As Oregons top banking companies duke it out in the hot business markets of Portland, Eugene, and Salem, $1 billion-asset Klamath First Bancorp in Klamath Falls is content to grow by catering to consumers in the sleepier parts of the state.
Long a presence in eastern Oregons vast agricultural lands and the smaller towns of the Central Valley, the parent of 67-year-old Klamath First Federal Savings and Loan said this week that it will expand westward by buying 13 Washington Mutual Bank branches, for $33 million. 
The branches, with $416 million of deposits and about $178 million of loans, are in familiar kinds of markets for Klamath First. Most are in slow-growth hamlets along the rocky Oregon coast.
Washington Mutual, in Seattle, said it is shedding the branches because they do not fit into its growth plans.
But Kermit K. Houser, Klamath Firsts president and chief executive officer, said branches in less robust markets can be profitable for smaller institutions, which typically have lower overhead.
A lot of the larger banks both the nationals and the regionals are not serving those areas as well as they could be, Mr. Houser said. We are a low-cost provider of services, and we can go into the smaller communities, serve them well, and still make an adequate return.
Indeed many small banks and thrifts have grown in recent years by buying the castoffs of Washington Mutual, Wells Fargo & Co., First Union Corp., and other large banks. Klamath First is a prime example it nearly quadrupled its branch network in 1997 when it bought 25 small-town branches in eastern Oregon for $18 million from the old Wells.
Of the 13 Washington Mutual branches Klamath First is acquiring, two are in eastern Oregon cities where it has none.
Robert J. Rogowski, a principal at Columbia Financial Advisors in Seattle, said Klamath First may be alone among midsize Oregon banks in its strategy.
Most of the bigger players in Oregon, like Centennial [Bancorp], West Coast [Bancorp] and Umpqua [Holdings Co.], have focused their growth along the Interstate 5 corridor, where the most of the states growth is, Mr. Rogowski said. Klamaths strategy is pretty unique serving customers in less competitive markets.
I call it the Wal-Mart strategy, he said expanding by going into slower areas first.
His description is particularly fitting considering that Klamath First will soon open branches in four Wal-Mart stores in Pendleton and Ontario in eastern Oregon and in the eastern Washington towns of Richland and Kennewick.
Klamath First tries to sell customer service and community banking, and its an easier sell in a small town than it is in a big city, Mr. Rogowski said.
Though the thrift has no plans to change its growth strategy, it will not rule out venturing into the states large cities, Mr. Houser said. If the right opportunity comes along, he said, Klamath First might, by yearend, open an office along Interstate 5 that would focus mainly on consumer banking.
Klamath First is also trying to expand its commercial business, to boost its bottom line. One reason it made the deal with Washington Mutual is because 12 of the branches belong to the $219 billion-asset companys business bank subsidiary, Western Bank.
We know that we have to get more into commercial lending to increase our earnings, Mr. Houser said. By purchasing these assets from Washington Mutual, he said, we get the expertise and the loan volume that we need.
But Klamath has no immediate plans to convert to a commercial bank. Right now we are satisfied with officially being listed as a thrift, Mr. Houser said, but that may change in time.
