Klamath First Bancorp, Inc. Receives Regulatory Approval for Acquisition of Thirteen Branches From Washington Mutual Bank.

Business Editors

KLAMATH FALLS, Ore.--(BUSINESS WIRE)--Aug. 2, 2001

Klamath First Bancorp, Inc. (Nasdaq:KFBI) (the "company") today announced that Klamath First Federal Savings and Loan Association ("Klamath First") has received conditional approval from its primary regulator, the Office of Thrift Supervision ("OTS"), to proceed with the acquisition of 12 Western Bank branches and one Washington Mutual Bank financial center located in Oregon from Washington Mutual Bank (WaMu).

"I am pleased that the OTS gave us such a quick response to our branch approval request," stated Kermit K. Houser, Klamath First president and chief executive officer. "We had very good dialogue with our regulators over this transaction and I am confident this acquisition will be a great benefit to our Oregon franchise and to the group of new customers we will have the opportunity to serve. The staff of both companies have already put many hours of effort into the pending transaction. This approval now gives us a green light to move forward even more diligently to close the transaction the first week in September."

On May 29, 2001, the company announced its intent to purchase 13 branch offices from WaMu. Twelve of the branches are from Western Bank, a division of WaMu. These branches have a commercial bank mix of deposits and loans. The transaction also includes one branch of WaMu, which includes deposits and no loans. As of March 31, 2001, the transaction totaled $416.2 million in deposits with an average cost of 3.6%, loans of $190.2 million with an average yield of 9.6%, the branch buildings and fixed assets, and 136 commercial bank branch employees. The company's strategic initiatives announced earlier this year, included transforming the company to be more commercial bank like, and elevating the company's sales and service culture to a higher level. "The Branch acquisition is a great fit with our existing initiatives to have a more commercial bank balance sheet," said Houser. "The transaction consists of 37% commercial real estate loans, 28% consumer loans, 24% commercial and industrial loans, and only 11% one-to-four family real estate loans. We are also acquiring a well trained and motivated commercial bank staff. In conjunction with the branch purchase we are in the process of gearing up our backroom operations to accommodate the expected changes in our product mix and the additional volume of transactions.

"We are looking forward to welcoming 136 Washington Mutual employees to the Klamath First team and to have the opportunity to welcome new customers to the Klamath First family of satisfied customers," added Houser.

Klamath First Bancorp, Inc. is the holding company for Klamath First which operates 37 offices, in 22 counties throughout Oregon. Klamath First serves the state of Oregon through these offices by offering a full range of products and services including commercial, consumer and real estate loans, various checking and savings products for both the consumer and business customer, 24 hour telephone banking, and online banking with bill pay through its web site KlamathFirst.com. Consolidated assets and net earnings as of the quarter ended June 30, 2001 were $1.0 billion and $6.8 million, respectively.

Safe Harbor Clause: Except for the historical information in this news release, the matters described herein are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include those related to the economic environment, particularly in the region where Klamath First Bancorp, Inc. operates, competitive products and pricing, fiscal and monetary policies of the U.S. government, acquisitions and the integration of acquired businesses, credit risk management, change in government regulations affecting financial institutions, and other risks and uncertainties discussed from time to time in Klamath First Bancorp, Inc.'s SEC filings including its 2000 Form 10-K. Klamath First Bancorp, Inc. disclaims any obligation to publicly announce future events or developments which affect the forward-looking statements herein.