
                                          ---------    ---------    --------
NET INCOME                                $   3,154    $   3,036    $  1,098
                                          =========    =========    ========
 Basic earnings per share                 $    0.78    $    0.38         N/A
 Diluted earnings per share               $    0.76    $    0.38         N/A
 Weighted average common shares
  outstanding:
  Basic                                   4,065,423    4,326,066         N/A
  Diluted                                 4,159,540    4,326,066         N/A

See Notes to Consolidated Financial Statements.

                                       25
<PAGE>

<TABLE>

Oregon Trail Financial Corp. and Subsidiary
Consolidated Statements of Shareholders' Equity
Years Ended March 31, 1999 and 1998 and the Nine Months Ended March 31, 1997
(In thousands, except share data)
                                                           Unearned   Unearned
                                                           Shares     Shares
                                                           Issued to  Issued to           Accumu-
                                                           Employee   Management          lated
                                                           Stock      Recogni-            Other
                                    Additional             Owner-     tion and  Compre-   Compre-
                    Common Stock     Paid-In   Retained    ship       Develop-  hensive   hensive
                 ------------------- Capital   Earnings    Trust      ment Plan Income    Income   Total
<S>               <C>        <C>     <C>       <C>         <C>        <C>       <C>       <C>      <C>
BALANCE, JULY 1,
 1996                     -  $    -  $      -  $  20,051   $      -   $      -            $  (47)  $ 20,004
Net income                -       -         -      1,098          -          -  $ 1,098        -      1,098
Unrealized loss on
 securities available
 for sale, net of tax     -       -         -          -          -          -      (75)     (75)       (75)
                                                                                -------
Comprehensive income      -       -         -          -          -          -  $ 1,023        -          -
                  ---------  ------  --------  ---------   --------   --------  =======   ------   --------
BALANCE, MARCH 31,
 1997                     -       -         -     21,149          -          -              (122)    21,027
Net income                -       -         -      3,036          -          -  $ 3,036        -      3,036
Cash dividends paid       -       -         -       (217)         -          -        -        -       (217)
Issuance of common
 stock, net       4,694,875      47    45,682          -          -          -        -        -     45,729
Unearned ESOP
 shares            (375,590)      -         -          -     (3,756)         -        -        -     (3,756)
Earned ESOP
 shares              26,828       -       203          -        268          -        -        -        471
Unrealized gain
 on securities
 available for
 sale, net of tax         -       -         -          -          -          -    1,011    1,011      1,011
                                                                                -------
Comprehensive income      -       -         -          -          -          -  $ 4,047        -          -
                  ---------  ------  --------  ---------   --------   --------  =======   ------   --------
BALANCE, MARCH 31,
 1998             4,346,113      47    45,885     23,968     (3,488)         -               889     67,301
Net income                -       -         -      3,154          -          -  $ 3,154        -      3,154
Cash dividends paid       -       -         -       (916)         -          -        -        -       (916)
Stock repurchased  (488,883)     (6)   (9,355)         -          -          -        -        -     (9,361)
Stock repurchased
 and issued to
 MRDP trust        (147,322)      1     1,641          -          -     (1,642)       -        -          -
Earned ESOP shares   53,656       -       186          -        537          -        -        -        723
Earned MRDP shares        -       -         -          -          -        189        -        -        189
Unrealized loss on
 securities available
 for sale, net of tax     -       -         -          -          -          -   (1,007)    (1,007)  (1,007)
                                                                                -------
Comprehensive income      -       -         -          -          -          -  $ 2,147        -          -
                  ---------  ------  --------  ---------   --------   --------  =======   ------   --------
BALANCE, MARCH 31,
 1999             3,763,564  $   42  $ 38,357  $  26,206   $ (2,951)  $ (1,453)           $ (118)  $ 60,083
                  =========  ======  ========  =========   ========   ========            ======   ========

See Notes to Consolidated Financial Statements.

                                                         26
</TABLE>
<PAGE>

Oregon Trail Financial Corp. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended March 31, 1999 and 1998 and the Nine
 Months Ended March3 1, 1997
(In thousands)
                                               1999         1998        1997

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                               $   3,154    $   3,036   $   1,098
 Adjustments to reconcile net income to
  net cash provided by operating
  activities:
   Depreciation                                 493          400         271
   Compensation expense related to ESOP         723          471           -
   Compensation expense related to MRDP         189            -           -
   Amortization of deferred loan fees, net     (248)        (184)       (195)
   Provision for loan losses                    483          138         216
   Deferred income taxes                        (60)          41         (90)
   Amortization and accretion of premiums
    and discounts on investments and loans
    purchased                                  (319)        (126)        (22)
   Federal Home Loan Bank of Seattle
    dividends                                  (236)        (222)       (154)
  (Gain) loss on sale of real estate owned      (11)           -           1
  (Gain) loss on sale of premises and
    equipment                                     4          (48)         21
 Change in assets and liabilities:
  Trading securities                              -            -         181
  Loans held for sale                             -          428        (428)
  Accrued interest receivable                  (336)        (351)         11
  Other assets                                   30         (466)        149
  Accrued expenses and other liabilities      1,140          621         (54)
                                          ---------    ---------    --------
  Net cash provided by operating activities   5,006        3,738       1,005
                                          ---------    ---------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Loan originations                         (108,660)     (56,591)    (27,257)
 Loan principal repayments                   84,090       47,175      21,285
 Loans purchased                             (7,693)      (5,777)       (572)
 Proceeds from maturity of securities
  available for sale                         25,223       77,427       5,000
 Principal repayments of securities
  available for sale                          8,916        2,986       2,053
 Purchase of securities available for sale  (68,781)    (108,049)    (1,000)
 Principal repayments of securities held
  to maturity                                 3,533        2,545      1,668
 Purchase of securities held to maturity          -          (33)         -
 Purchase of premises and equipment          (2,898)      (1,511)      (559)
 Proceeds from sale of premises and
  equipment                                     153          225          -
 Proceeds from sale of real estate owned        340            -         11
                                          ---------    ---------    --------
  Net cash provided by (used in) investing
   activities                               (65,777)     (41,603)       629
                                          ---------    ---------    --------
                                                                 (Continued)

                                       27
<PAGE>

Oregon Trail Financial Corp. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended March 31, 1999 and 1998 and the Nine
 Months Ended March 31, 1997
(In thousands)

                                                  1999       1998      1997

CASH FLOWS FROM FINANCING ACTIVITIES:
 Increase in deposits, net of withdrawals     $   6,855  $   13,577  $  2,539
 Decrease in securities sold under agreements
  to repurchase                                       -      (1,431)       (1)
 Change in advances from borrowers for
  taxes and insurance                               (92)         98      (762)
 Proceeds from Federal Home Loan Bank of
  Seattle advances                              127,950      41,600    21,850
 Repayment of Federal Home Loan Bank of
  Seattle advances                              (77,700)    (42,400)  (23,700)
 Proceeds from issuance of common stock,
  net of conversion expenses                          -     123,779         -

 Repayment of stock over subscription                 -     (78,050)        -

 Funding provided to ESOP for purchase of
   common stock                                       -      (3,756)        -
 Payment of cash dividend                          (916)       (217)        -
 Stock repurchase                                (9,361)          -         -
                                              ---------  ----------  --------
 Net cash provided by (used in) financing
  activities                                     46,736      53,200       (74)
                                              ---------  ----------  --------
NET INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS                                    (14,035)     15,335     1,560
CASH AND CASH EQUIVALENTS, BEGINNING OF
 PERIOD                                          20,311       4,976     3,416
                                              ---------  ----------  --------
CASH AND CASH EQUIVALENTS, END OF PERIOD      $   6,276  $   20,311  $  4,976
                                              =========  ==========  ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
Cash paid during the period for:
 Interest on deposits and other borrowings    $   7,823  $    7,769  $  5,616
 Income taxes                                     2,409       2,192       886
Noncash investing activities:
 Transfer of loans to foreclosed real estate         51         313        12
 Unrealized gain (loss) on securities
  available for sale, net of tax                  1,007       1,011       (76)
 Transfer of trading securities to
  available for sale securities, at fair value        -           -     2,387

See Notes to Consolidated Financial Statements.

                                       28
<PAGE>

Oregon Trail Financial Corp. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended March 31, 1999 and 1998 and the Nine Months Ended March 31, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation - The consolidated financial statements
include the accounts of Oregon Trail Financial Corp. and its wholly-owned
subsidiary, Pioneer Bank, a Federal Savings Bank (the "Bank"), collectively
(the "Company"). Oregon Trail Financial Corp. became the holding company of
the Bank upon conversion of the Bank from a federally-chartered mutual savings
and loan association to a federally-chartered capital stock savings and loan
association (Note 11). All intercompany accounts and transactions have been
eliminated in consolidation. Certain prior period amounts have been
reclassified to conform to current period presentation. In 1997, the Company
changed its fiscal year end from June 30 to March 31. As a result, the
consolidated financial statements present the Company's operations for the
years ended March 31, 1999 and 1998 and the nine months ended March 31, 1997.

     Nature of Operations - The Company is engaged in the business of
accepting savings and demand deposits and providing mortgage, consumer, and
commercial loans, and to a lesser extent, agricultural loans to its customers
in eastern Oregon.

     Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
assumptions. These assumptions result in estimates that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.

     Cash and Cash Equivalents - The Company considers all cash on hand and
due from banks, all interest-bearing deposits held at domestic banks, and
investment securities with an original term to maturity of three months or
less to be cash equivalents.

     Securities - The Company accounts for securities in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 115,
Accounting for Certain Investments in Debt and Equity Securities. Securities
are classified as held to maturity where the Company has the ability and
positive intent to hold them to maturity. Securities held to maturity are
carried at cost, adjusted for amortization of premiums and accretion of
discounts to maturity. Securities bought and held principally for the purpose
of sale in the near term are classified as trading securities and are carried
at fair value. There were no trading securities at March 31, 1999 and 1998.
Securities not classified as trading, or as held to maturity, are classified
as available for sale. Unrealized holding gains and losses on securities
available for sale are excluded from earnings and are reported net of tax as a
separate component of equity until realized. These unrealized holding gains
and losses net of tax are also included as a component of comprehensive
income. Unrealized losses on securities resulting from an other than temporary
decline in fair value are recognized in earnings when incurred. Realized and
unrealized gains and losses are determined using the specific identification
method.

     Federal Home Loan Bank Stock - The Company's investment in Federal Home
Loan Bank of Seattle ("FHLB") stock is carried at cost, which approximates its
fair value. As a member of the FHLB system, the Company is required to
maintain a minimum level of investment in FHLB stock based on specified
percentages of its outstanding mortgages, total assets or FHLB advances. At
March 31, 1999, the Company's minimum investment requirement was
approximately $2,513,000. The Company may request redemption at par value
of any stock in excess of the amount the Company is required to hold. Stock
redemptions are granted at the discretion of the FHLB.

     Loans Receivable - Loans are stated at unpaid principal less net deferred
loan origination fees. Interest income on loans is recognized based on the
principal and the stated interest rates and includes the amortization of net
deferred loan origination fees based on the level yield method over the
contractual life of the loans adjusted on a prospective basis for prepayments
and delinquencies. Net deferred loan origination fees on loans held for sale
are recognized in earnings when sold. Recognition of interest income is
discontinued and accrued interest is reversed when a loan is placed on
nonaccrual status. A loan is generally placed on nonaccrual status when the
loan becomes contractually past due more than 90 days. Delinquent interest on
loans past due 90 days or more is charged off or an allowance is established
by a charge to income equal to all interest previously accrued. Interest
payments received on nonaccrual loans are applied to principal if collection
of principal is doubtful. Loans are removed from nonaccrual status only when
the loan is deemed current and collectibility of principal and interest is no
longer doubtful.

                                       29
<PAGE>

     Loans Held for Sale - To mitigate interest rate sensitivity, from time to
time certain fixed rate loans are identified as held for sale in the secondary
market. Accordingly, such loans are classified as held for sale in the
consolidated balance sheets and are carried at the lower of aggregate cost or
net realizable value. At March 31, 1999 and 1998, there were no loans held for
sale.
     Allowance for Loan Losses - Allowances for losses on specific problem
loans and real estate owned are charged to earnings when it is determined that
the value of these loans and properties, in the judgment of management, is
impaired. In addition to specific reserves, the Company also maintains a
general allowance for loan losses based on evaluating known and inherent risks
in the loan portfolio, including management's continuing analysis of the
factors underlying the quality of the loan portfolio. These factors include
changes in the size and composition of the loan portfolio, actual loan loss
experience, current and anticipated economic conditions, detailed analysis of
individual loans for which full collectibility may not be assured, and
determination of the existence and realizable value of the collateral and
guarantees securing the loans. The reserve is an estimate based upon factors
and trends identified by management at the time financial statements are
prepared. The ultimate recovery of loans is susceptible to future market
factors beyond the Company's control, which may result in losses or recoveries
differing significantly from those provided in the consolidated financial
statements.
     The Company accounts for impaired loans in accordance with SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118,
Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures. These statements address the disclosure requirements and
allocations of the allowance for loan losses for certain impaired loans. A
loan within the scope of these statements is considered impaired when, based
on current information and events, it is probable that a creditor will be
unable to collect all amounts due according to the contractual terms of the
loan agreement, including scheduled interest payments. Smaller balance
homogeneous loans, including single family residential and consumer loans, are
excluded from the scope of this statement.
     When a loan has been identified as being impaired, the amount of the
impairment is measured by using discounted cash flows, except when it is
determined that the sole source of repayment for the loan is the operation or
liquidation of the underlying collateral. In such case, impairment is measured
at current fair value of the collateral, reduced by estimated selling costs.
When the measurement of the impaired loan is less than the recorded investment
in the loan (including accrued interest, net deferred loan fees or costs, and
premium or discount), loan impairment is recognized by establishing or
adjusting an allocation of the allowance for loan losses. The Company
generally considers these loans on a nonaccrual status to be impaired. SFAS
No. 114, as amended, does not change the timing of charge-offs of loans to
reflect the amount ultimately expected to be collected. At March 31, 1999 and
1998, respectively, the Company had no loans deemed to be impaired as defined
by SFAS No. 114.

     Loan Servicing Fees - Fees earned for servicing loans for the Federal
Home Loan Mortgage Corporation ("FHLMC") are reported as income when the
related mortgage loan payments are collected. Loan servicing costs are charged
to expense as incurred. The Company stopped servicing loans for FHLMC as of
December 31, 1997.

     Real Estate Owned - Real estate acquired through foreclosure is stated at
the lower of cost (principal balance of the former mortgage loan plus costs of
obtaining title and possession) or estimated fair value at the time of
foreclosure less estimated selling costs. Costs of development and improvement
of property are capitalized, and holding costs and market adjustments are
charged to expense as incurred.

     Premises and Equipment - Premises and Equipment are stated at cost less
accumulated depreciation. Depreciation is recognized on the straight-line
method over the estimated useful lives of the assets ranging from 3 to 40
years. Major renewals and betterments are capitalized and repairs are
expensed. Gains or losses from disposals of premises and equipment are
reflected in other noninterest expenses.

     Income Taxes - The Company accounts for income taxes in accordance with
the provisions of SFAS No. 109, Accounting For Income Taxes, which requires
the use of the asset and liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.  Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.

                                       30
<PAGE>

     Employee Stock Ownership Plan - The Company sponsors an Employee Stock
Ownership Plan ("ESOP"). The ESOP is accounted for in accordance with the
American Institute of Certified Public Accountants Statement of Position 93-6,
Employer's Accounting for Employee Stock Ownership Plans. Accordingly, the
shares held by the ESOP are reported as unearned shares issued to the employee
stock ownership plan in the balance sheet. As shares are committed to be
released, compensation expense is recorded equal to the then current market
price of the shares, and the shares become outstanding for earnings per share
calculations. The Company is allocating the shares ratably over a seven-year
period beginning with the first allocation on December 31, 1997.

     Management Recognition and Development Plan - The Company sponsors a
Management Recognition and Development Plan ("MRDP"). The MRDP is accounted
for in accordance with SFAS No. 123, Accounting for Stock-Based Compensation,
and a modification of FASB Interpretation No. 28, Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans. The plan
authorizes the grant of common stock shares to certain officers and directors,
which vest over a five to six year period in equal installments. The Company
recognizes compensation expense based on the fair value of the common stock at
the grant date, as granted shares become vested. Granted MRDP shares that have
not yet vested are considered to be contingently issuable shares and are only
included in diluted earnings per share. When the MRDP shares vest, they are
included in basic earnings per share.

     Stock-Based Compensation - The Company accounts for stock compensation
using the intrinsic value method as prescribed in Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. Under the intrinsic value based method, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
stock at grant date over the amount an employee must pay to acquire the stock.
Stock options granted by the Company have no intrinsic value at the grant date
and, under APB No. 25, there is no compensation expense to be recorded.
     SFAS No. 123 encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value.
The fair value approach measures compensation costs based on factors such as
the term of the option, the market price at grant date, and the option
exercise price, with expense recognized over the vesting period. See Note 15
for the pro forma effect on net income and earnings per share as if the fair
value method had been used.

     Recently Issued/Adopted Accounting Pronouncements - Effective April 1,
1998, the Company adopted SFAS No. 130, Reporting Comprehensive Income, and
presented all periods on a comparative basis. Other comprehensive income
consists of the current increase or decrease in net unrealized investment
gains and losses on securities available for sale, net of tax effects.
Accumulated other comprehensive income represents the net unrealized gains and
losses on securities available for sale.
     Effective April 1, 1998, the Company adopted SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. This statement
supercedes SFAS No. 14, Financial Reporting for Segments of Business
Enterprises. The statement requires that public companies report financial and
descriptive information about their operating segments. Operating segments
within a company are determined based on a company's organizational structure
and the way that a company manages its business for making operating decisions
and assessing its performance. The Company has determined it does not have
separate identifiable segments as defined by this statement.
     In February 1998, SFAS No. 132, Employers' Disclosures about Pensions and
Other Postretirement Benefits, was issued. SFAS No. 132 revises employers'
disclosures about pensions and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. It standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer as useful. The
Company adopted this standard effective April 1, 1998 and has restated
disclosures for earlier periods.
     Effective April 1, 1999, the Company adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, which establishes accounting
and disclosure requirements for derivative instruments, including certain
instruments embedded in other financial instruments, and for hedging
activities. The Company does not have any derivative instruments that meet the
scope of this statement. The statement also allows, on the date of initial
application, an entity to transfer any held to maturity securities into the
available for sale or trading categories. The Company transferred all held to
maturity securities with a book value and fair value of $9,338,000 and
$9,518,000, respectively,  to its available for sale portfolio. The transfer
was recorded as a direct increase to other comprehensive income of $111,000
(net of income tax of $69,000).

                                       31
<PAGE>

2. SECURITIES

     The amortized cost, gross unrealized gains and losses, and estimated fair
value of securities classified as available for sale and held to maturity at
March 31, 1999 and 1998 are summarized as follows (in thousands):

                                                 Gross     Gross
                                                  Un-        Un-
March 31, 1999                       Amortized  realized  realized    Fair
                                        Cost     Gains     Losses     Value
Available for sale:
 U.S. government and government
  agency obligations:
  Maturing after one year through
   five years                        $   5,027   $  16    $   -     $  5,043
  Maturing after five years through
   ten years                            19,404      17     (188)      19,233
  Maturing after ten years              13,818      10     (139)      13,689
                                     ---------   -----    -----     --------
                                        38,249      43     (327)      37,965
 Mortgage-backed and related         ---------   -----    -----     --------
  securities:
  GNMA maturing after one year
   through five years                      221       2        -          223
  GNMA maturing after five years
   through ten years                         4       -        -            4
  GNMA maturing after ten years         22,840     490     (202)      23,128
  FHLMC maturing after ten years        18,757       3     (229)      18,531
  FNMA maturing after ten years         18,456     113      (84)      18,485
                                     ---------   -----    -----     --------
                                        60,278     608     (515)      60,371
                                     ---------  ------    -----     --------
    Total available for sale         $  98,527  $  651    $(842)    $ 98,336
                                     =========  ======    =====     ========
Held to maturity:
 Mortgage-backed and related securities:
  GNMA maturing after ten years      $   8,230  $   171    $   -     $  8,401
  FNMA maturing after ten years            839        1        -          840
  FHLMC maturing after ten years           269        8        -          277
                                     ---------  -------    -----     --------
    Total held to maturity           $   9,338  $   180    $   -     $  9,518
                                     =========  =======    =====     ========
March 31, 1998
Available for sale:
 U.S. government and government
  agency obligations:
  Maturing after one year through
   five years                        $  15,042  $    60    $ (24)    $ 15,078
  Maturing after five years through
   ten years                            21,779      374       (6)      22,147
                                     ---------  -------    -----     --------
                                        36,821      434      (30)      37,225
                                     ---------  -------    -----     --------
Mortgage-backed and related
 securities:
  GNMA maturing after one year
   through five years                      169        1        -          170
  FHLMC maturing after one year
   through five years                      127        5        -          132
  GNMA maturing after five years
   through ten years                       164        2        -          166
  GNMA maturing after ten years         15,717      903        -       16,620
  FHLMC maturing after ten years            62        4        -           66

  FNMA maturing after ten years         10,506      121       (3)      10,624
                                     ---------  -------    -----     --------
                                        26,745    1,036       (3)      27,778
                                     ---------  -------    -----     --------
    Total available for sale         $  63,566  $ 1,470    $ (33)    $ 65,003
                                     =========  =======    =====     ========
Held to maturity:
 Mortgage-backed and related
  securities:
  GNMA maturing after ten years      $  11,139  $   385    $   -     $ 11,524
  FNMA maturing after ten years          1,366       24        -        1,390
  FHLMC maturing after ten years           300       11        -          311
                                     ---------  -------    -----     --------
    Total held to maturity           $  12,805  $   420    $   -     $ 13,225
                                     =========  =======    =====     ========

                                       32
<PAGE>

     Expected maturities of mortgage-backed and related securities will differ
from contractual maturities because borrowers may have the right to prepay
obligations with or without prepayment penalties.

     Investments and mortgage-backed and related securities totaling
$33,815,000 and $41,003,000 were pledged against public funds and other
deposits at March 31, 1999 and 1998, respectively.

3. LOANS RECEIVABLE

                                                             March 31,
Loans receivable are summarized as follows               1999        1998
 (in thousands):                                     -----------------------

Mortgage loans:
 One-to-four family                                  $  109,089   $  100,740
 Multi-family                                             2,810        1,194
 Commercial                                              10,657        7,905
 Agricultural                                             2,240          725
 Construction                                             2,825        1,617
 Land                                                       330          297
                                                     ----------   ----------
  Total mortgage loans                                  127,951      112,478
                                                     ----------   ----------
Consumer loans:
 Unsecured                                                2,836        2,047
 Home equity and second mortgage                         16,262       19,231
 Auto loans                                              11,843        5,719
 Credit card                                                949          854
 Loans secured by savings deposits                          416          648
 Other secured                                            2,985        4,623
                                                     ----------   ----------
  Total consumer loans                                   35,291       33,122
                                                     ----------   ----------
Commercial loans:
 Business                                                15,077        5,968
 Agricultural                                             9,781        4,254
                                                     ----------   ----------
  Total commercial loans                                 24,858       10,222
                                                     ----------   ----------
  Total loans                                           188,100      155,822
Less:
 Net deferred loan fees                                   1,125        1,035
 Undisbursed portion of loans in process                      -          102
 Allowance for loan losses                                1,228          847
                                                     ----------   ----------
  Total loans receivable, net                        $  185,747   $  153,838
                                                     ==========   ==========

The weighted average interest rate on loans at March 31, 1999 and 1998 were
7.92% and 8.31%, respectively.

The unpaid principal balance of loans serviced for the FHLMC, which is not
included in the consolidated financial statements, was zero at March 31, 1999
and 1998, and $1,388,000 at March 31, 1997.

                                       33
<PAGE>

     Allowance for loan loss activity is summarized as follows for the years
ended March 31, 1999 and 1998, and the nine months ended March 31, 1997 (in
thousands):

                                                   1999     1998      1997

Balance, beginning of year                     $    847  $   725   $   541
Provision for loan losses                           483      138       216
Charge-offs                                        (115)     (49)      (39)
Recoveries                                           13       33         7
                                               --------  -------   -------
                                               $  1,228  $   847   $   725
                                               ========  =======   =======

     Nonaccrual loans were $138,000 and $275,000 at March 31, 1999 and 1998,
respectively. Interest income that would have been recorded under the original
terms of nonaccrual loans totaled $7,000 for the years ended March 31, 1999
and 1998, and $16,000 for the nine-month period ended March 31, 1997.

4. TRANSACTIONS WITH AFFILIATES

     Loans - Certain directors and executive officers of the Company are
customers of, and have had transactions with, the Bank in the ordinary course
of business, and the Bank expects to have similar transactions in the future.

     An analysis of activity with respect to loans receivable from directors
and executive officers of the Company for the years ended March 31, 1999 and
1998, and the nine months ended March 31, 1997 is summarized as follows (in
thousands):

                                  1999      1998       1997

Beginning balance              $   576    $  326     $  204
Additions                          928       491        133
Reductions                        (142)     (241)       (11)
                               -------    ------     ------
Ending balance                 $ 1,362    $  576     $  326
                               =======    ======     ======

     At March 31, 1999, all loans to directors and executive officers of the
Company were current.

5. ACCRUED INTEREST RECEIVABLE

     Accrued interest receivable is summarized as follows (in thousands):

                                                          March 31,
                                                       1999      1998
                                                     -----------------

Loans receivable                                     $  1,086 $    870
Mortgage-backed and related securities                    391      223
U.S. government and government agencies                   535      583
                                                     -------- --------
                                                     $  2,012 $  1,676
                                                     ======== ========

                                       34
<PAGE>

6. PREMISES AND EQUIPMENT

     Premises and equipment are summarized as follows (in thousands):

                                                          March 31,
                                                       1999      1998
                                                     -----------------

Land                                                 $    836 $    876
Buildings and improvements                              5,633    4,524
Furniture, fixtures and equipment                       3,202    2,141
Construction in process                                   676      248
                                                     -------- --------

                                                       10,347    7,789
 Less accumulated depreciation                          2,722    2,407
                                                     -------- --------

                                                        7,625    5,382
Land held for development                                 200      200
                                                     -------- --------
                                                     $  7,825 $  5,582
                                                     ======== ========

7. DEPOSITS

     Savings deposits at March 31 are summarized as follows (dollars in
thousands):

                                     1999                      1998
                          -------------------------- ------------------------
                          Weighted                   Weighted
                          Average                    Average
                          Interest                   Interest
                            Rate   Balance   Percent   Rate  Balance  Percent

Non-interest bearing           -%  $ 11,594    5.81%      -% $  8,647   4.49%
NOW checking                1.36     36,676   18.38    1.70    33,366  17.31
Passbook savings accounts   2.35     21,083   10.56    2.86    23,741  12.32
Money market deposit        4.14     30,486   15.27    3.62    22,080  11.46
Time certificates           5.15     99,750   49.98    5.38   104,900  54.42
                            ----   --------  ------    ----  -------- ------
                            3.70%  $199,589  100.00%   3.99% $192,734 100.00%
                            ====   ========  ======    ====  ======== ======

     At March 31, 1999, time certificate maturities are as follows (in
thousands):

     Within one year                                             $    70,533
     One year to two years                                            18,932
     Two years to three years                                          5,802
     Three years to four years                                         1,238
     Four years to five years                                          1,196
     Thereafter                                                        2,049
                                                                 -----------
                                                                 $    99,750
                                                                 ===========

                                       35
<PAGE>

     The aggregate amount of time certificates with a minimum denomination of
$100,000 was $20,021,000 and $18,244,000 at March 31, 1999 and 1998.  Deposit
accounts in excess of $100,000 are not insured by the Federal Deposit
Insurance Corporation ("FDIC").

     Interest expense on deposits is summarized as follows for the years ended
March 31, 1999 and 1998, and the nine months ended March 31, 1997 (in
thousands):

                                            1999       1998         1997

NOW checking                            $    532   $    519     $    318
Passbook savings accounts                    579        779          526
Money market deposit                         889        687          404
Time certificates                          5,203      5,628        4,237
                                        --------   --------     --------
                                        $  7,203   $  7,613     $  5,485
                                        ========   ========     ========

8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

     Information concerning securities sold under agreements to repurchase is
summarized as follows (in thousands):

                                                    1999        1998

Average balance                                 $      -    $    924
Maximum month end balance                              -       1,473

Average interest rate at year end                    N/A         N/A

     The average balance is computed on a monthly average method. All
agreements mature the following business day. The Company maintains control of
the securities pledged as collateral. Effective December 1997, the Company
discontinued transactions of this type.

9. FHLB BORROWINGS

     The Bank has entered into borrowing arrangements with the FHLB to borrow
funds under a short-term cash management advance program and long-term loan
agreements. All borrowings are secured by stock of, and cash deposits in, the
FHLB. Additionally, mortgage loans receivable and securities issued, insured,
or guaranteed by the U.S. Government or agencies thereof are pledged as
security for the loans.

     At March 31, 1999, FHLB advances were scheduled to mature as follows
(dollars in thousands):

                             Adjustable           Fixed
                             Rate Advances    Rate Advances   Total Advances
                             --------------   --------------  ----------------
                             Rate*   Amount   Rate*  Amount   Rate*   Amount

Due in less than one year    5.28%  $ 27,750  4.81%  $ 7,000  5.18%  $ 34,750
One to two years                -          -  4.88     3,000  4.88      3,000
Two to three years              -          -  4.93     5,000  4.93      5,000
Four to five years              -          -  5.24     7,500  5.24      7,500
                             ----   --------  ----   -------  ----   --------
                             5.28%  $ 27,750  4.99%  $22,500  5.15%  $ 50,250
                             ====   ========  ====   =======  ====   ========

* Weighted average interest rate

                                       36
<PAGE>
     The maximum and average outstanding balances and average interest rates
on advances from the FHLB were as follows for the years ended March 31, 1999
and 1998 (dollars in thousands):

                                                          1999         1998

Maximum outstanding at any month end                 $  50,250     $  8,000
Monthly average outstanding                             17,108        3,024
Weighted average interest rates:
  Annual                                                  5.03%        5.85%
  End of year                                             5.15%         N/A
Interest expense during the year                     $     861     $    177

10. INCOME TAXES

     A reconciliation of the tax provision based on statutory corporate tax
rates and the provision shown in the accompanying consolidated statements of
income for the years ended March 31, 1999 and 1998, and the nine months ended
March 31, 1997 is summarized as follows (dollars in thousands):

                                     1999            1998           1997
                                --------------- --------------- --------------
                                Amount  Percent Amount  Percent Amount Percent

Federal income taxes at
 statutory rate                 $ 1,683  34.0%  $ 1,721  34.0%  $ 628   34.0%
State income taxes at statutory
 rate, net of related federal
 tax effect                         218   4.4       223   4.4      85    4.6
Other, net                         (104) (2.1)       82   1.6      37    2.0
                                -------  ----   -------  ----   -----   ----
                                $ 1,797  36.3%  $ 2,026  40.0%  $ 750   40.6%
                                =======  ====   =======  ====   =====   ====

     Provision (benefit) for income taxes for the years ended March 31, 1999
and 1998, and the nine months ended March 31, 1997 is summarized as follows
(in thousands):

                                              1999        1998       1997
Current:
 Federal                                 $   1,538   $   1,643   $    694
 State                                         319         342        146
                                         ---------   ---------   --------
  Total current                              1,857       1,985        840
Deferred:                                ---------   ---------   --------
 Federal                                       (50)         34        (75)
 State                                         (10)          7        (15)
                                         ---------   ---------   --------
  Total deferred                               (60)         41        (90)
                                         ---------   ---------   --------
    Total provision for income taxes     $   1,797   $   2,026   $    750
                                         =========   =========   ========

                                       37
<PAGE>

     The components of net deferred income assets and liabilities at March 31,
1999 and 1998 are summarized as follows (in thousands):

                                                     1999           1998

Deferred tax assets:
  Deferred loan fees                             $    150       $    195
  Allowance for loan losses                           464            311
  Vacation accrual                                    118            103
  Unrealized losses on securities
   available for sale                                 123             49
  Other                                                65             23
                                                 --------       --------
     Total deferred tax assets                        920            681
                                                 --------       --------
Deferred tax liabilities:
  FHLB stock dividends                               (897)          (806)
  Accumulated depreciation                           (180)           (66)
  Unrealized gains on securities available
   for sale                                             -           (552)
  Tax bad debt reserve in excess of base-
   year reserve                                      (298)          (398)
                                                 --------       --------
     Total deferred tax liabilities                (1,375)        (1,822)
                                                 --------       --------
     Net deferred tax liability                  $   (455)      $ (1,141)
                                                 ========       ========

     For the fiscal year ended June 30, 1996 and years prior, the Company
determined bad debt expense deducted from taxable income based on 8% of
taxable income before such deduction or based on the experience method as
provided by the Internal Revenue Code ("IRC"). In August 1996, the provision
in the IRC allowing the 8% of taxable income deduction was repealed.
Accordingly, the Company is required to use the experience method to record
bad debt expense for the current period and prospectively, and must also
recapture the excess reserve accumulated from use of the 8% method ratably
over a six-taxable-year period for all years subsequent to 1987. The income
tax provision from 1987 to 1996 included an amount for the tax effect of such
reserves.  At March 31, 1999, the Company had recaptured approximately
$785,000 of bad debt deductions taken in prior periods. At March 31, 1999,
remaining bad debt deductions to be recaptured approximated $778,000.

     As a result of the bad debt deductions taken in years prior to 1988,
retained earnings include accumulated earnings of approximately $2,500,000, on
which federal income taxes have not been provided. If, in the future, this
portion of retained earnings is used for any purpose other than to absorb
losses on loans or on property acquired through foreclosure, federal income
taxes may be imposed at the then prevailing corporate tax rates. The Company
does not contemplate that such amounts will be used for any purpose which
would create a federal income tax liability; therefore, no provision has been
made.

11. SHAREHOLDERS' EQUITY

     Oregon Trail Financial Corp. ("OTFC") was incorporated under Oregon law
in June 1997 to acquire and hold all of the outstanding capital stock of the
Bank, as part of the Bank's conversion from a federally-chartered mutual
savings and loan association. In connection with the conversion, which was
consummated on October 3, 1997, OTFC issued and sold 4,694,875 shares of
common stock including the shares allocated to the ESOP (par value of $.01 per
share) at a price of $10.00 per share for net total proceeds of $45,729,000
after conversion expenses of $1,220,000. OTFC retained one-half of the net
proceeds and used the remaining net proceeds to purchase the newly issued
capital stock of the Bank. The net conversion proceeds of $45,729,000 were
held in withdrawable accounts at the Bank at September 30, 1997. Since, among
other things, all required regulatory approvals to consummate the conversion
were received prior to September 30, 1997, the conversion has been accounted
for as being effective as of September 30, 1997. The oversubscription proceeds
of $78,050,000 were refunded, with accrued interest, on October 3, 1997.

                                       38
<PAGE>

     At the time of conversion, the Company established a liquidation account
in an amount equal to its retained earnings as of March 31, 1997, the date of
the latest balance sheet used in the final conversion prospectus. The
liquidation account will be maintained for the benefit of eligible
withdrawable account holders who have maintained their deposit accounts in the
Bank after conversion. In the event of a complete liquidation of the Bank (and
only in such event), eligible depositors who have continued to maintain
accounts will  be entitled to receive a distribution from the liquidation
account before any liquidation may be made with respect to common stock. The
Bank may not declare or pay cash dividends if the effect thereof would reduce
its regulatory capital below the amount required for the liquidation account.

     In August 1998, the Company received approval from the Office of Thrift
Supervision ("OTS") to repurchase 9%, or 422,539, of its outstanding shares.
The repurchase was completed by August 27, 1998. The shares were purchased at
a weighted average price of $15.51. In October 1998, the Company received a
non-objection response from the OTS to a request to repurchase an additional
5%, or 213,666, of its outstanding shares which was completed in February
1999. The shares were purchased at a weighted average price of $13.14. The
repurchase programs resulted in a 636,205 reduction of shares outstanding and
reduced equity by $9.4 million. The shares were used to fund the MRDP and the
Employee Stock Option Plan. These plans were approved by shareholders in
August 1998 and were implemented in October 1998.

12. EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")

     As part of the conversion discussed in Note 11, an ESOP was established
for all employees. The ESOP borrowed $3,756,000 from OTFC and used the funds
to purchase 375,590 shares of the common stock of OTFC issued in the
conversion. The loan will be repaid by the Bank over a seven-year period. The
loan had an outstanding balance of $3,123,000 and $3,552,000 at March 31, 1999
and 1998, respectively, at an interest rate of 8.5%. The shares included in
the ESOP are held in a suspense account and released to participants quarterly
over a seven-year period. Compensation expense is recognized to the extent of
the fair value of shares committed to be released. The Company recorded
compensation expense related to the ESOP of $723,000 and $471,000 during the
years ended March 31, 1999 and 1998, respectively.

     ESOP share activity is summarized in the following table:

                                                              Committed to
                                               Unreleased     be Released
                                               ESOP Shares      Shares

Balance, April 1, 1997                                -               -
 Issuance October 3, 1997                       375,590               -
 1998 release                                   (26,828)         26,828
                                               --------          ------
Balance, March 31, 1998                         348,762          26,828
 1999 release                                   (53,656)         53,656
                                               --------          ------
Balance, March 31, 1999                         295,106          80,484
                                               ========          ======

13. MANAGEMENT RECOGNITION AND DEVELOPMENT PLAN ("MRDP")

     In May 1998, the Board of Directors approved an MRDP for the benefit of
officers and non-employee directors which authorizes the grant of 187,795
common stock shares. Shareholders approved the plan in August 1998. On October
8, 1998, 147,322 shares were granted to eligible participants covered under
the plan at a share price of $11.15. Those eligible to receive benefits under
the MRDP are determined by members of a committee appointed by the Board of
Directors of the Company. MRDP awards vest ratably over a five- to six-year
period beginning on October 8, 2000 (the first anniversary of the effective
date of the MRDP) or upon the participant's death or disability. The Company
recognizes compensation expense based on the fair value of the common stock on
the grant date in accordance with the vesting schedule during the years in
which the shares are payable. Compensation expense for the year ended March
31, 1999 was $189,000.

                                       39
<PAGE>

14. EARNINGS PER SHARE ("EPS")

     EPS is computed in accordance with SFAS No. 128, Earnings Per Share.
Basic EPS is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding during the period,
without considering any dilutive items. 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 MRDP Plan and
stock options granted under the stock option plan. Shares held by the
Company's ESOP that are committed for release are included in the basic and
diluted EPS calculations. The following is a summary of the effect of dilutive
securities in weighted average number of shares (denominator) for the basic
and diluted EPS calculations for the years ended March 31, 1999 and 1998.
There are no resulting adjustments to net earnings:

                                                           1999        1998*
Weighted average common shares outstanding-basic        4,065,423   4,326,066
Effect of dilutive securities on number of shares:
  MRDP shares                                              70,635         N/A
  Stock options                                            23,482         N/A
                                                        ---------
Total dilutive securities                                  94,117         N/A
Weighted average common shares outstanding -
 assuming dilution                                      4,159,540   4,326,066

* Basic and diluted EPS for 1998 were computed based on net income since date
of conversion (October 3, 1997) divided by the weighted average number of
shares of common stock and common stock equivalents assumed to be outstanding
for the period October 3, 1997 through March 31, 1998.

15. STOCK OPTION PLAN

     On May 26, 1998, the Board of Directors approved a stock option plan for
officers, directors, and employees, which authorizes the granting of stock
options. The maximum number of shares which may be issued under this plan is
469,488 with a maximum term of ten years for each option from the date of
grant. The initial 356,500 stock options were granted on October 8, 1998 at
the estimated fair value of the common stock on that date ($11.15), and at
March 31, 1999 had a weighted average remaining contractual life of 9.5 years.
All initial awards vest in equal installments over a five- to six-year period.
Unvested options become immediately exercisable in the event of death or
disability.

     Stock option activity is summarized as follows:

                                                          Weighted
                                                           Average
                                      Number of           Exercise
                                         Shares              Price

Outstanding, April 1, 1998                    -          $       -
  Granted                               356,500              11.15
  Exercised                                   -                  -
  Canceled                                    -                  -
                                        -------          ---------
Outstanding, March 31, 1999             356,500          $   11.15
                                        =======          =========

     Additional Stock Plan Information - As discussed in Note 1, the Company
continues to account for its stock-based awards using the intrinsic value
method in accordance with APB No. 25 and its related interpretations.
Accordingly, no compensation expense has been recognized in the financial
statements for employee stock arrangements.

                                       40
<PAGE>

     SFAS No. 123 requires the disclosure of pro forma net income and earnings
per share had the Company adopted the fair value method as of the beginning of
fiscal year 1999. Under SFAS No. 123, the fair value of stock-based awards to
employees is calculated through the use of option pricing models, even though
such models were developed to estimate fair value of freely tradable, fully
transferable options without vesting restrictions, which significantly differ
from the Company's stock option awards. These models also require subjective
assumptions, including future stock price volatility and expected time to
exercise, which greatly affect the calculated values.

     The Company's calculations were made using the Black-Scholes option
pricing model with the following weighted average assumptions as of October
1998:

  Risk-free interest rate                       5.12%
  Expected dividend                             1.88%
  Expected lives, in years                       5.5
  Expected volatility                             50%

     The estimated weighted average grant-date fair value of options granted
during fiscal year 1999 was $4.85 per share. Had compensation cost for these
awards been determined in accordance with SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the following pro
forma amounts for the year ended March 31, 1999 dollars in thousands):

  Net income:
     As reported                           $   3,154
     Pro forma                                 3,057
  Earnings per common share - basic:
     As reported                           $    0.78
     Pro forma                                  0.75
  Earnings per common share - diluted:
     As reported                           $    0.76
     Pro forma                                  0.73

16. REGULATORY MATTERS AND CAPITAL REQUIREMENTS

     Regulatory Capital - The Bank is subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have
a direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.

     Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios of total and
Tier I capital to risk weighted assets, of Core I capital to total assets, and
tangible capital to tangible assets (set forth in the table below). Management
believes that the Bank meets all capital adequacy requirements to which it is
subject as of March 31, 1999.

     As of March 31, 1999, the most recent notification from OTS categorized
the Bank as "well capitalized" under the regulatory framework for prompt
corrective action. To be categorized as "well capitalized," the Bank must
maintain minimum total risk-based,

                                       41
<PAGE>

Tier I risk-based, and Tier I leverage ratios as set forth in the table below.
There are no conditions or events, since the notification, that management
believes have changed the Bank's category. The Bank's actual and required
capital amounts and ratios are presented in the table below (in thousands):

                                                           Categorized as
                                                         "Well Capitalized"
                                          For Capital       Under Prompt
                                            Adequacy        Corrective
As of March 31, 1999       Actual           Purposes     Action Provision
                       ---------------  ---------------  ----------------
                        Amount   Ratio   Amount   Ratio   Amount    Ratio
Total Capital
 (To risk weighted
   assets)             $ 51,516  33.1%  $ 12,455   8.0%  $ 15,569   10.0%
Tier I Capital
 (To risk weighted
   assets)             $ 50,288  32.3%       N/A   N/A   $  9,342    6.0%
Core Capital
 (To total assets)     $ 50,288  16.1%  $ 12,521   4.0%  $ 15,652    5.0%
Tangible Capital
 (To tangible assets)  $ 50,288  16.1%  $  4,695   1.5%       N/A    N/A

As of March 31, 1998

Total Capital
 (To risk weighted
   assets)             $ 47,768  37.5%  $ 10,180   8.0%  $ 12,725   10.0%
Tier I Capital
 (To risk weighted
   assets)             $ 46,921  36.9%       N/A   N/A   $  7,635    6.0%
Core Capital
 (To total assets)     $ 46,921  17.9%  $ 10,462   4.0%  $ 13,122    5.0%
Tangible Capital
 (To tangible assets)  $ 46,921  17.9%  $  3,923   1.5%       N/A    N/A

     The following table is a reconciliation of the Bank's capital, calculated
according to generally accepted accounting principles, to regulatory tangible
and risk-based capital at March 31, 1999 (in thousands):

  Equity                                        $   50,380
  Unrealized securities gains                          118
  Equity of non-includable subsidiaries               (210)
                                                ----------
  Tangible capital                                  50,288
  General valuation allowance                        1,228
                                                ----------
  Total capital                                 $   51,516
                                                ==========

     At periodic intervals, the OTS and the FDIC routinely examine the Bank as
part of their legally prescribed oversight of the thrift industry. Based on
these examinations, the regulators can direct that the Bank's financial
statements be adjusted in accordance with their findings. A future examination
by the OTS or the FDIC could include a review of certain transactions or other
amounts reported in the Bank's 1999, 1998, and 1997 financial statements. In
view of the uncertain regulatory environment in which the Bank operates, the
extent, if any, to which a forthcoming regulatory examination may ultimately
result in adjustments to the accompanying financial statements cannot
presently be determined.

     On September 30, 1996, the United States Congress passed and the
President signed into law the omnibus appropriations package, including the
Bank Insurance Fund/Savings Association Insurance Fund (BIF/SAIF) and
Regulatory Burden Relief packages. Included in this legislation was a
requirement for SAIF-insured institutions to recapitalize the SAIF insurance
fund through a one-time special assessment to be paid within 60 days of the
first of the month following enactment. As the Bank is insured by the SAIF,
this assessment resulted in a pre-tax charge to other expenses for the
nine-month period ended March 31, 1997 of $1,146,000 based on the March 31,
1995 SAIF deposit assessment base of $174,488,000.

                                       42
<PAGE>

17. EMPLOYEE BENEFIT PLAN

     The Company sponsors a contributory defined contribution plan pursuant to
Section 401(k) of the IRC covering substantially all employees. Under the
plan, the Company made contributions limited to 3.33% for the current year and
6.67% in prior periods of participating employees' salaries. Contributions and
plan administration expenses aggregated to $88,000, $92,000, and $95,000 for
the years ended March 31, 1999 and 1998, and the nine months ended March 31,
1997, respectively.

18. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK

     The Company is a party to certain financial instruments with off-balance
sheet risk to meet the financing needs of customers. Commitments to extend
credit were $31,619,000 and $23,023,000 at March 31, 1999 and 1998,
respectively, which include fixed rate loan commitments of $1,414,000 and
$1,821,000 at March 31, 1999 and 1998, respectively. The ranges of interest
rates for these loan commitments are 6.0% to 14.75% and 7.0% to 15.25% at
March 31, 1999 and 1998, respectively.

     Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee by the customer. Since many of the
commitments are expected to expire without being drawn up on, the total
commitment amounts do not necessarily represent future cash requirements. The
Bank evaluates creditworthiness on an individual customer basis.

     The Bank originates residential real estate loans and, to a lesser
extent, commercial, agriculture, and consumer loans. Greater than 75% of all
loans in the Bank's portfolio are secured by properties located in communities
of eastern Oregon.

19. FAIR VALUE OF FINANCIAL INSTRUMENTS

     A summary of carrying value and estimated fair value of financial
instruments is summarized as follows (in thousands):

                                     March 31, 1999         March 31, 1998
                                 ---------------------  ---------------------
                                 Carrying               Carrying
                                    Value   Fair Value     Value   Fair Value
Financial assets:
 Cash and cash equivalents       $  6,276   $  6,276   $  20,311   $  20,311
 Securities                       107,674    107,854      77,808      78,228
 Loans receivable, net of
  allowance for loan losses       185,747    189,930     153,838     159,009
 FHLB stock                         3,221      3,221       2,985       2,985
Financial liabilities:
 Demand and savings deposits       99,839     99,839      87,835      87,835
 Time certificates of deposit      99,750     99,965     104,900     104,443
 FHLB advances                     50,250     50,250           -           -

     Financial assets and liabilities other than investment securities are not
traded in active markets. Estimated fair values require subjective judgments
and are approximate. The above estimates of fair value are not necessarily
representative of amounts that could be realized in actual market
transactions, nor of the underlying value of the Company.  Changes in the
following methodologies and assumptions could significantly affect the
estimates.

     Financial Assets - The estimated fair value approximates the carrying
value of cash and cash equivalents. For securities, the fair value is based on
quoted market prices. The fair value of loans is estimated by discounting
future cash flows using current rates at which similar loans would be made.
The fair value of FHLB stock approximates the carrying amount.

     Financial Liabilities - The estimated fair value of demand and savings
deposits and FHLB advances approximates carrying amounts. The fair value of
time certificates of deposit is estimated by discounting the future cash flows
using current rates offered on similar instruments. The value of long-term
relationships with depositors is not reflected.

     Off-Balance Sheet Financial Instruments - Commitments to extend credit
represent all off-balance-sheet financial instruments. The fair value of these
commitments is not significant. See Note 18 to the consolidated financial
statements.

                                       43
<PAGE>

20. DIRECTORS' PENSION PLAN

     The Company established a directors emeritus plan (the "Plan") effective
February 25, 1997. The purpose of the Plan is to reward and retain directors
of experience and ability in key positions of responsibility by providing such
directors with a benefit upon their retirement from the Board of Directors, as
compensation for their past services to the Bank and as an incentive to
perform such services in the future. The Plan is funded through current
operations and no assets are specifically identified to fund future benefit
payments. Following are disclosures related to the Plan (in thousands):

                                                   1999           1998
Change in benefit obligation:
  Benefit obligation, beginning of year         $   330        $   348
     Service cost                                     8              8
     Interest cost                                   23             23
     Benefits paid                                  (48)           (49)
                                                -------        -------
     Benefit obligation, end of year            $   313        $   330
                                                =======        =======
  Unrecognized prior service cost               $   304        $   326
                                                =======        =======
  Weighted average assumption - discount rate         7%             7%
                                                =======        =======
  Components of net periodic benefit cost:
     Service cost                               $     8        $     8
     Interest cost                                   23             23
     Amortization of prior service cost              22             22
                                                -------        -------
  Net periodic benefit cost                     $    53        $    53
                                                =======        =======
21. PARENT COMPANY FINANCIAL INFORMATION

     The Parent company financial information at March 31, 1999 and 1998 is as
follows (in thousands):
                                                     1999          1998
Assets:
 Cash                                           $   6,198     $  15,371
 Investment in subsidiary                          28,224        24,891
 Other assets                                       3,502         3,900
                                                ---------     ---------
    Total                                       $  37,924     $  44,162
                                                =========     =========
Liabilities and Shareholders' Equity:
 Liabilities:
 Other liabilities                              $       -     $      27
 Shareholders' equity                              37,924        44,135
                                                ---------     ---------
   Total                                        $  37,924     $  44,162
                                                =========     =========
                                       44
<PAGE>

     The statements of income for the year ended March 31, 1999 and the period
from October 3, 1997 (inception) to March 31, 1998 are as follows (in
thousands):

                                                      1999           1998
Other income:
 Equity in undistributed income of subsidiary      $   3,239     $   1,987
 Interest on loan to ESOP                                288           154
                                                   ---------     ---------
    Subtotal                                           3,527         2,141

Other expense:
 Interest and other                                      426           282
 Income tax benefit                                      (53)          (49)
                                                   ---------     ---------
    Net income                                     $   3,154     $   1,908
                                                   =========     =========

     The statements of cash flows for the year ended March 31, 1999 and the
period  from October 3, 1997 (inception) to March 31, 1998 are as follows (in
thousands):

                                                      1999           1998
Cash flows from operating activities:
 Net income                                        $   3,154     $   1,908
 Adjustments to reconcile net income to
  net cash provided by (used in)
  operating activities:
   Equity in undistributed income of subsidiary       (3,239)       (1,987)
   Compensation expense related to MRDP                  189             -
 Change in assets and liabilities:
   Other assets                                          398        (3,900)
   Other liabilities                                     (27)           76
   Income tax accrual                                      -           (49)
                                                   ---------     ---------
    Net cash provided by (used in)
     operating activities                                475        (3,952)
                                                   ---------     ---------
Cash flows from investing activities -
 Investment in subsidiary                                (94)      (22,904)
                                                   ---------     ---------
Cash flows from financing activities:
 Net proceeds from issuance of common stock                -        45,729
 Repurchase of common stock                           (9,361)            -
 Proceeds from stock oversubscription                      -        78,050
 Repayment of stock oversubscription                       -       (78,050)
 Payment of cash dividend                               (916)         (217)
 Funding provided to ESOP for purchase of
  common stock                                           723        (3,285)
                                                   ---------     ---------
    Net cash provided by (used in)
     financing activities                             (9,554)       42,227
                                                   ---------     ---------
Net increase (decrease) in cash                       (9,173)       15,371

Cash:
 Beginning of period                                  15,371             -
                                                   ---------     ---------
 End of period                                     $   6,198    $   15,371
                                                   =========    ==========

                                       45
<PAGE>

22. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

     Year ended March 31, 1999 (in thousands, except share data):

                                June 30  September 30  December 31  March 31

Total interest income          $  4,786    $  4,923      $  5,540   $  5,332
Total interest expense            1,817       1,812         2,155      2,279
                               --------    --------      --------   --------
Net interest income               2,969       3,111         3,385      3,053
Provision for loan losses            86         111            82        205
Net interest income after      --------    --------      --------   --------
 provision                        2,883       3,000         3,303      2,848
Noninterest income                  238         245           301        313
Noninterest expense               1,794       1,871         2,037      2,479
                               --------    --------      --------   --------
Income before income taxes        1,327       1,374         1,567        682
Provision for income taxes          551         544           616         86
                               --------    --------      --------   --------
Net income                     $    776    $    830      $    951   $    596
                               ========    ========      ========   ========
Basic earnings per share       $   0.18    $   0.20      $   0.24   $   0.16
Diluted earnings per share     $   0.18    $   0.20      $   0.23   $   0.15

Year ended March 31, 1998 (in thousands, except share data):

                                June 30  September 30  December 31  March 31

Total interest income          $  4,113    $  4,556      $  5,037   $  4,805
Total interest expense            1,934       2,190         1,871      1,829
                               --------    --------      --------   --------
Net interest income               2,179       2,366         3,166      2,976
Provision for loan losses            31          43            46         18
Net interest income after      --------    --------      --------   --------
 provision                        2,148       2,323         3,120      2,958
Noninterest income                  275         251           245        275
Noninterest expense               1,359       1,402         1,737      2,035
                               --------    --------      --------   --------
Income before income taxes        1,064       1,172         1,628      1,198
Provision for income taxes          409         450           714        453
                               --------    --------      --------   --------
Net income                    $     655    $    722      $    914   $    745
                              =========    ========      ========   ========
Basic earnings per share            N/A         N/A      $   0.21   $   0.17
Diluted earnings per share          N/A         N/A      $   0.21   $   0.17

                                       46
<PAGE>

                               [Picture]

                               Since 1901
<PAGE>

Corporate Information

Corporate Headquarters:
  2055 First Street
  PO Box 786
  Baker City, OR 97814
  541.523.6327

Subsidiaries
  Pioneer Bank, a FSB

Transfer Agent and Registrar
  Registrar &
  Transfer Company
  10 Commerce Drive
  Cranford, NJ 07016

Independent Public Accountants and Auditors
  Deloitte &
  Touche LLP
  3900 US
  Bancorp Tower
  111 S.W. Fifth Avenue
  Portland, OR 97204

Special Counsel
  Breyer &
  Associates, PC
  1100 New York Avenue N.W.
  Suite 700 East
  Washington, DC 20005-3934

Annual Meeting of Stockholders
  10:00 a.m., Tuesday, July 27, 1999
  Sunridge Inn
  One Sunridge Lane
  Baker City, OR 97814

Executive Officers
  Jerry F. Aldape, President and CEO
  Zane F. Lockwood, Executive Vice President

Investor Relations
  Jerry F. Aldape, President and CEO
  Nadine Johnson, Chief Financial Officer

Investor Information
A copy of the Form 10-k, including consolidated financial statements, as filed
with the Securities and Exchange Commission, will be furnished without charge
to stockholders as of the record date for voting at the annual meeting of
stockholders upon written request to the Secretary, Oregon Trail Financial
Corp., 2055 First Street, PO Box 786, Baker City, Oregon 97814.

Board of Directors
Stephen R. Whittemore
Chairman of the Board
Owner, BesTruss, Inc. and
Partner, Wallowa Lake Tram

John Gentry
President and General Manager,
Gentry Ford Sales, Inc.

John A. Lienkaemper
Consultant and U.S. Safety Coordinator,
The Loewen Group

Albert H. Durgan
Retired President, Pioneer Bank

Edward H. Elms
Owner, P&E
Distributing

Charles H. Rouse
Sears Authorized Dealer and Property Developer

Jerry F. Aldape
President and CEO,
Oregon Trail Financial Corp. and Pioneer Bank, FSB

Stock Listing
Oregon Trail Financial Corp. common stock is traded over-the-counter on the
Nasdaq National Market under the symbol "OTFC." Stockholders of record at
March 31, 1999 totaled 1,016. This total does not reflect the number of
persons or entities who hold stock in nominee or "street" name through various
brokerage firms. The following table shows the reported high and low sale
prices of the Company's common stock and declared dividends for each quarter
since the initial offering on October 3, 1997.

                       Sale Price
                     --------------   Dividends
                      High      Low   Declared
-----------------------------------------------
Fiscal 1999
First quarter        18       15 3/4     $0.05
Second quarter       16       11         $0.05
Third quarter        14 1/8   11         $0.06
Fourth quarter       13 1/4   12 1/16    $0.06

Fiscal 1998
Initial offering
 price               --       10          --
Third quarter        17 3/8   15 1/2      --
Fourth quarter       18 1/2   16        $0.05

<PAGE>

Oregon
 Trail
 Financial Corporation

www.pioneerbankfsb.com

Administrative Offices
2055 First Street
Baker City, Oregon 97814
541.523.6327

Baker City Branch
2055 First Street
Baker City, Oregon 97814
541.523.5884

La Grande Branch
1215 Adams Avenue
La Grande, Oregon 97850
541.963.4126

Ontario Branch
225 S.W. Fourth Avenue
Ontario, Oregon 97914
541.889.3154

John Day Branch
150 W. Main Street
John Day, Oregon 97845
541.575.0257

Burns Branch
524 W. Monroe Street
Burns, Oregon 97720
541.573.2121

Enterprise Branch
205 W. Main Street
Enterprise, Oregon 97828
541.426.4529

Island City Branch
3106 Island Avenue
La Grande, Oregon 97850
541.963.2200

Vale Branch
150 Longfellow Street N.
Vale, Oregon 97918
541.473.3831

<PAGE>

                                 Exhibit 21

                         Subsidiaries of Registrant





                                        Percentage       Jurisdiction or
Subsidiary (1)                            Owned        State of Incorporation
--------------                            -----        ----------------------

Pioneer Bank, A Federal Savings Bank       100%            United States
Pioneer Development Corporation(2)         100%               Oregon
Pioneer Bank Investment Corporation(2)     100%               Oregon


-------------------
(1) The operations of the Company's subsidiary are included in the Company's
    consolidated financial statements.
(2) Wholly-owned subsidiary of Pioneer Bank, A Federal Savings Bank.

<PAGE>

                                 Exhibit 23

                      Consent of Deloitte & Touche LLP

<PAGE>


                   [Letterhead of Deloitte & Touche LLP]



INDEPENDENT AUDITORS' CONSENT



We consent to the incorporation by reference in Registration Statement No.
333-67541 of Oregon Trail Financial Corp. on Form S-8, of our report dated May
7, 1999, appearing in the Annual Report on Form 10-K of Oregon Trail Financial
Corp. for the year ended March 31, 1999.

/s/ Deloite & Touche LLP

DELOITTE  & TOUCHE LLP

Portland, Oregon
June 28, 1999


<PAGE>