Medford’s PremierWest Bank will open its first Klamath Falls branch in early 2004 and the timing couldn’t be better.

Klamath First Federal, long the leading player in that market, is being acquired by Sterling Financial Corp. of Spokane, Wash. Klamath First recently announced 130 administrative positions will be cut in January and February as part of the acquisition.

That allows PremierWest, formed just under four years ago, to position itself as the small-town choice for Klamath Falls customers — and potential employees.

"The timing is coincidental, but it does create a great opportunity," says Rich Hieb, PremierWest’s chief operating officer. "We’re quite familiar with Klamath Falls.

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"It's an opportunity when you have a lot of disgruntled employees and customers."

Hieb and bank President John Anhorn held similar positions at Western Bank when it occupied a 10,000-square-foot building at 421 S. Seventh St. in Klamath Falls. Washington Mutual acquired Western Bank in 1995 and eventually closed that branch. PremierWest acquired the building for $600,000. Hieb says there will be nine employees at the branch, along with three from Premier Finance Co., which will share the building.

The expansion solidifies the bank’s presence in the Klamath Basin. PremierWest acquired California branches in Dorris and Tulelake — both within 40 miles of Klamath Falls — when it bought Timberline Bank of Yreka in 2001.

Trey Senn, director of Klamath County Economic Development, says local residents were stunned when Klamath First announced the Sterling deal and the fallout continued with the layoff announcements.

"Most people here didn’t think it was going to be this kind of merger," Senn says. "I don’t think they knew it was in the cards, losing 130 people and everything going to Washington state. People have written some interesting editorials and that kind of stuff.

"The big question is what people with significant amounts of money (for deposits) are going to do."

Klamath First had $230 million out of Klamath County’s $721 million worth of bank deposits on June 30, when banking institutions make their annual report to the FDIC.

"Our goal when we get into a market is to get at least 10 percent of the (deposits), and we think we have an opportunity to exceed that here," Hieb says. "Within three or four years, we should have 10 percent."

PremierWest is installing an ATM machine and safe deposit boxes at its new Klamath Falls branch, while making sure the drive-up facility is operational. Help-wanted ads have appeared, resumes are coming in and potential managers are being sized up.

Despite the move eastward, PremierWest’s stated goal is to claim market share along the Interstate 5 corridor from south of Eugene to north of Sacramento.

"We want to stay in our footprint," Hieb says. "But you never know what opportunities will arise."

Reach reporter Greg Stiles at 776-4463 or e-mail business@mailtribune.com