PremierWest revenues decline, but gap narrows

PremierWest Bancorp narrowed its second-quarter losses, reducing expenses even as revenue declined.

The parent company of Medford-based PremierWest Bank reported a loss of $2 million, or 20 cents per share, for the three months ending June 30, down from a loss of $2.7 million, or 27 cents per share, in the second quarter of 2011. It reported a $4.8 million setback in the first quarter of 2012.

PremierWest President and Chief Executive Officer Jim Ford said loan loss provisions, one-time severance expenses related to the closing of nine branches this spring, and long-term impairment expenses from foreclosures accounted for the loss.

"Boiling it down, those expenses continue to go down," Ford said. "The expenses for our problem loans are coming down each quarter. When you look at the trajectory, you can say profitability is around the corner. The critical thing is that we have to get the problem loans off the balance sheet."

Ford pointed out that at the end of December 2009 the bank's adversely classified loans — those of substandard credit quality with full repayment of principal and interest questionable — totaled $280 million, while at the end of the most recent quarter the total was $118.1 million. Nonperforming loans at the end of 2009 totaled $95.8 million but have dropped to $38.5 million in the latest quarterly report.

"That's trending down, too," he said. "At the same time, we realize we have to keep our administrative expenses down and live within a lower expense base."

Net interest income for the quarter dropped 11 percent to $11.6 million from $13.1 million in the year-ago quarter. Total non-interest income decreased to $2.6 million from $2.7 million in the prior-year quarter.

Nine branches were shuttered and two more sold during the quarter. Ford said that even with $400,000 in severance costs during the period, the move announced in January and executed in the second quarter has begun to bear fruit. The branches — mostly in smaller Northern California and Southern Oregon communities — had a combined $100 million in deposits.

Ford said customers with $78.1 million in deposits stayed with PremierWest, while another $16.3 million transferred to the institution buying two branches. Customers moved nearly $13 million to other institutions.

Ford said new loan originations doubled during the first six months of the year, but not enough to offset the problem loans that have lingered for three years.

"If bankruptcy is involved, it can take two-plus years for credit resolution, sometimes longer," Ford said.

PremierWest has met regulatory standards for total risk-based capital and Tier 1 capital — such as common stock and retained earnings — but it remains under a regulatory consent order because it has less than a 10 percent leverage ratio. As of June 30, the bank's figure was 9.01 percent.

As long as PremierWest remains under the consent order, Ford said, it cannot issue dividend payments or repay Troubled Asset Relief Program funds.

"We've set aside the money and it affects our capital ratio," Ford said. "When the order is lifted, it will allow us to make the payments. From an accounting standpoint, we've taken it out, just as if we had written a check."

PremierWest shares fell 2 cents Tuesday to $1.35 during trading on the Nasdaq exchange.

Reach reporter Greg Stiles at 541-776-4463 or email

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